Calculating the yield on a Uniswap pool

This post will describe how to calculate the yield on a Uniswap pool. Uniswap is an ethereum protocol that provides the services of a decentralized exchange (DEX). It is governed by votes from the uniswap token (UNI).

Click here for a description from Binance about how Uniswap works.

Once I understood the mechanics of Uniswap, the next thing I was curious about is what the rate of return is for those who pool their coins on the platform pairs. Since pooled coins share the 0.30% fee applied to exchange transactions for each pair, a rate of return can be earned by pooling coins.

We cannot determine the future yield of a uniswap pair pool, but we can calculate the historical yield and the “current yield”. Navigate to the data website setup for uniswap called uniswap.info. On this site you can search any pair. Take UNI/ETH for example

Total liquidity for UNI/ETH is $77 million, the 24 hour fees are $82,000. We can then calculate the 24 hour yield as 82,000 / 77,000,000 = 0.1065 or 38% annualized. This is a very raw calculation, but good enough to see what kind of rates of return are possible.

Another example at the time of writing is the USDC/ETH pair has $149 million of liquidity and $125,000 of 24 hour fees, so the annual yield is only 0.30% annualized.

I haven’t thought too much about why some pairs have higher/lower pool yields. Probably related to their use, ability to borrow, volitility, etc.

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