How Much You Can Earn in Decentralized Finance

How much can you earn in decentralized finance? This is the most common question, and there is no definitive answer. Returns in decentralized finance depend on many factors: the assets in your portfolio, the instruments you choose to work with, the strategies you build using these instruments, the risks you are willing to take, and even the way you calculate your returns. There are different methods of calculating yield, and this is an important point that I will address later in this lesson.

Let’s start with the first factor — the assets in your portfolio. They have a significant impact on your earnings. For example, if your portfolio includes Ethereum, Bitcoin, and stablecoins, almost all tools in the decentralized finance ecosystem become available to you. You can use decentralized exchanges, lending markets, and many other passive-income instruments.

However, if your portfolio consists of different assets, your choice of instruments may be more limited. Naturally, the returns may also vary, because the set of assets affects trading volume, fee levels on decentralized exchanges, and the overall performance of your portfolio.

The strategies you choose also naturally affect the returns you receive in decentralized finance. Strategies vary widely: some involve using many different assets, some are focused solely on farming stablecoins, and others aim to increase the amount of assets in your portfolio rather than the dollar value of your holdings. There are many types of strategies, and your choice directly affects the yield you will receive.

Your returns are also influenced by the instruments you select and the risks you are willing to take with your investment assets. Different instruments come with different risk levels, different yield potential, and different assets that can be used within them. Everything is highly individual, and it is impossible to claim that there is a fixed return for a specific asset such as Bitcoin or stablecoins. The spectrum of available tools is too broad, and each person selects instruments and strategies differently.

Therefore, there is no single universal number that defines returns in decentralized finance.

And the most important point is how you calculate your returns, because users measure returns differently. Some people have a portfolio composed of stablecoins and want to generate passive income, withdrawing profits monthly in stablecoins. Others hold Bitcoin and Ethereum and want to increase the amount of these assets, without focusing on the dollar value of their portfolio.

Thus, different users have different goals and different methods of calculating yield.

For example, you may have started with one Bitcoin when it was worth fifteen thousand dollars. One year has passed, and during this time you used decentralized finance tools to grow your portfolio: from one Bitcoin you increased your position to one and a half Bitcoins. Technically, you are up fifty percent because the amount of Bitcoin you hold has increased. However, during this year, the price of Bitcoin dropped to five thousand dollars. As a result, in dollar terms you are in the negative, while in Bitcoin terms you are in the positive.

For some people, this is a good result; for others, it is negative, because they lost money in dollars. Everything is highly individual: whether you calculate returns in tokens or in dollars, whether you withdraw profits monthly or yearly, or choose not to withdraw at all and reinvest. This is why decentralized finance yields can vary significantly.

Market cycles also affect your returns. You might enter decentralized finance at the beginning of a bull market, buy assets — Bitcoin and altcoins — and the market begins to rise. Your portfolio in dollars increases significantly over six months, and you might think this is due to the tools you used. Yes, these tools help increase the amount of assets, but the primary reason for the growth is that the market itself went up. If the market had not grown, your returns would have been much lower.

The same applies to a bear market. If you enter decentralized finance during a downturn, your assets will decrease in value, your positions will drop, and the issue is not with the tools — the market simply fell, and Bitcoin’s price declined. However, even in this case, decentralized finance still allows you to increase the number of assets in your portfolio — to accumulate more Bitcoin, altcoins, and stablecoins. Later, when the next bull cycle begins, you can lock in these gains and earn a solid profit.

The most effective strategy in decentralized finance is combining portfolio investing with decentralized finance tools. If you simply held a strong investment portfolio that grows with the market — Bitcoin, Ethereum, a few altcoins, and some stablecoins — you would earn only from market appreciation.

But if you also use tools within the decentralized finance ecosystem, you earn not only from the market’s growth but also from the ecosystem itself. Your portfolio grows not only in dollar value — the amount of assets inside your portfolio also increases, and this is extremely important.

And this strategy can be used both during a bull market and during a bear market. In fact, during a bear market it becomes even more relevant, because while everything is falling and assets are extremely cheap, this is the best time to accumulate strong fundamental assets in your portfolio.

Therefore, to summarize and answer the question of how much you can earn in decentralized finance — I cannot name an exact number, neither in dollars nor in tokens. However, decentralized finance allows you to build passive income or use various tools to increase the capital in your investment portfolio.

But the actual yield and profit depend entirely on the five factors I described earlier in this lesson.

In the next lesson, I will explain how decentralized exchanges work, how much you can earn on them, and how liquidity provision functions.

These materials are created for educational purposes only and do not constitute financial advice.