APR vs. APY in Crypto: What Are the Major Differences? (2023)

APR and APY are two forms of interest rates. Both are measurements for yields generated by protocols, centralized digital asset lending platforms, and other crypto investment platforms.

Some platforms may use APR, while others work out yields using APY. While they may sound similar, the two interest rates do not generate the same results. This APR vs. APY guide covers the differences between the measures and explains how to calculate investment returns accurately.

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In this guide:

  • What is APR?
  • How is APR calculated?
  • Types of APR
  • What is APY?
  • APR vs. APY: which one should you consider?
  • APR vs. APY: the (s)takeaway
  • Frequently asked questions

What is APR?

APR vs. APY in Crypto: What Are the Major Differences? (1)

APR (annual percentage rate) is the annual yield a lender earns for lending their crypto assets.

Alternatively, you can think of APR as the annual interest a borrower pays on any loan. In other words, it’s the price you pay to borrow money, as per the U.S. Consumer Financial Protection Bureau’s definition.

Traditional financial institutions apply APR to mortgages, credit cards, car loans, and other types of credit. Within the crypto space, APR is applied to staking, crypto savings accounts, and lending and borrowing with crypto assets. Generally, APR is used for things that cost people money but may also appear in products that make people money, particularly in the crypto space.


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While APR is an annualized rate, borrowers often pay their loans monthly or more frequently, depending on the payment schedule. Furthermore, since it’s an annual rate, APRs are prorated — adjusted — for shorter periods. So, a 3% APR on a six-month loan means that the loan only comes with a charge of a 1.5% interest rate.

How is APR calculated?

APR is calculated using simple interest but may include fees and other additional costs associated with the transaction. That means you may need to calculate the APR to get the real annual cost of a loan.



The APR formula is as follows:

APR = ((interest + fees/loan amount) / number of days defined in the loan contract)) x 365 days or one year x 100

Now, let’s assume you want to borrow $10,000 worth of USDT from a lending protocol for two years, and the annual interest rate is 5%. The fees for this transaction are $30.

To calculate the APR, first, calculate the interest using the simple interest formula.

(Video) APR vs APY in crypto

Simple interest earned = P x I x T) where:

P = Principal amount

I = Annual interest rate

T = Time period

Going by our example above

P = $10,000



I = 5%

T = 2 years

Therefore, simple interest earned = 10,000 x 0.05 x 2

Simple interest earned = $1,000

With interest, you can proceed to calculate the APR as follows:

APR = ((1,000 + 30)) / 10,000) / 2)) x 1 x 100

APR = 5.15%

Based on this calculation, the annual interest rate may be 5%, but the real cost is actually 5.15% when you factor in additional fees on top of the interest. Similarly, calculating your staking reward based on the APR may not give an accurate figure of what you’ll receive. Why? Because factors like validator commissions, bonded tokens ratio, block minting speed, and token inflation rate may affect the final staking reward.

Types of APR

APRs can be fixed or variable. A fixed APR doesn’t change. On the other hand, a variable APR can alter at any time depending on market conditions and any other factors the lending platform may decide to factor in. As a result, borrowers are likely to pay more interest with a variable APR than a fixed one. This is especially true if market conditions are volatile.

What is APY?

APR vs. APY in Crypto: What Are the Major Differences? (11)



APY (annual percentage yield) is the actual rate of return you earn on an investment. APR takes the effect of compounding interest into account.

While APR is calculated using simple interest, the annual percentage yield (APY) uses compound interest. That means when using APY, platforms calculate interest on the principal amount and the interest accumulated. APY is typically used for things that earn people money. In crypto, this entails staking, yield farming, and also crypto savings accounts.

Effective annual interest rate (EAR) is an alternative term for APY. In TradFi, platforms apply APY to savings, deposits, money market funds, and other interest-paying accounts.

(Video) APR vs APY (Yield Farming) What's the Difference?

APY calculates the real return on investment since it uses compound interest. Compounding allows an investment to earn interest on interest over time, making APY a powerful instrument to calculate the real return of an investment. However, APY may not include fees.

How to calculate APY

Crypto platforms that offer interest-earning products may compound interest daily, monthly, quarterly, semi-annually, or annually. A platform that is compounding interest more frequently — e.g., daily — will earn investors higher returns.

You can calculate APY using this formula:

APY = ((1 + r/n) ^ n) – 1 where

r = Annual interest rate

n = Number of compounding periods per year

Here’s what the compounding frequency looks like against the number of compounding periods:

Compounding FrequencyNumber of Periods

So, let’s look at this example.



