Crypto applications
The idea
Yield can come from protocol issuance, transaction activity, borrowing demand or incentives. Each source carries different risks, including lockups, penalties, token-price changes and counterparty failure. A quoted annual rate can change and may be paid in an asset whose price falls.
A worked example
A 5% increase in token quantity does not create a positive currency return if the token price falls 20% over the same period.
Try it yourself
Separate an example yield into quantity growth, asset-price change and fees.
A mistake to avoid
Comparing a promotional crypto yield directly with a bank rate while ignoring the underlying risks.