APR is an annual rate that does not include compounding. APY includes the effect of earning returns on earlier returns. Neither figure guarantees what a crypto investor will receive, especially when rates or token prices change. Binance Academy’s APR vs. APY explainer discusses compounding and crypto-specific considerations. For related beginner guides, visit the BlockBriefing Learn hub.
What is APR?
APR means annual percentage rate. It expresses a yearly rate without accounting for the effect of compounding within that year. In crypto, a platform may display APR for lending, staking rewards or other yield products. The label alone does not tell you whether the rate is fixed, variable, paid in the same token or subject to protocol risk.
What is APY?
APY means annual percentage yield and includes the effect of compounding. If rewards are added to a balance and then earn rewards themselves, the effective annual return can be higher than the stated simple rate. The APY shown by a crypto platform often assumes rewards can be reinvested at a particular frequency and that the rate remains unchanged.
APR and APY in a simple example
Imagine a hypothetical product offering a 10% APR with rewards compounded monthly. If the rate remained constant and every reward were reinvested, the effective APY would be about 10.47%. This is an illustration, not a forecast. Crypto yields can change, and token prices can move enough to outweigh the displayed percentage.
What advertised yield figures leave out
A high APY may reflect temporary incentives, token emissions, borrowing demand or risks that are not obvious in a headline number. Check whether the rate is variable, how rewards are funded, whether withdrawals can be paused, what fees apply and whether you must lock funds. Smart-contract vulnerabilities, platform failure and token-price declines can cause losses.
How to compare offers fairly
Compare products over the same period and in the same currency. Review compounding assumptions, payout token, fees, lock-up terms and the risks of the provider or protocol. Do not compare a guaranteed bank rate directly with a variable crypto yield as if the protections were identical. Read the official terms before depositing assets.
Frequently asked questions
Is APY always better than APR?
They describe rates differently. APY includes compounding, but it does not guarantee a higher realized return if the rate or token price changes.
Can crypto APY change?
Yes. Many crypto yield rates are variable and may change with market conditions or protocol parameters.
Related Learn guides
Continue learning with these related explainers: Dollar-Cost Averaging (DCA) in Crypto: How It Works; What Is Decentralized Finance (DeFi)?; Crypto Risk-to-Reward Ratio Explained.
Editorial note
Information is provided for educational purposes and can become outdated. Verify technical details against official documentation, understand the risks involved, and never share wallet recovery phrases or private keys.
