Yields & Returns
APY
Annual Percentage Yield
Annualized return including compounding, assuming a constant rate
Definition
APY is an annualized return that includes compounding. It assumes a stated reinvestment frequency and a constant rate for a year; a variable DeFi rate is a projection, not a promise. Token rewards must be valued separately from the deposited asset.
Example
At a constant 12% APR compounded monthly, APY = (1 + 0.12/12)^12 - 1 = 12.68%. A $1,000 deposit becomes $1,126.83 before fees.
How it works
Reinvested interest earns interest in subsequent periods. APY converts that repeated growth into a one-year percentage; compare rates only with matching compounding and fee assumptions.
Risks to Consider
- Changing utilization changes the interest rate
- Reward-token prices can collapse before rewards are sold
- Harvest fees and gas reduce the assumed compounding benefit
Common Questions
How is APY different from APR?
APR excludes compounding; APY includes it. A quoted APY is not a guaranteed realized return.
