It can be challenging even for experienced investors to take full advantage of novel capital allocation avenues in the decentralized finance sector since the variety of options is quite staggering. With over 11,000 tracked pools to choose from and close to 100 different projects, it is a Herculean task to find what works well. Trying to create a source of DeFi passive income is often a lengthy process of throwing stuff at the wall and seeing what sticks. Even the best yield farming platforms in 2025 may offer relatively low yields or expose your portfolio to excess risks.
We are going to cover some of the most intriguing options in the sector and give you some advice on how to approach the very concept of these innovative financial tools. However, it is important to have a solid understanding of this investment method and be aware of significant risks that often accompany a portfolio full of such positions.
Searching for the best DeFi Yield farming APYs
First, let’s explore why this particular investment strategy has taken the world of crypto by storm. The decentralized finance ecosystem is diverse and has unique solutions for finances like instant trustless loans backed by collateral or swapping assets for less than 0.1% in fees and commissions. These incredibly useful and comparatively cheap services are enabled through the use of liquidity provided by ecosystem participants in exchange for rewards.
Below are a couple of examples:
- DEXes are always in need of additional liquidity. They incentivize users to provide their funds to a collective pool powering rapid and smooth transactions on the exchange. Depending on the competitiveness in the industry and the performance of the latter, you can expect either outstanding returns or very low rates. For example, Uniswap is one of the most popular destinations for many capital holders with rewards for wrapped Bitcoin and Ethereum pool reaching 11.3% (30-day mean average). At the same time, some studies indicate that over 60% of users lose money in this protocol.
- Lending also requires user funds. Compound is a pitch-perfect example of a Dapp that has been around for years and still delivers good returns. Gains on such protocols can be very safe and beat tradfi solutions consistently. The concept here is very simple. Investors put their tokens in a pool from which borrowers can take out target assets using different ones as collateral. Different rates are used for borrowing and lending with the difference comprising the bulk of the revenue a share of which is given as a reward. Compound V3 offers 3.63% APY on USDC investments with an additional 0.5% paid out in COMP.
- Liquid staking. Proof-of-stake mechanisms are doing quite well as people try to switch to more reliable and less environmentally harmful options. Bitcoin is still the most dominant force in this domain, but Ethereum and other PoS networks seem to be offering a lot more to users. Staking can generate anywhere from 5% to 30% annually depending on the performance of the underlying network. Some solutions like LIDO take advantage of it and give users equivalent tokens called stETH which can be further locked in on something like Kelp DAO or GMX V2. The latter offers 23.33% base APY with 30-day averages reaching 70.75% in August 2024.
Among leading yield farming crypto platforms, the vast majority specialize in one of the methods above. However, various development teams have successfully rolled out other options like leveraged strategies, insurance, derivatives, and even indices. Given the sheer complexity of the DeFi landscape, identifying promising investment prospects is a process requiring close monitoring of the industry and assessing risks on a level never seen before in tradfi.
Advantages of high-yield farming platforms
The compounding effect is quite powerful over long periods. The idea of exponentially growing capital attracts capital holders. However, one must remember that the difference between even daily compounding and annual compounding rates is often negligible and starts becoming meaningful only after a decade or more. This means that many people who cannot afford to wait so long simply ignore many great products in the crypto ecosystem.
Many Dapps developers saw the opportunity to capitalize on the desire of people to earn more regardless of risks. The implementation of services like liquid staking and wrapped tokens made it possible to earn exorbitant quantities of various digital coins. On one hand, it creates inflationary pressures across the board significantly reducing the value of generated rewards. On the other hand, smart investors can take advantage of constantly changing market conditions and make massive profits on speculative trading.
It is possible to set up DeFi trading bots or focus on automated compounding to ensure that you are always receiving adequate returns on investments. Just like in the case of any other investment method, some people are excellent at it while others struggle to avoid losses. It does not matter whether someone works with the best yield farming crypto platforms or falls for a scam, if you do not use the benefits of this capital allocation method while reducing risks, you will fail all the same.
So what are the advantages of these applications?
