What is the difference between APR and APY?

This is something I only learned fairly recently, for a long time I thought it was the same thing.


APR is Annual Percentage Rate and APY is Annual Percentage Yield.


APR is the interest generated over a year without compounding the interest.


APY is what you get when you compound interest earned with the current APR over the course of a year.



Here is a website dedicated to calculating this: APRTOAPY.COM


You can see with the calculator on this website that compounding daily makes quite a big difference from compounding weekly or monthly.


In conclusion, it is important to make the distinction between APR and APY when looking for a staking pool/liquidity pool, a lower APR may give you bigger rewards than a higher APY pool. It can make a huge difference. Compounding daily vs weekly/monthly can also make a big difference. Daily seems to be the way to go, but twice a day or more than that probably doesn't make a big difference.


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