Investment details
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Total return
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Principal
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Interest earned
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APY vs APR comparison
Metric
APY (compound)
APR (simple)
Annual return
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1yr on $10,000
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⚠ For informational purposes only. DeFi yields are variable and not guaranteed. Not financial advice.
APY vs APR — what is the difference?
APR (Annual Percentage Rate) is simple interest — it does not account for compounding. APY (Annual Percentage Yield) includes the effect of compounding, meaning interest earned is reinvested to earn more interest.
In DeFi, protocols often advertise APY which assumes rewards are continuously reinvested. The actual returns depend on whether you compound manually or automatically, and how frequently. This calculator lets you model both scenarios.
Frequently asked questions
What is APY in DeFi?
APY (Annual Percentage Yield) in DeFi represents the annual return including compound interest. It assumes rewards are automatically reinvested. Most yield farming and liquidity protocols quote APY.
What is the difference between APY and APR?
APR is simple interest — you earn the stated percentage on your principal only. APY includes compounding — you earn interest on your interest. A 12% APR compounded daily equals a 12.75% APY.
How often should I compound?
More frequent compounding means higher effective yield, but gas fees for manual compounding can eat into returns. Auto-compounding protocols (vaults) handle this automatically. For high-yield positions, daily compounding is ideal.
Are DeFi APY rates guaranteed?
No. DeFi yields are variable and depend on protocol usage, liquidity, token emissions, and market conditions. High APY often comes with higher risk including smart contract risk, impermanent loss, and token price volatility.
Compound formula
A = P(1 + r/n)^(nt)
P = principal amount
r = annual rate (decimal)
n = compounds per year
t = time in years
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