If you stake, lend, or chase yield in DeFi, the headline rate is never the whole story. We wrote this guide because APR and APY look similar on paper, yet they compound differently—and that gap shows up directly in your returns.
APY (annual percentage yield) includes compounding—it can be applied on a quarterly, monthly, weekly, or daily rhythm depending on the product. APR (annual percentage rate) is a simpler yearly rate without that compounding baked in. The practical difference is that more frequent compounding pushes realized returns closer to the higher APY figure, which is why APY is often larger than APR on the same protocol marketing page.
What is APR?
APR is the annual percentage rate: the interest quoted for a year without assuming you reinvest every interest payment. For lending-style deals, you can read it as “what you earn or owe over one year if the rate stays flat and compounding is not part of the advertised math.”
What is APY?
APY is the annual percentage yield: the rate that reflects compounding. Instead of one lump sum at year-end, many DeFi products accrue on a shorter cadence, and those smaller payouts can themselves earn—so APY is the standard way to express what you end up with if you keep rolling rewards back into the position.
Final takeaway: APR vs. APY in crypto
Both APR and APY show up everywhere in crypto—especially DeFi staking and yield programs. When you can compound more frequently (daily or weekly, for example), your realized outcome typically tracks closer to APY than to APR on the same nominal rate. In practice you will often see APY above APR on comparable products purely because of that compounding effect. We still read the fee schedule, withdrawal rules, and lockups, because the label on the rate does not replace risk management.
