📈 APY vs APR APY vs APR
APR is the plain yearly interest rate with no compounding. APY is the yearly return with compounding folded in, so it shows what you actually keep once your rewards get reinvested.
🏷️ The simple version — sticker price vs final price
Think of APR (Annual Percentage Rate) as the price on the sticker: the plain yearly rate, charged once on your original amount and nothing more. APY (Annual Percentage Yield) is the price after the auto-reinvest bonus is folded in. With APY, the rewards you earn get put back to work and start earning their own rewards — what people call interest on interest. Same starting rate, but APY shows what you actually walk away with when earnings keep compounding.
🔢 A number you can feel
Say a product pays a 10% rate on 1,000 tokens. As an APR, that's a flat 100 tokens over the year. As an APY, where your rewards get reinvested along the way, you'd end up with about 105 tokens instead. Scale it up and the gap grows: $10,000 at a 12% rate compounded monthly earns roughly $1,268 in a year (about 12.68% APY), versus $1,200 with simple interest. The extra comes entirely from your earnings earning more.
| Metric | What it counts | 10% on 1,000 tokens |
|---|---|---|
| 🏷️ APR | Plain rate on the original amount only | +100 tokens |
| 📈 APY | Plain rate plus interest on interest | ~+105 tokens |
🧮 How they connect
The two are tied together by one formula: APY = (1 + r/n)n − 1, where r is the stated APR rate and n is how many times a year it compounds. The key takeaway: when n = 1 (it compounds just once a year), APY equals APR. The more often it compounds — monthly, then weekly, then daily, then hourly — the higher the APY climbs for the very same APR. Crypto often compounds very frequently, sometimes daily, which is why its APY numbers can sit noticeably above the headline rate.
🪙 Where you'll meet each one in crypto
You'll usually see APY on products that reinvest rewards for you: staking, yield farming, liquidity pools, and exchange savings or "Earn" pages. APR shows up more on lending and some liquidity-pool quotes. For example, Ethereum staking yields are quoted as an APR/APY, and stablecoin earn products built on coins like USDC routinely advertise an APY.
🚨 Things beginners should know
- ⚖️ Don't compare across yardsticks — An APR and an APY are not apples to apples; check which one is quoted before you compare two products
- 🌀 Rates are usually variable — Crypto APR/APY move with liquidity, supply and demand, and protocol rules; today's number is not a promise
- 💱 Token value can swing — Rewards are often paid in the crypto itself, so the dollar value can fall even while your token count grows
- 🚫 Beware impossible yields — A headline APY like "1% per day" or a "guaranteed" fixed return is almost always a scam
❓ FAQ
- Is a higher advertised percentage always the better deal?
- No. APR and APY are different yardsticks, so you can't compare them side by side. A 10% APR product can pay less than a 9% APY product, depending on how often it compounds. Always check which number a platform is quoting first.
- Why does crypto usually show APY instead of APR?
- Many crypto products reinvest your rewards automatically and very often, sometimes daily. APY is the number that includes all that compounding, so it shows what you'd actually end up with. You'll see APY most on staking, yield farming, and savings or 'Earn' products.
- Is a crypto APY a fixed, guaranteed return?
- No. Crypto APR and APY are usually variable and move with supply, demand, and protocol rules. Rewards are also often paid in the crypto itself, so the dollar value can fall even when your token count grows.