- Higher returns compared to tradfi or staking. A typical HY bank deposit will bring you about 5% annually with US treasury bonds paying out 4.11% in 2024. Staking on Ethereum is generating 3.2% on average, but rates vary greatly depending on the circumstances. These are good numbers for the traditional economy. However, you can realistically achieve 10% — 30% using various DeFi protocols. For example, DAI on MakerDAO has a 6% base APY which can be further increased with DSR to acquire sDAI and use it to borrow USDC which can be locked in on Goldfinch for an additional 9.5% APY. Since it is possible to earn more on converting sDAI back after paying debt in USDC, effective earnings can reach 20% annually.
- A diverse list of easily accessible options. Even if you don’t like the idea of doing everything manually and trying to calculate the best ratio of risk and reward, it is possible to invest easily with so-called yield aggregators like Beefy Finance or Yearn Finance. These solutions offer you an opportunity to automatically collect rewards and reinvest them, switch assets, and adjust the composition of the portfolio. Some teams like RIVO.xyz have specialists who create strategies that can be further validated by the algorithm. Investors without the stomach for concentrated positions and analytical work can simply start investing in indices. For example, the DeFi core index has a 23.6% interest rate and focuses on liquidity pools.
- Working with a variety of reliable assets. You can always start the investment layering process with mainstream tokens like Ethereum or Bitcoin. Liquid staking is a great way to magnify potential gains by using your capital without stopping the stream of rewards from main nets. If you are careful enough, it is possible to create a system where you always come out on top by taking out only “good” coins and leaving governance, LP, and sttokens behind. Perfecting such approaches takes quite some time and dedication and requires people to stay in touch with the industry continuously, but payoffs can be incredibly large and turn a source of passive income into a fruitful career as a full-time active retail trader.
- No intermediaries or lengthy background checks. Lending and borrowing specifically benefit from the implementation of smart contracts that allow for trustless and permissionless transactions between parties. In theory, these ecosystems can be fully autonomous without the need for any human oversight and require just a small amount of technical support. In practice, smart contracts often have vulnerabilities and errors that must be quickly addressed by developers. Despite that, the absence of middlemen significantly reduces fees and improves interoperability.
These advantages may create an impression that the whole ecosystem is a paradise for people who are willing to put in the work. The problem is that strategies revolving around using top-yield farming platforms are associated with novel risks and dangers that many people are not equipped to deal with. Navigating this complex environment is outstandingly demanding physically and mentally.
Before we start talking about the most interesting brands in the domain, we need to briefly discuss the risks of using them in the first place. We won’t be covering obvious issues like smart contract vulnerabilities, economic uncertainty, or regulations. Instead, we want to address some novel dangers that many people may not be aware of at all!
The threats of using high-growth yield farming platforms
Facing the harsh realities of contemporary investing is something that millions of newcomers to the crypto industry are not prepared for. While new ways of capital allocation with potential returns measured in thousands of percentile points sound awesome, the unfortunate reality is that the vast majority of them are either scams, meme coin generators, or otherwise unreliable schemes that should not be considered by careful investors.
Even using time-tested solutions with good track records and seemingly safe strategies can be quite dangerous in the world of decentralized finance. Consider some of the more novel risks that many newcomers have never heard of:
● Impermanent loss or opportunity cost. When prices on CEXes and DEXes diverge from the level they were at when you put coins in, it can lead to so-called impermanent loss. In some cases, smart contract designs are made to automatically adjust users’ positions to keep value ratios in liquidity pools stable. These losses can be recuperated, but studies indicate that the vast majority of novices lose money on places like Uniswap.
- Compounding risk with layering. As mentioned previously, one can receive stETH from LIDO by allocating funds to their services (at 2.92% APY). Wrapping these tokens for rewards on Kelp DAO for an additional 3.05% APY. In total, you can expect to earn roughly 6% APY. Depending on the conditions in the blockchain domain, the total rate can go up to 10% or even higher. The issue is that you are now exposed to the danger of both LIDO and Kelp DAO failing.
- Uncertain calculations. Rates are dynamic and change with prices, liquidity levels, and many other factors depending on the service and the design of its smart contracts. Herein lies the problem: you cannot predict real returns on investments. Experienced veterans have to engage with multiple protocols to gauge their real profitability.
