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Onchain Economics
Yield

Mercenary Capital

Capital that moves between protocols purely to chase the highest incentives, with no loyalty or long-term commitment.

In-Depth Explanation

Mercenary capital deposits for yield farming rewards and leaves immediately when incentives decrease. It inflates TVL metrics temporarily but doesn't indicate sustainable protocol health. Protocols try to convert mercenary capital to sticky deposits through good products and community.

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Real Users Vs Subsidized Activity

Related Terms

Liquidity Mining

Earning token rewards by providing liquidity to a DeFi protocol.

Total Value Locked

TVL

The total value of crypto assets deposited in a DeFi protocol or across all of DeFi.

Emissions

New tokens distributed by a protocol as incentives, typically to liquidity providers or users.

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Annual Percentage Yield

APY

The annualized return on an investment accounting for compound interest.

Annual Percentage Rate

APR

The annualized return on an investment without accounting for compounding.

Real Yield

Yield derived from actual protocol revenue and economic activity, not token emissions or inflation.

Impermanent Loss

IL

The loss in value compared to simply holding assets, caused by providing liquidity to an AMM as prices diverge.

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