DeFi Summer: The 10,000% APY Era Nobody Talks About

On 15 June 2020, a lending app called Compound began handing out a new token, COMP, to everyone who lent or borrowed money through it. Within hours COMP was trading at around $62 on Uniswap. The arithmetic was suddenly absurd: people were being paid more in free COMP than they were paying in interest, so it made sense to borrow just to collect the reward. That afternoon started what the industry still calls "DeFi Summer".

DeFi stands for decentralised finance: lending, borrowing and trading run by programs on a blockchain (a shared public ledger) instead of by a bank or a broker. A smart contract is code that moves money by itself when its conditions are met, so a lending app is simply a pot of deposits and a rulebook that sets the interest rate. No branch, no loan officer.

The numbers

DefiLlama, a public service that tracks how much money sits in these apps, put the total at about $1.1 billion in June 2020. By 1 September it was $8.6 billion. By the end of the year it was $15 billion. It peaked at about $177 billion on 9 November 2021. The advertised returns were the hook. Yields were quoted as an APY (annual percentage yield, the yearly return including compounding, the figure a savings account shows), and screens showed 1,000%, 5,000%, sometimes five figures.

How the yields were made

The engine was "liquidity mining", also called yield farming. A trading app needs a stock of coins to trade against, much as a market maker on a stock exchange keeps inventory. Uniswap, the largest such app, worked as an automated market maker: instead of matching buyers with sellers, it held pools of two tokens and let a formula set the price. The people who deposited coins into those pools, liquidity providers, took a cut of every trade.

Liquidity mining added a second payment on top: a brand-new governance token, a coin that works like a voting share in the app. Compound paid COMP. Balancer paid BAL from 1 June 2020. Andre Cronje's Yearn Finance released 30,000 YFI in July 2020 with no sale and no allocation to the team; deposits jumped from about $8 million to over $300 million once the token was announced, and within two months one YFI cost more than one bitcoin.

The flaw was simple. A 10,000% yield paid in a token the app had just printed is not income. It is dilution, like a company paying its dividend in freshly issued shares. The yield is only worth what the token fetches when sold, and everyone farming it was selling.

The copies

In late August 2020 an anonymous developer known as Chef Nomi copied Uniswap's code, called it SushiSwap, and paid SUSHI tokens to anyone who deposited their Uniswap pool receipts. It was a "vampire attack": take a rival's customers by bribing them to move. By the migration on 9 September, roughly $810 million of Uniswap's deposits had moved across. Four days earlier Chef Nomi had sold his developer stake for about $14 million in Ether. After a public outcry he handed control to Sam Bankman-Fried, then running the trading firm Alameda Research, and later returned the money.

Uniswap answered on 16 September 2020 by sending 400 of its own new UNI tokens to every address that had ever used it, worth about $1,200 at the time. Food-named copies such as Kimchi, Pizza and Hotdog came and went within weeks. YAM, launched on 11 August 2020, drew hundreds of millions of dollars of deposits within a day, then a bug in its supply code broke it. Its market value fell from nearly $475 million to about $19.5 million in minutes, according to The Block. Brock Elmore, a co-founder, apologised.

What was left

The bear market of 2022 finished off most farms. The same high-yield promise, moved into companies, took down the lender Celsius, which had offered savers up to 18% before freezing withdrawals in June 2022. By the end of 2022 DefiLlama counted $38 billion in DeFi, down almost 80% from the peak.

The idea did not die, but the yields did. The apps that lasted earned money from real activity: Uniswap from trading fees, Aave and Compound from the gap between what borrowers pay and lenders receive, Lido from the rewards Ethereum pays for securing the network (staking, the crypto version of earning interest for keeping a deposit locked). Maker, the issuer of the DAI dollar token, renamed itself Sky in 2024 and kept going. Those yields usually sit in single digits, like a bond fund rather than a lottery.

The fat-yield model kept resurfacing in new clothes. In November 2025 Stream Finance said an outside fund manager had lost about $93 million of user money, and its xUSD token, meant to hold $1, fell to around $0.26, according to Decrypt and Cointelegraph. Balancer, which helped start the craze with BAL, was hacked for about $128 million that month; its token holders voted in September 2026 to shut it down.

DefiLlama's total recovered to about $171 billion in October 2025, then fell every month of 2026 to a low of about $68 billion on 1 July. On 16 October 2026 it stood near $90 billion. DeFi Summer's legacy is not the 10,000% farms. It is a handful of apps that charge real fees, and a reliable rule: if nobody can say in one sentence where the yield comes from, it is coming from the people who arrived last.