- Faulty strategies with auto-compounding. It sounds nice to have a service that will automatically search for the best reward rates and reinvest them without ever missing unbounding windows (periods when digital assets can be withdrawn). However, some strategies designed by humans or algorithms can be poorly optimized and significantly underperform in the long term.
- Sophisticated fee structures. Since users invest assets at fixed ratios in LPs, any value change requires adjustments. Each transaction costs money since DeFi projects are non-custodial and perform all operations directly on chains. It is possible to mitigate some of these costs by offloading processes on layer 2 chains. Another problem is that leverage used by many veterans requires you to take out a loan with borrowing APYs also change depending on circumstances. Calculating investment costs and profits can be quite challenging with so many variables.
Taking these risks into account when designing your strategy is extremely important. It is not enough to just find the best DeFi yield farming platforms and call it a day. Balancing risks is also more difficult because you don’t have the same range of tools like trailing stop losses, position sizing, and more in trading automation products.
Some of these threats are so novel (like impermanent loss) that newcomers simply cannot grasp the concept fully and end up losing money simply because they don’t understand the very principles of LP operation. We strongly encourage all our readers to take time and learn how these investment systems work before jumping head-first into a pool (pun intended).
Promising yield farming platforms in 2025
The list of projects that may catch your attention is quite lengthy. We don’t want to rank them as performances vary greatly just like target assets. It is also quite hard to compare returns denoted in stablecoins versus memecoins or something like Ethereum. The crypto world is volatile and prices change all the time creating difficulties for everyone trying to calculate returns in reference assets (let’s say US dollars).
Instead, we simply picked time-tested Dapps that have interesting products and enthusiastic communities. User activity, total value locked, and other metrics are also taken into consideration since investing in something with just $100,000 TVL is certainly not a good idea if you don’t have some real insider information.
LIDO
Deployed on the Ethereum blockchain, this project is focused on providing additional utility to stakers who want to invest in the main net. LIDO allows users to exchange their locked assets for stETH which has its price pegged to ETH. These tokens can be further used on partnered protocols like 1inch or Curve for additional returns or speculative trading.
As of the time of writing, LIDO had a massive $25 billion TVL and 2.92% base APY with 30-day averages reaching 3.23% APY. LIDO maintains its good image by heavily investing in third-party audits, bug bounties, and other activities aimed at enhancing security. Throughout its existence, LIDO paid out $4 million to cover these expenses. It is partnered with Curve, 1inch, Aave, Balancer, and MakerDAO.
Currently, LIDO supports Ethereum and Polygon while offering governance tokens as a reward on top of interest rates. LDO is often cited as a speculative asset vulnerable to inflationary pressure. Nonetheless, you can still trade it successfully.
Bifrost
As a multichain system that focuses on Polkadot, Kusama, and its own Testnet, Bifrost is a good choice for enthusiasts who do not like the Ethereum ecosystem and would like to invest in layer 0 solutions or other promising technologies. Locking in DOT is quite profitable with Bifrost paying 17.24% APY (30-day mean average) on top of 0.25% in rewards. This particular token is one of the digital assets that are still trading above launch prices.
Kusama is also an interesting target for adventurous investors. It is similar to Polkadot in market dynamics but mixed APY is higher with monthly averages reaching 16.73%. Bifrost also has other solutions allowing users to invest in ETH, Filecoin, Moonbeam, and Manta at competitive interest rates. The total value locked in August 2024 is $54 million with over 88,000 wallet addresses participating.
Note that the company has been active for just 2 years and TVL numbers started climbing only at the beginning of 2024 reaching an all-time high of $134 million.
Aave
Focused on liquidity provision and lending across 10 blockchains including Ethereum, Avalanche, Optimism, BASE, and Polygon, Aave is on its third iteration looking better than ever. APYs on some of the products are quite impressive. For example, lending APY for GHO (USD-pegged native stablecoin) is over 25.52% which is more than any other offering among protocols with TVL over $10 million. Using stablecoins as target assets brings in anywhere from 4.09% to 5.37% (30-day averages) which is higher than US treasury bond rates.
Aave has $21 billion in total value locked with over $103 million worth of digital assets comprising a large community treasury. You can also participate in governance by using $AAVE. This chain is one of the most popular among crypto users interested in working with reliable stablecoins like GHO, USDC, USDT, DAI, and others.
