Manually claiming and reinvesting DeFi rewards is tedious, gas-expensive, and leaves money on the table. Yield aggregators solve this by automatically compounding your rewards—and the difference can be substantial. A 10% APR with daily compounding becomes 10.52% APY. On large positions over long periods, that compounds into significant additional returns.
This guide covers how yield aggregators work, compares the major platforms, and helps you understand when aggregators make sense versus managing yields yourself.
📑 What You'll Learn
- • How yield aggregators and auto-compounders work
- • APR vs APY: the power of compounding
- • Major aggregator platforms compared
- • Fee structures and break-even analysis
- • Strategy vaults and yield optimization
- • Risks and considerations
How Yield Aggregators Work
Yield aggregators are protocols that automatically optimize and compound your DeFi yields. Instead of manually claiming rewards and reinvesting, aggregators do this automatically, batching transactions across users to reduce gas costs.
The Auto-Compounding Process
1. You deposit LP tokens or assets into an aggregator vault
2. Vault deploys capital to underlying protocol (e.g., Curve pool)
3. Rewards (CRV, bonus tokens) accumulate
4. Harvester bots claim rewards at optimal intervals
5. Rewards are swapped back to the deposited asset
6. Converted assets are redeposited, increasing your position
7. Process repeats automatically
The "optimal interval" is key—compounding too frequently wastes gas, too rarely leaves yield on the table. Good aggregators calculate the optimal compound frequency based on reward rate and gas costs.
Types of Yield Aggregators
Auto-Compounders: Focus purely on claiming and reinvesting rewards. Beefy Finance is the prime example—simple, widespread, multi-chain.
Strategy Vaults: More sophisticated. Deploy capital across multiple protocols, shift between opportunities, and implement complex strategies. Yearn Finance pioneered this approach.
Boost Optimizers: Specifically optimize boost mechanisms like veCRV voting power. Convex Finance aggregates CRV voting power to maximize Curve yields for all depositors.
💡 Key Insight
The value of aggregators isn't just auto-compounding—it's gas efficiency. A single user compounding $1,000 daily pays $10-50 in gas per compound. An aggregator batching 1,000 users pays that once and splits the cost. At scale, aggregators make frequent compounding economical.
APR vs APY: The Math of Compounding
Understanding the difference between APR (Annual Percentage Rate) and APY (Annual Percentage Yield) is essential for evaluating aggregator value.
The Compounding Formula
APY = (1 + APR/n)^n - 1
Where n is the number of compounding periods per year. More frequent compounding = higher APY for the same APR.
| Base APR | Compound Monthly | Compound Daily | Compound Hourly |
|---|---|---|---|
| 5% | 5.12% | 5.13% | 5.13% |
| 10% | 10.47% | 10.52% | 10.52% |
| 20% | 21.94% | 22.13% | 22.14% |
| 50% | 63.21% | 64.82% | 64.87% |
Notice that higher APRs benefit more from frequent compounding. A 50% APR becomes 64.87% APY with hourly compounding—almost 30% additional return from compounding alone.
Interactive: Yield Aggregator Calculator
Compare different yield aggregators and see how auto-compounding affects your returns over time.
vault • TVL: $300M
Simple Interest
$10,640
With Auto-Compound
$10,661
Compounding Bonus
+$21
Auto-compounding saves gas and time. On Ethereum mainnet, manual compounding costs $10-50 per transaction. Aggregators batch compounds across users, making frequent compounding economical even for smaller positions.
Major Yield Aggregator Platforms
Yearn Finance
Type: Strategy Vaults | Chains: Ethereum, Arbitrum, Fantom
Fee: 20% performance fee | TVL: ~$300M
The original yield aggregator. Yearn vaults implement complex strategies managed by experienced strategists. The v3 vault system introduced modular strategies and better risk management. Best for: sophisticated yield strategies on blue-chip assets.
Beefy Finance
Type: Auto-Compounder | Chains: 20+ chains
Fee: 4.5% performance fee | TVL: ~$200M
The most widely deployed auto-compounder. Simple, reliable, and available on virtually every chain. Lower fees than competitors. Best for: simple auto-compounding across multiple chains.
Convex Finance
Type: Boost Optimizer | Chains: Ethereum
Fee: 16% performance fee | TVL: ~$2B
Dominates Curve liquidity optimization. By pooling veCRV voting power, Convex provides boosted yields to all depositors regardless of individual veCRV holdings. Also processes CVX rewards. Best for: Curve LP positions.
Concentrator
Type: Auto-Compounder | Chains: Ethereum
Fee: 10% performance fee | TVL: ~$100M
Auto-compounds Convex and Curve rewards into a single asset. Instead of receiving multiple tokens, rewards convert to your chosen asset. Best for: simplified Curve/Convex yield.