Imagine you want to invest $1,000 in ether (ETH) on a staking platform with an annual interest rate of 11%, compounded monthly. Here’s the resulting APY:

APY = ((1 + (11%/12)) ^ 12) – 1

APY = 11.57%, meaning an annual interest of 11% compounded monthly will give an APY of 11.57%. Therefore, $1,000 in 1 year will become $1,122.04 should the APY really apply for the given period.

Forms of APY

Just like APR, APY can also have flexible and variable rates. A flexible APY remains the same over the investment period. However, a variable APY will not stay at the original rate throughout the investment’s duration. Instead, it may fluctuate based on market conditions and any other factors the protocol or crypto exchange will factor in.

APR vs. APY: which one should you consider?

APR vs. APY in Crypto: What Are the Major Differences? (12)

The main difference between APR and APY is that the former uses simple interest while the latter utilizes compounding interest. Hence, crypto investors need to focus on APY because it is a more accurate return measurement than APR.

The frequency of compounding is also a measure to consider since it will determine the size of a return.

Besides comparing APR with APY, investors should also examine these factors:

  • Associated costs: Consider costs like on-chain transaction fees and the exchange’s withdrawal costs.
  • The APR and APY type: APRs and APYs can be fixed or variable. Therefore, ensure you understand the type of APR or APY on offer before taking a loan or investing your money.
  • The digital asset’s current performance and future prospects: Attractive APYs and APRs from platforms whose digital assets are posting dismal numbers aren’t worth it. It’s also risky to stake coins with questionable futures. If their prices drop, your investment will lose value as well, and the APY or APR measurement will turn out inaccurate.
  • The reputation and size of the platform: Large DeFi and CeFi platforms that are well-established are likely to have better liquidity than small platforms. This is not a hard and fast rule. However, it’s essential to consider this factor before allowing higher interest rates from smaller establishments to tempt you.

APR vs. APY: the (s)takeaway

While APY is generally the better measurement for examining returns on investment, some staking and other interest-earning crypto platforms offer APRs instead. This could throw you off and make it difficult to compare interest rates across different providers.



Some people may also choose the platform offering an APY over another that uses APR. But it’s never that straightforward. A higher APY doesn’t necessarily always generate more interest than a lower APR due to the aforementioned factors. To make a more accurate comparison, convert APRs and APYs using online tools if you know the compounding frequency.

Furthermore, only compare APYs with the same compounding period. That’s because an APY that’s compounding interest monthly isn’t the same as one using a quarterly frequency. This is a crucial tip when choosing the best products. Another important thing to remember is that staking rewards are typically paid in crypto instead of fiat. This means your staking rewards will be subject to price volatility.

(Video) APR vs APY | In 2 Minutes

Frequently asked questions

What is APY and APR in crypto staking?

Stakers use APY and APR to calculate the rewards they can earn from locking their crypto assets for a certain period of time. However, the two methods do not give the same result.

APY uses compound interest, while APR uses simple interest. That means APY factors in interest earned on interest plus the principal amount. In contrast, APR only considers interest earned on the principal. Hence, stakers should receive more accurate measurements of yields with APY than with APR.

What does APR mean in crypto?

The annual percentage rate (APR) is the cost borrowers pay to get a loan. From a lender’s perspective, APR is the yield one earns from making their crypto assets available for borrowing.

Platforms may also use APR to indicate the rate of return for staking, yield farming, and saving crypto over a specific period of time. APR uses simple interest to calculate returns.

What’s the difference between APR and APY on Coinbase?

Coinbase generally sets its interest rates in APY, which means investors get a picture of interest earned on interest and the principal. APYs on Coinbase can be flexible or variable. A flexible APY remains the same over the investment period but a variable APY changes.

Can you get an APY in crypto?

Yes, you can get an APY in crypto

Various platforms show APY yields for staking, yield farming, crypto savings, and other investment products. An APY allows investors to estimate the yield of interest earned on interest and the initial investment amount. Different platforms will have different frequencies of compounding interest.

How do I calculate APR crypto?

The formula for calculating APR in crypto is the same as what traditional financial institutions use in traditional finance (TradFi). Thus, APR = ((interest + fees / loan amount) / number of days in the loan term)) x 365 days or 1 year x 100.

In other words, add the interest plus fees, then divide by the loan or investment amount. Next, divide the result by the number of days in the loan/investment term and then multiply by 365 days or 1 year. Lastly, multiply the result by 100 to get the annual percentage rate.

What does 5.00% APY mean?