DeDust
This DEX was launched in 2022 on the TON blockchain and offers a wide range of interesting products to the community. The design philosophy is all about creating an excellent user experience while maintaining high levels of security and personal data safety. DeDust has one of the most lucrative offerings among Dapps with TVLs higher than $100 million. The TON-USDT pair has a 2.35% base APY with 30.95% reward APY with mixed 30-day averages reaching 50.08% in August.
TON is one of the best performers in the crypto market with its price still being more than 12 times higher compared to the launch. If you are interested in protocols that operate in this growing ecosystem, DeDust is the best destination as it offers a variety of options for stablecoins, memecoins, and other digital assets.
One must remember that the TON blockchain is still evolving. We do not know its development trajectory and long-term performance. Several years after launch, many currently struggling chains seemed very promising. For example, Cardano (ADA) reached its ATH three years into its lifetime (2021) with price climbing by 1,290%. Now, it is at $0.33 barely above the initial $0.024.
Amnis Finance
This protocol was launched in September 2023. It is a liquid staking and yield tokenization service on the Aptos blockchain. amAPT and stAPT are minted when you participate in corresponding strategies. Returns on $APT investments are quite impressive with 30-day averages reaching 10.65% APY and numbers on PanCakeSwap being over 44% APR.
Many contemporary investors are seeking new ways to enter the DeFi ecosystem. Amnis is a good starting point as it offers a range of flexible products on one of the fastest-growing blockchains. The current TVL is $113 million with over 19 million APT locked in by 222,000 addresses. On top of the standard products, Amnis also has decentralized gambling in the form of lotteries, lucky wheel spinning, and more.
Just like in the case of any up-and-coming brand, we strongly suggest doing your own research and including a position on Amnis in a portfolio only after considering the risks associated with working on an untested Dapp.
Uniswap
This is the biggest DEX by far with over $533 million in daily trading volumes and an impressive 13.5% market share. Deployed on Ethereum, it also has the advantage of being the go-to exchange on the most populous main net in the world. Note that Uniswap is very reliable but not as profitable as many other similar DEXes. On the other hand, it has some of the highest base APYs for stablecoins. For example, their USDT-WETH pair has 16.01% APY which is the best offer among Dapps with TVL over $100 million.
Many users flock to Uniswap because of its flexible products that coexist with investment opportunities. For instance, daily trading volumes on the non-custodial exchange reach $1 billion on some days when economic events shake the industry. With millions of users using Uniswap to simply move assets around, it is a good choice simply due to its utility and useful functionality.
As of the time of writing, Uniswap had 46 pools with TVL over $10 million with base APYs reaching 64% on some chains and 30-day averages hitting 90% at times. Many newcomers will find the interface of the exchange intuitive and integrations flexible enough to warrant an easy integration regardless of which blockchain was your starting point. Uniswap works with Base, Arbitrum, Polygon, and Celo to name a few.
Should you start investing using this strategy?
Creating a balanced portfolio with only retail trading activities and mid-term positions is close to impossible. Even with advanced tools like the AI bot from WunderTrading or other sophisticated systems, it is necessary to stay focused on the situation on CEXes and DEXes and adjust positions when needed. In this sense, protocols like Aave or LIDO significantly simplify the life of an investor by allowing them to earn money passively.
The effectiveness of capital allocation with this strategy depends on a variety of factors, some of which are outside of the user’s control. Several risk factors are complicated and require newcomers and veterans to learn new instruments and analytical methods that are better suited to vivisect the inner workings of lending and liquidity mining Dapps.
On paper, interest rates on stablecoins and main net tokens are much higher compared to tradfi. However, it is important to understand that we must work hard and pick appropriate protocols to consistently beat the offerings from investment banks. It is more than possible with riskier investments in memecoins, governance tokens, and other digital assets paid out as rewards. The downside is that prices are incredibly volatile making it hard for anyone to estimate potential earnings.
We strongly believe that personal preferences and risk tolerance levels of individual capital holders should determine which strategy works well in each particular scenario. If you don’t like the idea of manually monitoring the market and making adjustments all the time, passively investing in LPs can be a good idea.