Arbitrum has cemented itself as the leading Layer 2 for DeFi in 2026, offering low fees, fast finality, and a rich ecosystem of yield opportunities. But with dozens of protocols competing for liquidity, separating sustainable yields from inflationary hype is critical. In this guide, we dive deep into the three most prominent yield farming protocols on Arbitrum: GMX, Pendle, and Camelot. We analyze their real APY (not just promotional numbers), risk profiles, impermanent loss exposure, and provide step-by-step instructions to start farming today.
Whether you're a seasoned DeFi farmer or a beginner looking to put your assets to work, this data-driven comparison will help you make informed decisions and maximize your risk-adjusted returns in 2026.
➡️ Read next (recommended)
📋 Table of Contents
Why Arbitrum in 2026?
Arbitrum One remains the dominant Layer 2 by TVL, with over $12 billion locked across DeFi protocols. Its optimistic rollup technology provides Ethereum-level security with transaction fees often below $0.10. For yield farmers, this means:
💡 Arbitrum Advantages for Yield Farmers:
- Low Fees: Frequent compounding and position adjustments are economical.
- Rich Ecosystem: Dozens of protocols compete, driving innovation and yield.
- Native Bridges & Fast Finality: Move assets from Ethereum in ~10 minutes.
- Incentive Programs: Arbitrum Foundation and protocols offer extra token rewards.
GMX: Perpetual DEX & Real Yield
GMX
Blue ChipGMX is a decentralized spot and perpetual exchange that generates fees from traders. Liquidity providers (LPs) earn a share of these fees, plus esGMX rewards. The protocol is known for its sustainable “real yield” model.
📊 Real APY Analysis (Feb 2026)
GLP (ETH/BTC/stable): 14.2% APY (60% from fees, 40% from esGMX incentives)
GMX staking (staked GMX): 22% APY (fees + multiplier points)
Historical volatility: APY ranges 10–25% depending on trading volume.
⚠️ Risks
GLP is an index of assets, so you are exposed to price movements of ETH/BTC. Impermanent loss is minimized due to the pool’s composition, but not zero. Smart contract risk is low after multiple audits and battle-testing.
Pendle: Future Yield Tokenization
Pendle
Yield DerivativesPendle enables users to tokenize and sell future yield. You can buy Principal Tokens (PT) for fixed yield or Yield Tokens (YT) for leveraged exposure. Pendle v3 on Arbitrum has seen explosive growth, with pools for Lido, Rocket Pool, GMX, and more.
📊 Real APY Analysis (Feb 2026)
Pendle LP (e.g., wstETH pool): 18% APY (swap fees + PENDLE incentives)
Buying YT (leveraged yield): Can yield 50–200% if rates rise, but high risk.
Fixed yield via PT: 8–12% guaranteed (e.g., PT-stETH).
⚠️ Complexity Risk
Pendle’s mechanisms require understanding of principal/yield separation. Impermanent loss can be high if you LP volatile pairs. Always understand the PT/YT dynamics before entering.
Camelot: Customizable AMM & Nitro Pools
Camelot
Innovative AMMCamelot is a next-generation DEX built natively on Arbitrum, offering customizable pools (dual fees, concentrated liquidity) and Nitro Pools that distribute protocol tokens to LPs. It’s the go-to launchpad for new Arbitrum projects.
📊 Real APY Analysis (Feb 2026)
Stablecoin LP (USDC/USDT): 12% APY (swap fees + GRAIL incentives)
Volatile pair (ARB/ETH) concentrated range: 35% APY, but high IL risk.
Nitro Pools (new projects): 50–100% APY (often unsustainable after initial period).
⚡ Advanced Strategy
Use xGRAIL (staked GRAIL) to boost your LP rewards by up to 2.5x. However, xGRAIL has a 6-month unlock, so commit only what you can lock.
