APR vs APY in Crypto: Staking, Lending & LP Yields
Protocols advertise **APR** (simple annual rate) or **APY** (compounded). In crypto, headline yields often ignore **emission dilution**, **IL**, **gas**, and **token price drift**—compare like with like before chasing the highest number.
Core formula
APY ≈ (1 + APR/n)ⁿ − 1 · n = compounding periods per yearStep by step
1. Check if rewards auto-compound
Manual claim = closer to APR until you reinvest. Auto-compound vaults approach APY if rewards stay in the same denomination.
2. Convert to a common basis
Convert APR to APY (or vice versa) with the same compounding frequency before comparing two products.
3. Subtract real costs
Model IL for LPs, lock-ups for staking, and tax on reward income. Net yield can be far below the advertised rate.
APR vs APY (crypto contexts)
APR is not “worse”—it may be more honest when rewards are paid out and not reinvested.
- APR: Simple rate; common for staking quotes and borrow costs.
- APY: Includes compounding; higher headline for the same underlying APR.
- LP “APR”: Often fee APR only—add IL and reward token price risk separately.
- Lending: Borrow APR vs supply APY—protocol reserve factors sit in between.
Use our calculators
Common mistakes
- Treating LP fee APR as net return without IL
- Ignoring unlock periods when comparing to liquid lending
FAQ
Why is APY so much higher than APR?
Frequent compounding magnifies the quoted APY even when APR is modest.
Are advertised yields guaranteed?
No—rates change with utilization, emissions, and token prices.