If you’re earning a 5% APY compounded annually on an investment of $1,000 and the investment period is 4 years, you are projected to earn an interest of $215.51. This will bring your total investment to $1,215.51.


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What are the differences between APY and APR in crypto? ›

In cryptocurrency trading, APR and APY are very much the same. APY only considers simple, ordinary interest, while APY includes compound interest. So, APY is regarded as the better pick.

What's the difference between APR and APY on Coinbase? ›

APR takes the effect of compounding interest into account. While APR is calculated using simple interest, the annual percentage yield (APY) uses compound interest. That means when using APY, platforms calculate interest on the principal amount and the interest accumulated.

What is the difference between APY and APR staking? ›

APR means annual percentage rate, the investment rate you get with simple interest. APY stands for annual percentage yield, which is based on the compound investment. APY is more profitable than APR since it includes interest on interest and not only interest on the initial investment.

What is the difference between APR and APY quizlet? ›

The Effective Annual Rate (EAR), also known as the Annual Percentage Yield (APY) is the total amount of interest that will be earned, or paid at the end of one year, and is subject to compounding periods. An annual percentage rate (APR) is the annual rate charged for borrowing or earned through an investment.

Is APR or APY better? ›

APYs give you the most accurate idea of an account's earning potential, while APRs give an idea of what you could owe. Since both are shown over a single year, they are more accurate than interest rate alone.

Is APR higher or lower than APY? ›

APY is an acronym for Annual Percentage Yield. It is a common term used when defining the interest paid in a savings, checking, or other interest-bearing accounts. Unlike APR, APY reflects interest paid on interest. Thus, APY is always higher than APR.

What determines APR on crypto? ›

Interest rates are determined by the initial loan-to-value (LTV) ratio of your loan and the amount of your CRO stake in the Crypto.com Exchange as of the date of the loan drawdown.

How does APR work with crypto? ›

What is APR in crypto? In cryptocurrency, the APR is the percentage investors can expect to earn as interest on their investment, for lending their crypto or making it available for loans. It considers other fees a borrower needs to pay but does not include compound interest.

Why are some crypto APY so high? ›

Usually, liquidity pools and staking incentives are usually advertised at their start, when there are none or few participants and the added rewards are concentrated among a certain few. Thus a very high crypto APY advertised!

Why is APY different than interest rate? ›

APY calculates money paid to you on depository bank accounts such as savings and certificates of deposit. It factors in the interest rate, plus any fees, costs, and compounding interest frequency. APR calculates the money you would owe to pay back loans, such as car loans and house mortgages.

How do you explain APR and interest rate? ›

A loan's Annual Percentage Rate, or APR, is the cost of your mortgage credit as a yearly rate. Your Annual Percentage Rate is typically higher than your interest rate because it includes your interest rate plus certain fees, such as lender and mortgage broker fees, based on the specific characteristics of your loan.

What does APY mean for dummies? ›

Quick Answer. Annual Percentage Yield (APY) is the amount you actually stand to earn in a year on an account that pays interest, like a savings account or CD. APY adds compound interest to your interest rate to show how much interest you'll make as your money grows.

What is the highest APY crypto staking? ›

The Best Crypto Staking Platforms with the Highest Rewards
  • Lucky Block - Overall Best Crypto Staking Platform Alternative.
  • OKX - World-Class Crypto Staking Platform Offering up to 300% APY.
  • eToro - Top-tier Crypto Exchange with High-interest Staking.
  • Crypto.com - Earn up to 14.5% APY in Passive Interest.
Jan 31, 2023

Which coin has the highest staking APY? ›

The cryptocurrencies with the highest staking market cap include ETH, SOL and ADA, in which the typical annual yield is around 4% to 5%. Note rewards on the Ethereum network are typically locked up until the Ethereum 2.0 network is complete. Also of note, more than 10% of Ethereum is staked.

What affects APY in crypto staking? ›

The APY for crypto assets is variable and fluctuates based on supply and demand in each of the blockchain's different protocols. This is determined differently and can change at any given moment. If you are staking crypto, rewards are earned differently depending on which asset you are staking.

What is 10% APR in crypto? ›

It tells crypto investors how much they can earn in a year, expressed as a percentage of their initial investment. For example, if a crypto lending platform has an APR of 10%, that means crypto investors can earn 10% on their crypto investments each year.

Is 24% APR too much? ›

Yes, a 24% APR is high for a credit card. While many credit cards offer a range of interest rates, you'll qualify for lower rates with a higher credit score. Improving your credit score is a simple path to getting lower rates on your credit card.

