Crypto glossary
APY (annual percentage yield)
APY, or annual percentage yield, is the yearly return on a deposit including the effect of compounding, used to quote staking, lending and farming yields.
APY expresses how much a deposit would grow over one year if the earned interest is reinvested at the stated rate. It differs from APR, the annual percentage rate, which ignores compounding. The more often rewards compound, the bigger the gap between the two: a 10% APR compounded daily equals about 10.5% APY.
In crypto, APY figures appear on staking dashboards, lending markets, exchange earn products and yield farms. Many are variable and recalculated constantly from current demand, fees and token emissions, so the displayed number describes the present rate, not a guaranteed return.
Very high APYs usually come from rewards paid in a project's own token. If that token falls in price, the dollar return can be far lower than advertised or negative. Comparing APY across products only makes sense when the asset, the source of the yield and the risks are also compared.
Example
Depositing 1,000 USDC at a 5% APR that compounds daily yields about 1,051.27 USDC after a year, an APY of roughly 5.13%, provided the rate stays the same.
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