Harvest Frequency: Hourly vs Daily vs Weekly

Hourly compounding maximizes capital efficiency by minimizing idle asset time, especially critical in high-APY environments. For example, a vault earning 10% APY on a $10M TVL can generate over $27,000 in additional annual yield compared to daily compounding, assuming continuous reinvestment. Protocols like Yearn Finance and Compound automate this via keepers and flash loans to capture micro-opportunities. However, this strategy incurs significantly higher gas costs and requires robust, low-latency infrastructure to execute reliably.

Daily compounding offers a pragmatic balance, reducing transaction frequency by ~96% compared to hourly while still capturing most of the efficiency gains. This is the standard for many mainstream DeFi protocols like Aave and Lido. The trade-off is a predictable, manageable gas overhead versus leaving a small percentage of potential yield on the table. Weekly compounding further reduces operational complexity and cost, making it suitable for protocols on higher-fee chains like Ethereum Mainnet or for strategies where gas optimization is the primary constraint.

The key trade-off: If your priority is maximizing yield for large TVL protocols on low-cost L2s (Arbitrum, Optimism), choose hourly compounding. The marginal gas cost is negligible compared to the yield captured. If you prioritize operational simplicity, predictable costs, and compatibility across diverse chain environments, choose daily or weekly compounding. This is often the correct choice for general-purpose vaults or protocols where user gas reimbursements are a concern.

Hourly harvesting excels at maximizing capital efficiency and yield by minimizing idle capital. For protocols like Aave or Compound, where interest accrues continuously, frequent compounding can significantly boost APY. For example, a vault with a 10% base APY can see a 10-15% relative increase in effective yield by moving from daily to hourly harvests, as shown in simulations from Yearn Finance strategies. However, this requires robust, low-latency automation via keepers like Chainlink Automation or Gelato, and incurs higher gas fees on networks like Ethereum.

Daily harvesting takes a balanced approach by optimizing for cost predictability and system reliability. This strategy reduces on-chain transaction costs by ~95% compared to hourly cycles on mainnet, making it the default for many established protocols like Convex Finance. It simplifies monitoring and reduces the risk of failed transactions during network congestion. The trade-off is a predictable, minor sacrifice in absolute yield—often less than 0.5% APY difference for most liquid staking or stablecoin pools—which is acceptable for projects prioritizing operational simplicity.

Weekly or less frequent harvesting is a strategic choice for protocols with high gas costs or illiquid positions. This is common for niche yield strategies on sidechains or Layer 2s where fees are less of a concern, or for protocols like Balancer that manage concentrated liquidity positions with high withdrawal penalties. The key trade-off is substantial gas savings and reduced keeper dependency, but at the cost of significant opportunity cost on volatile yield sources or during periods of high base rate volatility.

The key trade-off: If your priority is maximizing yield for a high-TVL protocol on an L2 or low-fee chain and you have engineering resources for resilient automation, choose hourly. If you prioritize cost-effective, reliable operations on Ethereum mainnet for a mainstream DeFi product, choose daily. Reserve weekly harvesting for experimental strategies, illiquid assets, or protocols where gas optimization is the paramount concern.