Protocols like Aave, Morpho, or Compound have become popular decentralized finance platforms that let users borrow against their assets or earn yield by supplying assets or facilitating peer-to-peer lending. However, interacting with these protocols often requires users to navigate multiple platforms and manage complex wallet setups.
What is Yield in DeFi?
In DeFi, yield refers to the earnings generated by putting your crypto assets to work in various financial activities on blockchain networks. Unlike traditional finance, DeFi offers multiple avenues to earn yield, each with unique mechanisms and risk profiles. DeFi protocols can significantly reduce costs—sometimes by up to 70%—by eliminating intermediaries, making earning yield more efficient than in traditional finance. The main types of yield in DeFi include:
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Lending Yield: By supplying digital assets like USDC, DAI, or ETH to lending protocols such as Aave or Compound, users earn interest paid by borrowers who take loans against collateral. This interest is typically expressed as an Annual Percentage Yield (APY) and is accrued automatically through tokens like aTokens on Ethereum smart contracts.
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Staking Yield: Users can stake tokens in proof-of-stake blockchains or specific DeFi protocols to support network security or governance, earning staking rewards in return. This yield depends on factors like staking duration, network inflation, and protocol incentives.
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Yield Farming: This involves providing liquidity to a decentralized exchange or liquidity pools and earning rewards in the form of fees and additional tokens. Yield farming often requires users to lock their assets in smart contracts and may include complex strategies to maximize returns.
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Liquidity Mining: Similar to yield farming, liquidity mining rewards users for supplying liquidity to an exchange but typically includes extra incentives such as governance tokens distributed by the protocol. These incentives are distributed through smart contracts that are deployed on the blockchain.
Yield in DeFi is dynamic and influenced by market demand, protocol rules, and blockchain network conditions. Users need to understand the variable nature of returns and the underlying blockchain technology that secures these protocols.
This article primarily focuses on lending yield, where users supply digital currencies to lending markets and earn interest through decentralized protocols secured by Ethereum smart contracts. Integrating these yield opportunities into applications can empower users to generate passive income while maintaining control over their crypto assets through secure and seamless embedded wallet solutions.
Yield Protocols
Several decentralized protocols have been developed to specialize in providing lending yield, each with unique mechanics and risk profiles:
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Aave is a leading decentralized lending protocol where users supply assets to earn interest while borrowers post collateral to take loans. It uses dynamic interest-rate models and issues aTokens to represent supplied assets. With a multi-chain presence on the Ethereum network and other blockchain networks, mature developer documentation, and a unified API for accessing DeFi yields, Aave is popular for integration.
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Morpho operates as a capital-efficiency layer on top of base lending markets like Aave. It optimizes interest rates by matching lenders and borrowers in a peer-to-peer fashion, reducing spreads and potentially increasing returns for suppliers. Morpho is often paired with other lending pools to boost yield.
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Compound is another prominent decentralized lending protocol that allows users to supply and borrow assets with variable interest rates determined by market conditions. Compound issues cTokens to represent user deposits, which accrue interest over time. Known for its pioneering role in DeFi lending, Compound offers a straightforward and reliable platform with strong community support and integration options.
Protocols feature variable interest rates that fluctuate according to supply, demand, and market utilization. Developers integrating these protocols benefit from access to real-time analytics platforms and yield aggregation tools that enable users to optimize returns.
Example: Openfort x Aave Integration
Aave is an open-source, non-custodial liquidity protocol built on Ethereum and other blockchain networks. It enables users to supply digital assets to earn yield and borrow against collateral. When users supply assets, Aave mints aTokens that accrue interest automatically, reflecting the growing value of the supplied assets.
Aave is deployed on multiple blockchain networks, enabling cross-chain features that expand its utility for developers and users alike. Aave and Openfort are creating foundational infrastructure for decentralized finance, facilitating new capabilities and unlocking value across the ecosystem.
Openfort provides the infrastructure and toolkit to embed wallets seamlessly into applications, enabling users to interact with decentralized protocols like Aave without the complexity of traditional wallet setups. Openfort’s ‘Invisible Wallets’ allow sign-up using familiar web-based Web2 authentication methods, bridging traditional and decentralized systems and removing barriers for onboarding to enhance user experience.
The Wallet-as-a-Service (WaaS) solution supports automated systems and secure transaction execution, enabling developers to build scalable DeFi applications that integrate lending, borrowing, and yield farming functionalities.
Together, Openfort and Aave form a powerful combination that leverages blockchain technology to create a user-friendly, secure, and compliant decentralized finance ecosystem, with Openfort playing a key role in ensuring compliance with regulatory standards.
What is an Embedded Wallet?
An embedded wallet operates seamlessly within your app, enabling users to create accounts and sign transactions without external browser extensions or separate wallet apps. Openfort offers this as a non-custodial product and SDK, including 'Invisible Wallets' that simplify onboarding by allowing sign-up via familiar Web2 authentication methods.
This embedded wallet infrastructure acts as an operating system for your application's crypto transactions, providing secure execution, gas sponsorship, and compliance support behind the scenes.
The integration of Aave’s lending protocol with Openfort’s embedded wallets enables a streamlined experience within a single application, combining lending and borrowing functionalities without the need for external wallets or platform switching.
Key features of this integration include:
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Unified User Interface: Users can supply and borrow assets directly within the app, with real-time access to live APY data sourced from Aave’s analytics platform and decentralized marketplaces.
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Gas Sponsorship Support: Openfort’s embedded wallets can handle transaction fees on behalf of users, removing the necessity for users to hold native tokens like ETH to perform actions. This gasless transaction feature lowers barriers and improves user adoption.
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Customizable User Flows: The integration allows the app to guide users through deposits, withdrawals, borrowing, and repayments with tailored prompts and educational information, ensuring a smooth and intuitive experience.
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Security, Decentralization, and Compliance: The solution maintains the security assurances of decentralized smart contracts while offering a user-friendly, non-custodial wallet experience. Openfort’s infrastructure ensures compliance with regulatory standards, safeguarding both users and developers.
Applications using this integration can present important metrics such as:
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Current APYs per asset with timestamps to reflect their variable nature.
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Utilization ratios and supply/borrow rates to provide context for APY changes.
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aToken balances showing accrued interest and yield.
These elements contribute to a transparent and cohesive user experience within the app, empowering users with actionable intelligence and control over their digital assets.
Get Started Today
For detailed setup instructions, example code, and comprehensive guidance, developers are encouraged to explore the Openfort Aave recipe available on GitHub. The full documentation provides everything needed to implement this integration efficiently within your application.
Begin your integration journey by visiting the Openfort website and explore the detailed Aave integration recipe on GitHub for step-by-step guidance.