Head-to-Head Comparison: Real APY & Key Metrics
Data as of February 25, 2026. APYs are net of fees and include token incentives where applicable. Always verify current rates on official dashboards.
| Protocol | Primary Pools | Real APY Range | TVL (Arbitrum) | Risk Level | IL Exposure |
|---|---|---|---|---|---|
| GMX | GLP (multi-asset), GMX staking | 14–22% | $2.8B | Low–Medium | Low (index pool) |
| Pendle | PT/Yt pools (LSTs, GMX) | 12–18% (LP), variable for YT | $1.5B | Medium | Medium–High |
| Camelot | Concentrated pools, Nitro Pools | 12–35% (depends on range) | $900M | Medium–High | High (if range narrow) |
How to Start Yield Farming on Arbitrum (Step-by-Step)
Bridge Assets to Arbitrum
Use the official Arbitrum Bridge or a third-party bridge like Hop or Across. Transfer ETH, USDC, or other assets. Total time: ~10–15 minutes.
Set Up a Wallet
Use MetaMask, Rabby, or Frame. Add the Arbitrum One network (Chain ID 42161) via Chainlist. Ensure you have a small amount of ETH for gas.
Choose Your Protocol
Based on your risk tolerance and yield goals, pick one of the protocols above. For beginners, GMX GLP is a solid start. For advanced users, Pendle or Camelot offer higher upside.
Provide Liquidity or Stake
Follow the protocol’s interface: mint GLP, buy PT/YT, or add liquidity to a Camelot pool. Approve tokens and confirm transactions.
Monitor and Compound
Use DeFi dashboard tools like DeBank or Zapper to track your positions. Compound rewards manually or use auto-compounding vaults (like Beefy) for convenience.
Key Risks & Mitigation Strategies
⚠️ Smart Contract Risk
All DeFi protocols carry smart contract risk. Stick to well-audited protocols with a long track record (GMX, Pendle) and consider using insurance options like Nexus Mutual.
📉 Impermanent Loss (IL)
When providing liquidity to volatile pairs, IL can eat into your yield. Mitigation: choose stablecoin pairs, use concentrated ranges wisely, or opt for single-sided exposure (like GMX GLP).
💸 Token Incentive Risk
High APYs often come from protocol tokens that may depreciate. Focus on “real yield” (fees) and diversify across protocols to smooth out volatility.
Frequently Asked Questions
GMX is widely considered the safest due to its battle-tested code, multiple audits, and transparent fee model. The GLP pool is also diversified across assets, reducing idiosyncratic risk.
Advertised APY often includes token incentives that may be inflationary. To calculate real APY, look at the portion of fees generated by the protocol (e.g., trading fees on GMX). Tools like APY.vision or DeFiLlama can help decompose yield sources.
Yes. Price declines of deposited assets, impermanent loss, smart contract exploits, and falling token incentives can all lead to losses. Never invest more than you can afford to lose, and start with small amounts to learn.
On Arbitrum, gas fees are low, so daily or weekly compounding is feasible. Use auto-compounding vaults like Beefy or manually compound when rewards reach a meaningful threshold (e.g., $50 worth).
In most jurisdictions, rewards are taxable as income when received, and trades (like swapping rewards) trigger capital gains. Use tools like CoinLedger or Koinly to track transactions. Consult a tax professional.
Choosing the Right Arbitrum Yield Farm
Arbitrum remains a fertile ground for yield farmers in 2026, offering a mix of stable, real-yield protocols and higher-risk, higher-reward opportunities. GMX is the go-to for conservative farmers seeking sustainable returns. Pendle appeals to those who want to speculate on future yield or lock in fixed rates. Camelot rewards active LPs who can manage concentrated positions and time Nitro Pool entries.
Always diversify, stay informed about protocol updates, and never chase APYs without understanding the underlying risks. The DeFi landscape evolves rapidly, but with the data and strategies in this guide, you’re equipped to navigate Arbitrum’s yield landscape confidently.