Annual Percentage Rate (APR)

APR is quoted as a simple, linear rate: it tells you what a deposit or loan would earn or cost over one year if the rate stayed flat and none of the interest was reinvested. That makes it the more conservative of the two headline crypto yield figures, since it ignores the extra growth that comes from earning interest on previously earned interest.

Centralized and decentralized platforms both lean on APR, but for different reasons. Lending and borrowing markets typically quote APR because the interest is usually paid out rather than automatically reinvested, and because it gives borrowers a clean, undistorted view of their true cost of capital. In yield farming and liquidity provision, protocols often blend two revenue streams into one APR figure: a share of trading fees earned by the pool, and separate token emissions paid as an incentive on top. Both are typically calculated from a short lookback window, such as the past 24 hours or 7 days, then annualized, so a sudden spike in trading volume or a temporary rewards boost can make the advertised rate misleading if conditions don't hold for the full year.

Because APY compounds and APR does not, APY is always equal to or higher than APR at the same underlying rate, and the gap widens the more frequently rewards compound. A protocol advertising a headline APR should be treated as a starting point, not a guarantee: real returns also depend on reward-token price swings, pool dilution as more capital arrives, and, for liquidity pools, impermanent loss.