Hi there, I’ve recently become an LP in Curve’s ETH/stETH pool and have been noticing the daily APY fluctuates between 2-3%, which I understand is largely derived from trading fees. However, when I attempt to calculate these daily trading fees, the results seem far too insignificant to reach a 2% APR.
To illustrate my calculations, let’s take a snapshot of today’s data:
## Currency reserves
[**ETH**]( **329,195.20982** **(49.67%)**
## Base vAPY
* Daily **2.45%**
* Weekly **2.20%**
## Rewards tAPR
**CRV0.00075% → 0.0018% CRV**
* Daily USD volume: **$4.95m**
* Liquidity utilization: 0.40%
* Fee: **0.04%**
* DAO fee: 0.02%
* Virtual price: **1.073**
pool\_income = volume \* fee = $4.95m \* 0.04% = $1980
so all $1.231b worth of token in this pool is splitting the $1980.
every dollar will earn $1980/1.231b = 1.608E-6
APY = (1+1.608E-6)\^365 – 1 = 0.0587%
If my calculations are accurate, this suggests that the daily APR of 2.45% has very little correlation with trading fees. So, my question is: where exactly does this APR originate from?
5 thoughts on “How is Curve APY calculated? Looks like trading fee contributes very little”
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Hey! You should check this blogpost that talks exactly what is it to be an LP on Curve and their returns:
I wrote a piece of research on it recently that I’d like to link here, but the moderators here tag everything as spam, so I won’t do it to not be flagged as spammer (shame on you, mods).
The base vAPY shown in the website is about the swap fees only, and in fact, last year LPs in this pool made 2.94% APY. I don’t know how they calculate this “Daily Volume” but there are two possibilities here: 1) maybe this is the daily volumes of fees, so no need to multiply by 0.04% again 2) the timeframe used to calculate the volume is different of the vAPY, and is taking in account a period with much less swaps.
I guess what u/Belletz28 was trying to say is that, even though LPs are making 2.94% from swap fees, if you take into accound the rewards (in CRV and LDO tokens), the realized APY goes to ~6%. It happens because the Curve DAO emits the CRV token and distributes it to the LPs in the pools, and the same is valid for the Lido DAO with their LDO tokens. If you sell it at market value, you can add it to your returns.
It’s also worth noting that the vAPY can only be accurately used as “swap fees APY” for pegged assets pools, like the USDT/USDC/DAI or stETH/ETH pools. V2 pools like tricrypto don’t follow the same logic (and you will probably loose money in the long term due to impermanent loss).
You can find my text googling “Defi Returns Impermanent Loss and APY for Curve’s LPs”