Glossary · A
APY vs APR
Two ways to quote yield. APR (annual percentage rate) is simple interest without compounding — 10% APR is about 10% over a year if rates hold. APY (annual percentage yield) includes compounding, so the same nominal rate looks higher when rewards compound often. In DeFi, always check whether a dashboard shows APR or APY before comparing products. Also searched as: APY versus APR, APR meaning in DeFi.
Last updated
How APY vs APR works in practice
APR is the simple annual rate; APY is what you actually receive once compounding is included. In DeFi the gap is often enormous, because rewards can be harvested and redeposited many times a year — and because a high APY is a better marketing number, quoted rates are frequently the compounded one.
Worked example
A pool advertising 100% APR, compounded daily, produces an APY of about 171%. Compounded hourly it is closer to 172%. The underlying earning rate has not changed at all — only the assumption about how often you reinvest, and whether gas makes that realistic.
Figures are illustrative and chosen to be checkable, not live market data.
The mistake that costs people money
Comparing one protocol's APY against another's APR. Also worth checking: a quoted APY usually assumes the reward token's price holds. If it halves over the year, the realised return is nothing like the headline.
APY vs APR: common questions
- What is APY vs APR?
- Two ways to quote yield. APR (annual percentage rate) is simple interest without compounding — 10% APR is about 10% over a year if rates hold. APY (annual percentage yield) includes compounding, so the same nominal rate looks higher when rewards compound often. In DeFi, always check whether a dashboard shows APR or APY before comparing products. Also searched as: APY versus APR, APR meaning in DeFi.
- How does APY vs APR work in practice?
- APR is the simple annual rate; APY is what you actually receive once compounding is included. In DeFi the gap is often enormous, because rewards can be harvested and redeposited many times a year — and because a high APY is a better marketing number, quoted rates are frequently the compounded one.
- Can you give an example of APY vs APR?
- A pool advertising 100% APR, compounded daily, produces an APY of about 171%. Compounded hourly it is closer to 172%. The underlying earning rate has not changed at all — only the assumption about how often you reinvest, and whether gas makes that realistic.
- What do people get wrong about APY vs APR?
- Comparing one protocol's APY against another's APR. Also worth checking: a quoted APY usually assumes the reward token's price holds. If it halves over the year, the realised return is nothing like the headline.