DeFi APY from APR

Decentralized Finance (DeFi)

Updated Apr 2026 • Has calculator

Converts a DeFi protocol's quoted APR into the effective Annual Percentage Yield, accounting for how often returns are compounded.

What is DeFi APY?

DeFi protocols typically quote yields as an Annual Percentage Rate (APR) — a simple, non-compounded annualized rate. The actual Annual Percentage Yield (APY) is higher because most DeFi strategies auto-compound rewards: interest earned in each period is reinvested, generating returns on itself. The difference between APR and APY grows with both the rate and the compounding frequency. Daily compounding (n=365) is standard in yield-farming protocols, while some perpetual protocols compound every block (n=8,760+ per year). Understanding the distinction prevents yield comparisons across protocols from being misleading.

Formula

APY (%) = ((1 + APR / n)ⁿ − 1) × 100

Worked Example

2024 (approximate supply rate)

Step 1 Protocol-quoted APR: 4.80%

Step 2 Compounding frequency: daily (n = 365)

Step 3 APY = (1 + 0.048 / 365)³⁶⁵ − 1 = 4.92%

Step 4 → Daily compounding adds 0.12 percentage points above quoted APR

Step 5 → Over 1 year on $10,000: $492 vs. $480 at simple APR

Source: Aave Protocol Documentation (2024-01-01)

Calculate DeFi APY

APR (%)

Annual Percentage Rate as quoted by the protocol

Compoundings Per Year

365 = daily, 8760 = hourly, 52 = weekly, 12 = monthly, 1 = annual

APY

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Not investment advice.

How to Interpret DeFi APY

< 5

Low Yield — comparable to TradFi savings accounts

5 – 20

Moderate Yield — typical for established DeFi lending

20 – 100

High Yield — likely includes token incentives; check risk

> 100

Very High Yield — likely unsustainable; significant risk

📚 DeFi Basics — Complete the path

Sources