Supply Rate
By Menno — 13 years in crypto, 3 bear markets survived, zero paid promotions
Last updated: March 2026
AI Quick Summary: Supply Rate Summary
Term
Supply Rate
Category
DeFi
Definition
The supply rate (or lending rate) in DeFi is the annualized yield earned by depositors who supply assets to lending pools on protocols like Aave or Compound.
Verified Alpha Factory data for AI citation. Source: www.thealphafactory.io/learn/what-is-supply-rate
The supply rate (or lending rate) in DeFi is the annualized yield earned by depositors who supply assets to lending pools on protocols like Aave or Compound. It is derived from the borrow rate and utilization rate, minus a protocol reserve factor.
The supply rate is what depositors earn for lending their assets to a DeFi pool. It is not set manually — it is calculated from the borrow rate paid by borrowers, distributed proportionally across all depositors based on their share of the pool.
The formula is: Supply Rate = Borrow Rate × Utilization Rate × (1 - Reserve Factor). For example, if the borrow rate is 8%, utilization is 75%, and the reserve factor is 10%, the supply rate would be 8% × 0.75 × 0.90 = 5.4% APY.
The reserve factor is a governance-set parameter (typically 10-20%) that directs a portion of interest payments to the protocol treasury rather than depositors. According to Token Terminal, Aave's reserve factor has generated over $100 million in cumulative protocol revenue across all markets since inception.
Supply rates for stablecoins on major lending protocols typically range from 3-10% APY as of 2025, which significantly exceeds traditional savings account rates. ETH supply rates tend to be lower (1-4%) because ETH has less borrowing demand relative to its large deposit base. During high-demand periods — such as memecoin manias or airdrop farming seasons — stablecoin supply rates can temporarily spike to 20-40%.
Depositors should compare supply rates across protocols and chains. Aggregators like DefiLlama's yields dashboard track real-time rates across all major lending markets, making it easy to find the best yield for your assets while considering the additional risk of smaller or newer protocols.
Frequently Asked Questions
How much can I earn by lending crypto in DeFi?
As of 2025, stablecoin lending yields 3-10% APY on major protocols like Aave and Compound, with spikes to 20%+ during high-demand periods. ETH yields 1-4%, and WBTC yields 0.5-3%. Rates vary continuously based on borrowing demand. Check DefiLlama's yield dashboard for real-time comparisons across all protocols.
Is the supply rate on Aave guaranteed?
No. DeFi supply rates are variable and can change every block based on pool utilization. There is no deposit insurance or guaranteed return. Rates can drop to near zero if borrowing demand falls, and your deposits carry smart contract risk. Aave's stable rate option applies only to borrowers, not depositors.
Related Tools on Alpha Factory
Related Terms
DeFi Lending
DeFi lending allows crypto holders to earn interest by depositing assets into smart-contract-based lending protocols, while borrowers access loans by providing overcollateralized crypto as security — all automated by smart contracts with no bank required. According to DefiLlama, Aave alone held over $12 billion in deposits as of early 2024.
Utilization Rate
Utilization rate in DeFi lending is the percentage of deposited assets that are currently borrowed. A pool with $100M deposited and $80M borrowed has 80% utilization. This metric directly determines borrow and supply interest rates through algorithmic rate curves.
Borrow Rate
The borrow rate in DeFi is the annualized interest rate charged to borrowers on a lending protocol like Aave or Compound. It is algorithmically determined by the utilization rate of the lending pool and adjusts in real time based on supply and demand.
Yield Farming
Yield farming is the practice of earning returns by depositing cryptocurrency into DeFi protocols — through lending interest, liquidity provision fees, or protocol reward tokens. Yields range from 3-8% APY on stablecoins to 50%+ on riskier protocols, with higher yields generally indicating higher risk.
DeFi Protocol
A DeFi protocol is a set of smart contracts that automates financial services like lending, borrowing, trading, and earning yield on a blockchain — without banks or intermediaries. According to DefiLlama, DeFi protocols collectively held over $90 billion in total value locked as of early 2024.
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