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Reading APY and APR

Checked 19 Oct 2026 7 min read 3 of 6 in Earn

Two numbers, different maths, and one of them is designed to look bigger. Here is how to compare two offers honestly.

Both numbers describe a yearly rate. They are calculated differently, and the difference is not a technicality — it is why the same offer can be advertised as two different figures, and the larger one usually wins the advertisement.

The same rate, written two ways10% APRwhat is actually paidCOMPOUNDEDevery day, for a year10.52% APYthe same moneyWhere it stops being true×rewards you have to claimthey sit still until you act×a rate that changes weeklythe projection assumed a year×a lock-up you cannot exityou cannot reinvest anythingCompare two offers by the same measure or not at all.An APY next to an APR is not a comparison, it is a presentation.
APY is APR plus an assumption. The assumption is that every payout is immediately put back to work at the same rate for a year. Where that does not happen — and it often does not — the bigger number is a projection, not a payment.

The difference in one paragraph

APR is the simple rate. Ten per cent APR on a hundred units pays ten units over a year, and that is the whole calculation.

APY assumes the return is reinvested as it arrives, so later payments earn on earlier ones. Ten per cent compounded daily is about 10.5 per cent APY. The gap widens as the rate rises: 100 per cent APR compounded daily is roughly 171 per cent APY.

APY is a projection, not a payment

It says what you would get if the rate held for a year and everything compounded automatically. Both assumptions are usually false in crypto, where rates move weekly and compounding often needs a manual transaction that costs a fee.

Where the projection breaks

The rate does not hold. Yields move with demand, and an incentive programme is designed to start high and fall as it attracts deposits. The APY on the screen is a snapshot, not a forecast.

Compounding is not free. If it requires you to claim and re-deposit, each round costs a network fee. On a busy network, small positions can lose more to fees than compounding gains.

The number may be in a token you did not choose. A pool paying 40 per cent in its own token is quoting a figure in something whose price is unknown. Sometimes it is worth more later. Frequently it is worth less, because everyone earning it is also selling it.

Work it out

What an advertised rate actually pays

APY assumes every payout goes straight back to work at the same rate for a full year. Where that does not happen, the bigger number is a projection rather than a payment.

If that rate is an APR, the APY is10.52%
If it is already an APY, the APR behind it is9.53%
On 1,000 units, the difference over a year is5.2 units

This is the arithmetic of compounding and nothing else. It does not know whether the rate holds for a year, whether the rewards compound without you claiming them, or who is paying. Where yield comes from is the question that decides whether the number means anything.

Making two offers comparable

  1. Convert both to the same basisIf one quotes APY and the other APR, put them side by side in APR. The comparison is otherwise a comparison of formatting.
  2. Ask what it pays inThe deposited asset, or something the platform issues? These are different products regardless of the number.
  3. Ask how long the rate has heldA rate that has been stable for six months and a launch rate three days old are not the same, whatever they currently read.
  4. Subtract the cost of getting outLock-ups, unbonding, withdrawal fees, and the fee to claim. A slightly lower rate you can leave at any time is often the better one.

The number that should stop you

There is no threshold above which a yield is automatically fraudulent, and pretending otherwise would be lazy. Real opportunities have paid large numbers for short periods, usually because someone was spending a marketing budget.

What does hold is this: the higher the number, the more specific the explanation needs to be. Four per cent from staking explains itself. Forty per cent needs a named mechanism, and if the answer is "our strategy" or "arbitrage" with nothing you can verify, the honest reading is that you are the mechanism.

Per day, per week, guaranteed — three words that end the conversation

A yearly rate that fluctuates is how a real return is described. A fixed number per day is how a payout schedule is described, and the page on mini-app schemes covers where that leads.

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