Lending APY Calculator

Supply rates in a DeFi money market are not set by a committee; they are output by a curve whose only input is the utilization ratio, meaning borrowed assets divided by total supplied assets. Both Aave and Compound use a kinked model: below an optimal utilization point, often around 80 to 90 percent for stablecoins, the borrow rate rises gently, and above it the slope steepens sharply to force utilization back down and protect withdrawal liquidity. The supply rate is then the borrow rate multiplied by utilization and by one minus the reserve factor, which is the share diverted to the protocol treasury. That product is why suppliers always earn less than borrowers pay, and why a pool at 40 percent utilization pays roughly half what the same borrow rate would suggest. The compounding convention matters when comparing quotes. This tool applies daily compounding, so a 5 percent nominal rate over 365 days returns about 5.13 percent, whereas Ethereum protocols accrue per block or per second and quote an APY that already includes that effect. Realistic ranges differ sharply by asset: stablecoins such as USDC and DAI have generally paid roughly 2 to 8 percent, ether typically well under 3 percent because few users borrow it, and wrapped bitcoin often below 0.5 percent since it is held as collateral rather than borrowed. The rates preloaded here are illustrative snapshots, not live quotes, and they move every block. Nothing in the model prices smart contract risk, oracle failure, bad debt from a failed liquidation, or the possibility that high utilization temporarily blocks withdrawal.

Algorithmic on-chain lending began with Compound, founded by Robert Leshner and Geoffrey Hayes and launched on Ethereum in September 2018. Its contribution was replacing peer-to-peer loan matching with a pooled liquidity model and an interest rate set mechanically by utilization, which meant lenders and borrowers never had to find each other or agree terms. Aave took a different route to the same place: it began as ETHLend, a peer-to-peer lending project raised by Stani Kulechov in 2017, and was rebuilt as a pooled protocol under the Aave name, introducing interest-bearing aTokens whose balance grows in the holder's wallet as interest accrues. MakerDAO predates both. Founded by Rune Christensen around 2014, it launched single-collateral Dai in December 2017 and multi-collateral Dai in November 2019, and it is structurally different: rather than intermediating between suppliers and borrowers it mints Dai against overcollateralized vaults. The Dai Savings Rate, introduced with the multi-collateral upgrade, is therefore a monetary policy lever set by governance to manage Dai demand and its peg, not a market-clearing lending rate, which is why it can sit above or below comparable pool rates for long periods. The decisive moment for the whole sector came in June 2020, when Compound began distributing COMP tokens to users, launching liquidity mining and briefly pushing headline yields far above what the underlying interest rate models were producing.