Comparing Aggregators
| Aggregator | Best For | Fee | Complexity |
|---|---|---|---|
| Yearn | Sophisticated strategies | 20% | High |
| Beefy | Multi-chain simplicity | 4.5% | Low |
| Convex | Curve optimization | 16% | Medium |
| Concentrator | Single-asset compounding | 10% | Medium |
Fee Analysis: When Aggregators Make Sense
Aggregator fees eat into your yield. The question isn't whether fees are bad—they're payment for a service—but whether the service provides more value than it costs.
Break-Even Analysis
For an aggregator to be worth using, the additional yield from compounding must exceed the fees charged.
Example: 20% APR position, 20% performance fee
Manual (monthly compound): 21.94% APY
Aggregator (daily compound): 22.13% APY
Net after 20% fee: 17.7% APY
Result: Aggregator loses! Fee exceeds compounding benefit.
In this case, a 20% performance fee on modest APR positions destroys value. Let's try higher APR:
Example: 50% APR position, 4.5% performance fee (Beefy)
Manual (monthly compound): 63.21% APY
Aggregator (daily compound): 64.82% APY
Net after 4.5% fee: 61.90% APY
Result: Aggregator wins IF your gas costs for monthly manual compounds exceed 1.31% of position annually.
⚠️ Fee Reality Check
High performance fees (15-20%) often don't make sense for simple auto-compounding. They may be justified for complex strategy vaults where active management genuinely adds value. Always calculate: does the fee exceed the compounding benefit?
Advanced Aggregator Strategies
Strategy Vault Selection
Not all vaults are equal. When evaluating strategy vaults:
- Historical Performance: Check vault history on DefiLlama. Has it consistently delivered advertised yields?
- Strategy Complexity: More complex strategies have more failure modes. Understand what the vault actually does.
- Strategist Track Record: Who built the strategy? Yearn strategies are public; check the strategist's history.
- Asset Risk: A vault can perform perfectly while the underlying asset tanks. Match vault assets to your risk tolerance.
Boost Stacking
Layer boost mechanisms for maximum yield:
Base: Curve pool LP fees (2%)
+ Curve CRV emissions (5%)
+ Convex CVX emissions (8%)
+ Convex boost from pooled veCRV (4%)
= Total: ~19% APY
Then auto-compound via Concentrator for additional optimization
Aggregator Arbitrage
Sometimes the same underlying position has different net yields on different aggregators due to fee structures and harvest efficiency. Tools like DefiLlama let you compare actual yields across aggregators for the same base strategy.
Risks and Considerations
Smart Contract Risk
Aggregators add another contract layer. If the aggregator or underlying protocol is exploited, you lose funds. More layers = more attack surface.
Strategy Risk
Complex strategy vaults can have bugs in strategy logic. Even if contracts are secure, a bad strategy can lose money.
Harvest Timing
Sub-optimal harvest timing leaves yield on the table. Check aggregator harvest frequency and efficiency.
Slippage on Swaps
Converting rewards to base asset incurs slippage. Low liquidity reward tokens can suffer significant slippage.
Frequently Asked Questions
Should I always use aggregators?
No. For small positions or low-APR yields, aggregator fees may exceed benefits. For large positions you plan to actively manage, direct deposits give more control. Aggregators shine for medium positions where manual compounding gas costs are significant.
How do I know if my harvests are efficient?
Check the vault's harvest history on-chain or through the aggregator's dashboard. Irregular or infrequent harvests suggest suboptimal compounding. Good aggregators harvest whenever it's gas-efficient to do so.
What's the difference between vault tokens and receipt tokens?
When you deposit, you receive vault tokens (like yvUSDC for Yearn) representing your share. As the vault earns yield, your share becomes worth more. You don't see yield increasing your token count—instead, each token becomes worth more underlying assets.
Can I lose money in an auto-compounder?
Yes. If the underlying asset or LP position loses value, you lose. If the protocol is exploited, you lose. Auto-compounders compound returns—they don't guarantee them. Underlying risks remain.
How do taxes work with auto-compounding?
This is complex and jurisdiction-dependent. Some argue each compound is a taxable event (selling rewards, buying more LP). Others treat it as unrealized gains until withdrawal. Consult a crypto-savvy tax professional.
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Conclusion: Optimize Your Compounding
Yield aggregators solve a real problem—the gas cost and time burden of manual compounding. Used correctly, they can meaningfully improve your DeFi returns. Used incorrectly, you pay fees that exceed benefits.
The key is matching aggregator to use case. Use low-fee auto-compounders (Beefy) for simple positions. Use boost optimizers (Convex) for Curve positions. Consider strategy vaults (Yearn) only when the active management genuinely adds value beyond compounding.
And always do the math—if aggregator fees exceed the compounding benefit, you're paying for nothing. Calculate your break-even and make informed decisions.