What is a good APY%? ›

What is a good APY? The national average savings rate is 0.33% APY, but you can find rates higher than that. Some of the best savings rates come from online banks and are around 2.00% or higher.

Is 20% a high APR? ›

A 20% APR is not good for mortgages, student loans, or auto loans, as it's far higher than what most borrowers should expect to pay and what most lenders will even offer. A 20% APR is reasonable for personal loans and credit cards, however, particularly for people with below-average credit.

Does 1% APR make a difference? ›

The Bottom Line: 1% In Pennies Adds Up To A Small Fortune

While it might not seem like much of a benefit at first, a 1% difference in interest savings (or even a quarter or half of a percent in mortgage interest rate savings) can potentially save you thousands of dollars on a 15- or 30-year mortgage.

What does APR mean for crypto? ›

The monetary value or reward that investors may earn by making their crypto tokens accessible for loans, taking into consideration the interest rates and any other fees that borrowers must pay, is referred to as the annual percentage rate (APR).

What is a good APY for crypto? ›

Crypto Interest Rates
Crypto Interest AccountAPY on 0.1 BTCAPY on 1,000 USDC
CoinLoan4.2% - 5%6.2% - 8.2%
Haru Invest6%4.5%
2 more rows

What is APR interest on crypto? ›

What is Annual Percentage Rate (APR) in Crypto? APR is an estimate of rewards you will earn in Cryptocurrency over the selected timeframe. It does not display the actual or predicted APR in any fiat currency. APR is adjusted daily and the estimated rewards may be different from the actual rewards generated. 2.

How do you explain APR for dummies? ›

Put simply, APR is the cost of borrowing on a credit card. It refers to the yearly interest rate you'll pay if you carry a balance, and it often varies from card to card. For example, you may have one card with an APR of 9.99% and another with an APR of 14.99%.

How does APR work in crypto staking? ›

Basically, in staking APR, the inflation-driven interest is distributed from the annual block provision to staking users. Asides from inflation & annual provision, there are other factors to consider like community tax and bonded tokens ratio. Community tax, in most cases, is relatively small, for example, 2%.

Is higher APR better or worse? ›

The lower the APR, generally the better it is for the cardholder.

What is the safest crypto interest account? ›

The Top Crypto Savings Accounts For 2022
  • Nexo. Our Score: 9. Supported Cryptos: 40. ...
  • YouHodler. Our Score: 9. Supported Cryptos: 50+ ...
  • Crypto.com. Our Score: 8.5. Supported Cryptos: 200+ ...
  • Uphold. Our Score: 8.5. Supported Cryptos: 200+ ...
  • BlockFi. Our Score: 8.5. ...
  • Gemini. Our Score: 8.5. ...
  • Coinbase. Our Score: 8. ...
  • KuCoin. Our Score: 8.
Jan 5, 2023

What is the highest APY staking crypto? ›

The Best Crypto Staking Platforms with the Highest Rewards
  • Lucky Block - Overall Best Crypto Staking Platform Alternative.
  • OKX - World-Class Crypto Staking Platform Offering up to 300% APY.
  • eToro - Top-tier Crypto Exchange with High-interest Staking.
  • Crypto.com - Earn up to 14.5% APY in Passive Interest.
Jan 31, 2023

Is 20% APR a lot? ›

A 20% APR is not good for mortgages, student loans, or auto loans, as it's far higher than what most borrowers should expect to pay and what most lenders will even offer. A 20% APR is reasonable for personal loans and credit cards, however, particularly for people with below-average credit.

What does 7 day APY mean in crypto? ›

The seven-day APY is an annualized yield using seven-day returns. It's calculated by taking the net difference in price from seven days ago and today and generating an annual percentage. The formula to calculate seven-day APY is as follows: APY = (end − beginning − weekly_fees) ÷ beginning × 365/7.

Is 1 APR a big difference? ›

In short, the difference that a 1% increase in mortgage rates makes could add up to tens of thousands of dollars in savings over the life of a 30-year loan term.

How do you earn APR on crypto? ›

How to Earn Interest on Cryptocurrency
  1. Open a crypto account. To get started, you'll need to make an account with a platform that allows you to earn interest on your crypto holdings.
  2. Compare interest rates. ...
  3. Add cryptocurrencies to your portfolio. ...
  4. Earn interest.
Oct 28, 2022

What does a 24% APR mean? ›

A 24% APR on a credit card is another way of saying that the interest you're charged over 12 months is equal to roughly 24% of your balance. For example, if the APR is 24% and you carry a $1,000 balance for a year, you would owe around $236.71 in interest by the end of that year.


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