You’re scrolling through a DeFi platform and you see it:
💸 APR: 45%
💸 APY: 62.9%
Hold up.
Aren’t they both just interest rates? Why two?
Let’s cut the confusion.
In this post, you’ll learn what APR and APY actually mean, how they’re calculated, and which one you should care about when making your crypto move.
🤓 First — What’s APR?
APR = Annual Percentage Rate
This is the straight-up interest rate — no compounding, no tricks.
If a platform says 30% APR, it means you earn 30% of your principal over a year, assuming you don’t reinvest your earnings.
✅ Good for: simple staking platforms, fixed-income DeFi protocols.
📈 Then What’s APY?
APY = Annual Percentage Yield
This includes compound interest — meaning your rewards get reinvested and start earning more rewards.
If you’re compounding daily, weekly, or monthly, that 45% APR can jump to 62.9% APY (or higher).
✅ Good for: yield farming, vaults, auto-compounders like Yearn or Beefy.
📉 APR vs APY: Side-by-Side
🔍 Metric APR APY 📆 Based On Simple interest Compound interest 🔁 Reinvestment Not assumed Assumes reinvestment 📊 Earned Lower Higher 💡 Example 30% = 30% 30% APR can become 34.5% APY if compounded monthly
🧠 Why This Matters in DeFi
Because platforms advertise whichever number looks better.
Some show APY to look flashier. Others stick to APR for simplicity.
But you need to ask yourself:
👉🏽 “Am I compounding or not?”
That answer changes everything.
👇 Crypto Sensei Tip:
If a platform compounds rewards automatically, always compare APY across platforms.
If you have to claim and reinvest manually, focus on APR and do the math.
🧮 Quick Math Example:
Let’s say you stake $1,000 at:
-
APR: 20%
-
Compound monthly → turns into APY: 21.94%
At the end of the year:
-
APR earns you: $200
-
APY earns you: $219.40
That’s an extra $19.40 just for reinvesting.
Now imagine that on $10k+ across months. That’s how real DeFi gains build up.
🛠️ Tools to Help You Compare:
(Bookmark these — real Senseis keep their tools sharp 🔪)
🔚 Final Thoughts
APR and APY might look like boring math, but in DeFi, they decide how fast your portfolio grows.
Know the difference.
Make smarter moves.
Grow faster — and wiser.
🧠 Master the basics. That’s how Crypto Senseis are made.
