APY & APR

The difference

$$\mathrm{APY} = \left(1 + \frac{r}{n}\right)^n - 1$$

where $r$ is APR and $n$ is the number of compounding periods per year.

• APR 10% → if you do nothing, you earn 10% in a year.
• APY 10% → already accounts for auto-compounding, the raw APR is lower.

What to watch for

• Inflated APYs from token emissions. A «200% APY» in a farm token often evaporates as the token dumps.
• Variable rates — most DeFi yields float with utilization.
• Net yield = gross APY − impermanent loss − gas costs − token dump.

Where it applies

Staking (ETH, SOL), lending (Aave, Compound), liquidity pools (Uniswap, Curve), yield aggregators (Yearn).