How to Create a Yield Strategy
Building a yield strategy involves combining DeFi protocols to maximize returns while managing risk. This guide covers the framework for creating strategies.
Strategy Framework
Key Components:- Base asset allocation
- Yield generation method
- Risk mitigation
- Execution plan
| Type | Complexity | Risk | Return |
|---|---|---|---|
| . . . | . . . . . . | . . . | . . . . |
| Simple staking | Low | Low | 3-5% |
| LP + staking | Medium | Medium | 10-20% |
| Levered yield | High | High | 20-50%+ |
Evaluation Criteria
- Sustainable APY vs emissions
- Smart contract risk
- Impermanent loss exposure
- Liquidity for exit
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Step-by-Step Instructions
1
Define Objectives
Set target return, risk tolerance, time horizon, and asset preferences.
Tips
- ✓Be realistic about returns
- ✓Higher yield = higher risk
- ✓Match to your situation
2
Research Opportunities
Survey current yields across protocols. Use DefiLlama, Fensory, or protocol sites.
Tips
- ✓Compare similar risk levels
- ✓Check if yield is sustainable
- ✓Avoid obvious Ponzi schemes
3
Assess Risks
Evaluate smart contract, counterparty, IL, and market risks for each option.
Tips
- ✓Audits reduce but do not eliminate risk
- ✓TVL indicates trust level
- ✓Diversify across protocols
4
Design Strategy
Combine protocols: deposit here, stake there, compound with this.
Tips
- ✓Map out fund flows
- ✓Identify all transaction steps
- ✓Calculate total expected yield
5
Model Scenarios
Calculate returns in good, bad, and worst cases. Include gas costs.
Tips
- ✓What if token drops 50%?
- ✓What if rates collapse?
- ✓Can you exit quickly?
6
Execute Strategy
Implement step by step. Start small, then scale if working.
Tips
- ✓Test with small amount first
- ✓Document each step
- ✓Verify each position
7
Monitor and Iterate
Track performance vs expectations. Adjust as conditions change.
Tips
- ✓Regular review schedule
- ✓Exit non-performers
- ✓Compound winners