How to use it
- Enter the deposit in CAD and the number of days.
- Split the advertised APR into its fee part and its reward-token part.
- Enter a price change for the reward token over the period.
- Enter the price change of token A against token B, which drives impermanent loss.
- Add the total gas for entering, claiming and exiting, then read the net result against holding.
Taking a headline APR apart
Farm screens usually show one number made of two different things. The fee APR comes from trading fees, paid in the pool's own tokens. The reward APR comes from incentive tokens, normally valued at today's price. Reward tokens are often sold by many recipients, so their price can fall during the very period you are earning them.
The calculator treats the two parts separately. Fees are earned as an APR on the pool position. Rewards are valued at the deposit-time price and then adjusted by half of the reward token's price change. That is the average effect if rewards arrive evenly, the price moves in a straight line, and each reward is valued when it arrives. If you hold every reward token to the end, the full price change applies, so the calculator is optimistic in that case.
Worked example
Illustrative inputs: $10,000 in a 50/50 pool for 180 days; an 8% fee APR and a 30% reward APR (38% headline); token A rises 50% against token B; the reward token falls 50%; $60 of gas in total.
A naive reading of the 38% headline for 180 days on $10,000 suggests about $1,873.97. The rebuilt contribution of farming is $1,280.22, roughly a third less. If the reward token had gone to zero, rewards would count for $739.73 under the half-move assumption and the net result would be $910.36; if it had held its price, $1,650.09.
| Component | CAD |
|---|---|
| Value if you had simply held both tokens | $12,500.00 |
| Pool value before fees (impermanent loss 2.02%) | $12,247.45 |
| Trading fees (8% APR for 180 days) | +$483.19 |
| Rewards at the deposit-time price (30% APR for 180 days) | $1,479.45 |
| Rewards after half of the −50% reward-token move | +$1,109.59 |
| Gas | −$60.00 |
| End value | $13,780.22 |
| Net result against holding | +$1,280.22 |
Reading the realized APR carefully
The results also show a realized APR: the end value against your deposit, annualized. In the example it is 76.65%, far above the 38% headline. The farm did not pay more. Token A rose 50%, and the realized APR includes that market gain; with a falling pair, it would include the market loss instead.
To judge the farm itself, use the net result against holding. It isolates what providing liquidity added or cost after impermanent loss, the reward token's decline and gas.
What the model does not capture
The model uses a full-range 50/50 constant-product pool and a constant fee APR. It leaves out withdrawal fees or lockups, changes in your share of the pool as others enter or leave, and the chance that an incentive program ends early. Gas is a single total; to see how large a position must be to recover it, use the gas breakeven calculator.
The largest risks sit outside the arithmetic: contract exploits, administrator keys that can change a farm's rules, and reward tokens with too little trading volume to sell. See smart contract risk, and use the impermanent loss calculator for stable-pool cases.
Canadian tax pointers
CRA has not published guidance on liquidity provision or farm rewards. Its general crypto-asset guidance treats trading one crypto-asset for another as a disposition and decides between capital gains and business income using factors such as how often you transact and how much time you spend. An active farming strategy may look more like a business; see capital vs business income.
Each claim, swap and deposit can be a recordable event. Track the CAD value of reward tokens when received and when sold; the ACB calculator keeps the average cost straight.