# Projected and realized yield: measuring what actually happened Projected yield estimates a future or annualized outcome using assumptions. Realized return measures what happened over a defined holding period after accounting for relevant cash flows and costs. A position can earn more token units while losing value in dollars, so the unit of measurement must be explicit. Evidence: [How does compound interest work?](https://www.consumerfinance.gov/ask-cfpb/how-does-compound-interest-work-en-1683/); [DefiLlama: How we calculate TVL](https://docs.llama.fi/analysts/data-definitions); [Reserve](https://www.aave.com/docs/aave-v3/concepts/reserve) Canonical: https://degreesofsatoshi.com/encyclopedia/realized-vs-projected-yield/ Published: 2026-10-02 Substantively modified: 2026-10-02 Independently verified by an automated reviewer: 2026-10-02T18:15:18.493Z Data current through: 2026-10-02 AI-assisted research and drafting with a separate automated source-verification pass; no external expert or named human review is implied. ## Key facts - **Compounding inputs:** Principal, interest rate and compounding frequency determine the illustrated compound-interest calculation. ([How does compound interest work?](https://www.consumerfinance.gov/ask-cfpb/how-does-compound-interest-work-en-1683/)) - **Currency:** Token units and their market-valued amount are separate quantities. ([ERC-20 Token Standard](https://eips.ethereum.org/EIPS/eip-20); [DefiLlama: How we calculate TVL](https://docs.llama.fi/analysts/data-definitions)) - **Rate changes:** Aave reserve rates can change with utilization and governance parameters. ([Reserve](https://www.aave.com/docs/aave-v3/concepts/reserve)) ## More tokens can still mean less dollar value Suppose a position starts with 100 tokens valued at $2 each and ends with 105 tokens valued at $1.50 each. Token units rose 5%, but the ending value is $157.50 against $200 initially, before costs and other cash flows. The example shows denomination risk, not a forecast. Report both the asset-unit change and the valuation basis. Evidence: [ERC-20 Token Standard](https://eips.ethereum.org/EIPS/eip-20) ## Deposits and withdrawals are not investment earnings If more assets were added during the period, a larger ending balance does not by itself measure return. Keep contributions, withdrawals, claimed rewards and remaining shares separate. A reproducible report specifies its method and dates. Comparing wallets with different cash-flow timing requires more care than subtracting two balances. Evidence: [Tokenized Vaults](https://eips.ethereum.org/EIPS/eip-4626) ## Expose the assumptions behind an annual rate State whether the rate extrapolates a recent window, assumes compounding or values future incentive tokens at today’s price. Include costs that affect the holder’s outcome. An annualized display can be useful for comparison when methods match. It should not be labeled a verified future return. Evidence: [How does compound interest work?](https://www.consumerfinance.gov/ask-cfpb/how-does-compound-interest-work-en-1683/); [DefiLlama: How we calculate TVL](https://docs.llama.fi/analysts/data-definitions) ## Questions ### Is an unclaimed reward automatically realized profit? No. It may remain an asset exposure with uncertain sale value and claim costs. Define whether the report measures accrued token rewards, claimed units or net proceeds in a chosen currency. Evidence: [DefiLlama: How we calculate TVL](https://docs.llama.fi/analysts/data-definitions); [ERC-20 Token Standard](https://eips.ethereum.org/EIPS/eip-20) ## Claims and scope ### realized-vs-projected-yield-quick-answer Projected yield estimates a future or annualized outcome using assumptions. Realized return measures what happened over a defined holding period after accounting for relevant cash flows and costs. A position can earn more token units while losing value in dollars, so the unit of measurement must be explicit. Scope: {"collection":"defi","dataAsOf":"2026-10-02","blockHeight":null} ### realized-vs-projected-yield-fact-compounding-inputs Compounding inputs: Principal, interest rate and compounding frequency determine the illustrated compound-interest calculation. Scope: {"collection":"defi","dataAsOf":"2026-10-02","blockHeight":null} ### realized-vs-projected-yield-fact-currency Currency: Token units and their market-valued amount are separate quantities. Scope: {"collection":"defi","dataAsOf":"2026-10-02","blockHeight":null} ### realized-vs-projected-yield-fact-rate-changes Rate changes: Aave reserve rates can change with utilization and governance parameters. Scope: {"collection":"defi","dataAsOf":"2026-10-02","blockHeight":null} ## Sources - [How does compound interest work?](https://www.consumerfinance.gov/ask-cfpb/how-does-compound-interest-work-en-1683/) — Consumer Financial Protection Bureau. The arithmetic effect of compounding at a stated hypothetical rate. Locator: Compound interest; Examples. Retrieved: 2026-10-02T17:21:46.950Z. - [DefiLlama: How we calculate TVL](https://docs.llama.fi/analysts/data-definitions) — DefiLlama. Provider-specific valuation scope and TVL methodology. Locator: Total Value Locked. Retrieved: 2026-10-02T17:03:46.209Z. - [Reserve](https://www.aave.com/docs/aave-v3/concepts/reserve) — Aave. Reserve LTV, liquidation threshold, borrow availability, caps and rate parameters. Locator: Key Reserve Parameters; Dynamic Parameters and Governance. Retrieved: 2026-10-02T17:03:44.647Z. - [ERC-20 Token Standard](https://eips.ethereum.org/EIPS/eip-20) — Ethereum Improvement Proposals. Token supply, displayed units and balance accounting. Locator: totalSupply; balanceOf; transfer; decimals; approve; allowance; transferFrom; Transfer. Retrieved: 2026-10-02T17:03:45.826Z. - [Tokenized Vaults](https://eips.ethereum.org/EIPS/eip-4626) — Ethereum Improvement Proposals. Assets, shares, deposits, withdrawals, limits and preview rounding. Locator: Specification; Security Considerations. Retrieved: 2026-10-02T17:03:42.366Z. ## Revision history - 2026-10-02: First publication after primary-source research and independent automated verification. ## Cite this entry Degrees of Satoshi editorial project. “Projected and realized yield: measuring what actually happened.” Published 2026-10-02; updated 2026-10-02. https://degreesofsatoshi.com/encyclopedia/realized-vs-projected-yield/