# APR vs APY in Crypto: What's the Difference?

> APR and APY look similar but can mean very different returns. Learn how compounding turns APR into APY and why it matters for staking and yield farming.

Source: https://thecryptotools.com/guides/apr-vs-apy-crypto/ · Updated: 2026-07-16 · Reading time: 5 min

You'll see both APR and APY advertised across staking, lending and yield-farming platforms — and they're not the same. Confusing them can make an offer look better or worse than it really is.

## APR: the simple rate

APR (Annual Percentage Rate) is the simple annual interest, ignoring compounding. If a pool pays 12% APR and you never reinvest, $1,000 earns $120 over a year.

## APY: the compounded rate

APY (Annual Percentage Yield) includes the effect of reinvesting your earnings. The formula is APY = (1 + APR/n)^n − 1, where n is how many times per year you compound. The more often you reinvest, the higher your effective yield.

> 12% APR compounded daily becomes about 12.75% APY. The gap widens fast at higher rates — 100% APR daily compounds to roughly 171% APY.

→ Calculator: https://thecryptotools.com/tools/yield-farming-apy-calculator/

## Why it matters in DeFi

- Platforms often advertise the bigger APY number — check whether it assumes auto-compounding you'd have to do yourself.
- Each manual compound costs gas, so daily compounding isn't always worth it on small positions.
- Advertised yields move constantly with pool size and token prices — treat them as a snapshot.

Use the calculators below to convert between APR and APY and to project how compounding grows a balance over time.

→ Calculator: https://thecryptotools.com/tools/compound-interest-calculator/

## Frequently asked questions

### Is APY always higher than APR?

Yes, whenever you compound more than once a year. If there's no compounding, APR and APY are equal.

### Which should I compare between platforms?

Compare like with like — ideally APY, but check the assumed compounding frequency. An APY that assumes daily auto-compounding may not match your actual behavior.

### Does more frequent compounding always help?

It raises APY, but gas costs for manual compounding can outweigh the benefit on small positions. Auto-compounding vaults reduce that friction.

## Related calculators

- https://thecryptotools.com/tools/yield-farming-apy-calculator/
- https://thecryptotools.com/tools/apy-calculator/
- https://thecryptotools.com/tools/compound-interest-calculator/
- https://thecryptotools.com/tools/staking-rewards-calculator/