What are APR and APY?

DeFi protocols use two metrics to represent returns of cryptocurrency investments (yield farming): Annual Percentage Rate (APR) and Annual Percentage Yield (APY).

Annual Percentage Rate, abbreviated APR, is the annual rate of return expressed in percentages. Also called simple interest, this APR gives DeFi users a figure that can be easily compared to the rates of other protocols.

Annual Percentage Yield, abbreviated APY, is the annual compounded return expressed in percentages. It is calculated by taking interest on the initial amount invested and the interest accrued on this amount. In other words, one earns interest on interest.