Earning · 6 min read
How stablecoin yields work
Where stablecoin interest comes from (lending, treasuries, strategies, rewards), APY vs APR with a worked example, why StableRate ranks by 30-day average, and why very high rates are a warning sign.
Education, not financial advice. Rates change; DeFi carries smart-contract and depeg risk. Do your own research.
Where the interest comes from
Yield is never free money. Someone pays it, and knowing who is the best way to judge the risk.
- Lending. On lending protocols you deposit stablecoins into a shared pool that borrowers draw from. Borrowers post more crypto than they borrow as collateral and pay interest. The rate moves with demand: when lots of the pool is borrowed, rates rise to attract deposits.
- Real-world assets (RWAs) and treasuries. Some products hold tokenized short-term US government bills or similar loans. Their yield roughly follows traditional interest rates, minus fees, and adds issuer and legal risk.
- Strategies. Some pools earn from trading strategies, such as collecting funding payments from futures traders. These can pay well, but the income can shrink or turn negative.
- Reward tokens. Some protocols add payouts in their own token to attract deposits. Those tokens can fall in price, so that part of the rate is less reliable. We mark pools where part of the rate is rewards.
- Fixed-rate products. Some let you lock in a rate until a set date. You get that rate only if you hold until it matures.
APY vs APR
APR (annual percentage rate) is the simple yearly rate with no compounding. APY (annual percentage yield) includes compounding, meaning you earn interest on your interest.
The formula is APY = (1 + APR ÷ n)n − 1, where n is how many times a year it compounds. For example, a 10% APR compounded daily works out to about 10.52% APY. With small rates the gap is small; with big rates it grows.
The rates on StableRate are APY, as reported by DefiLlama. Try your own numbers in the yield calculator.
Why 30-day averages matter
DeFi rates are variable. They can change every block and can jump for a few hours when someone borrows a lot or a reward program starts. A list sorted by today’s rate is often topped by a pool that won’t pay that much tomorrow.
That’s why StableRate ranks by the 30-day average APY. It shows what a pool has actually paid over the last month. We also show today’s rate and whether it is rising or falling compared with the average, so you can see both.
Why very high rates are risky
A high rate is a price paid for taking risk. If a stablecoin pool pays far more than the typical rate shown on our leaderboard, ask why. Common reasons:
- a young or small protocol trying to attract deposits,
- a riskier stablecoin or borrower behind the pool,
- a large share paid in reward tokens,
- a strategy that could lose money, or a lockup that’s hard to exit.
That is why the site highlights 15%+ rates in amber, and filters out pools over 25%, small pools and pools with less than 30 days of history. Those filters cut out obvious outliers; they don’t make the remaining pools safe.