> For the complete documentation index, see [llms.txt](https://hertzflow.gitbook.io/hertzflow-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://hertzflow.gitbook.io/hertzflow-docs/liquidity-provision/yield.md).

# Yield

Where LP yield comes from — trading fees, borrow fees, and trader losses.

## Where Your Yield Comes From

As an LP, you earn from three fee streams — all generated by real trading activity, not token emissions:

### Trading Fees

Every time a trader opens or closes a position, they pay a fee. A portion goes directly to your pool, increasing your HzLP/HzV token value.

### Borrow Fees

Traders pay an hourly borrow fee for using your liquidity as leverage. The more your pool is utilized, the higher the borrow rate — and the more you earn.

### Liquidation Fees

When a trader's position is force-closed, a liquidation fee is charged. This compensates you for bearing the execution risk.

All fees settle continuously into the pool. Your HzLP/HzV tokens appreciate automatically — **no manual claiming required**.

## Understanding APY

The platform shows two yield metrics:

| Metric        | What It Measures                                                             | Volatility                     |
| ------------- | ---------------------------------------------------------------------------- | ------------------------------ |
| **Fee APR**   | Annualized returns from trading fees only (open, close, borrow, liquidation) | Lower — steady baseline        |
| **Total APY** | All yield sources including trader PnL impact                                | Higher — includes PnL variance |

Fee APR gives you a conservative baseline of what to expect from fee income alone. Total APY is the complete picture, but it swings more because trader PnL can go either way.

**APY formula:**

$$
APY\_{total} = \left( 1 + \frac{APR\_{Day}}{365} \right)^{365} - 1
$$

**Example:** If a pool generates 0.1% daily APR from fees, the compounded APY is approximately 44%.

{% hint style="info" %}
APY is variable and not guaranteed. Past performance does not predict future results.
{% endhint %}

## Revenue Distribution

| Recipient             | Share | Purpose                                                                                                                                                         |
| --------------------- | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| **You (LPs)**         | 63%   | Compensation for providing liquidity and bearing counterparty risk                                                                                              |
| **Protocol Treasury** | 37%   | Reinvested into protocol growth: protocol-owned liquidity, gas subsidies, trading competitions, trader rebates, LP insurance backstops, and incentive campaigns |

The treasury share ultimately flows back to benefit LPs and traders — through deeper liquidity, better incentives, and stronger protocol resilience.


---

# Agent Instructions
This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com.

## Querying This Documentation
If you need additional information that is not directly available in this page, you can query the documentation by asking a question.

Perform an HTTP GET request on the following URL with the `ask` and `goal` query parameters:

```
GET https://hertzflow.gitbook.io/hertzflow-docs/liquidity-provision/yield.md?ask=<question>&goal=<user_goal>
```

`ask` is the immediate question: it should be specific, self-contained, and written in natural language.
`goal` is what the user is ultimately trying to achieve, the reason they need the answer. Sharing it helps GitBook give you a better, more relevant answer. A goal is most helpful when it describes the outcome the user wants rather than restating the question. For example, with `ask=how do I create an API token`, a goal like `automate deployments from our CI pipeline` lets GitBook tailor the answer to that use case.

The response will contain a direct answer to the question and relevant excerpts and sources from the documentation.

Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.