> 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 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.


---

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