What is the difference between APR and APY in DeFi?

APR (Annual Percentage Rate) does not account for the effect of compounding interest, whereas APY (Annual Percentage Yield) includes compounding frequency (e.g. daily, hourly, continuous).

How does compound frequency affect DeFi yields?

Frequent compounding increases the effective yield, but in on-chain environments, high gas transaction fees can easily eat up profits if manual compounding is triggered too frequently on smaller deposits.

DeFi & Web3 Economics · Engine v3.7

DeFi APY to APR & Compounding Yield Converter

Convert seamlessly between nominal APR and compounding APY across all crypto protocols. Accurately model 8-hour perpetual funding, gas fees, and performance fee drag.

Protocol Presets:

Conversion Direction

Annual Percentage Rate (APR)

Compounding Frequency

Portfolio & Friction Parameters

Deposit Capital / Principal

Holding Horizon (Days)

Protocol Performance Fee

Est. Gas / Claim Costs ($)

Converted Yield & Real Returns

Effective Annual Yield (APY)

27.11%

+3.11% compounding boost over APR

Total Net Earnings

$2,711

Gross: $2,711

Daily Interest Payout

$6.58 / day

$202.75 / mo

Nominal APR vs Real APY

24.0% vs 27.1%

Daily compounding factor

Total Ending Portfolio

$12,711

+27.11% Net ROI

Compound Horizon Breakdown ($10k Principal)

Time Horizon	Net Profit ($)	Total Portfolio ($)	Effective Yield

The Mathematical Formulas: APR vs APY

Understanding whether a platform quotes APR or APY is critical in decentralized finance. Simple interest (APR) grows linearly, whereas compounded interest (APY) grows exponentially.

APR to APY (Discrete Compounding): $$\text{APY} = \left(1 + \frac{\text{APR}}{n}\right)^n - 1$$ where $n$ is compounding events per year ($n=365$ for daily, $n=1,095$ for 8-hour perp funding).
APR to APY (Continuous Compounding): $$\text{APY} = e^{\text{APR}} - 1$$
APY to APR (Solving for Nominal Rate): $$\text{APR} = n \times \left((1 + \text{APY})^{1/n} - 1\right)$$ $$\text{APR}_{\text{continuous}} = \ln(1 + \text{APY})$$
Net Realized Earnings: $$\text{Net Earnings} = (\text{Gross Compounded Interest} \times [1 - \text{Performance Fee}]) - \text{Gas Costs}$$

Frequently Asked Questions

What is the difference between APR and APY in crypto?

APR (Annual Percentage Rate) does not account for the compounding of interest within the year. APY (Annual Percentage Yield) takes compounding into account—meaning interest earned is automatically added back to the principal to earn additional interest. For any rate above 0%, APY is always strictly higher than APR.

Why do DeFi protocols advertise APY instead of APR?

DeFi auto-compounders and yield vaults advertise APY because the number appears substantially higher, particularly at high interest rates. For example, a 100% APR farm compounded daily results in a 171.46% APY—making the protocol appear 71% more profitable without any change in underlying token emissions.

How does perpetual funding rate compounding work?

Perpetual futures funding rates typically settle every 8 hours (3 times per day, or 1,095 times per year). An 8-hour funding rate of +0.02% equates to a linear nominal APR of 21.9% ($0.02\% \times 3 \times 365$). If profits are continually reinvested every 8 hours, the compounded APY becomes 24.47%.

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Frequently Asked Questions

Is DeFi APY to APR Converter free to use?

Yes, DeFi APY to APR Converter is completely free with no signup or registration required. All processing happens directly in your browser.

Is my data safe?

Absolutely. Your data never leaves your device. Everything runs locally in your browser — no uploads, no servers, no tracking.

Do I need to install anything?

No installation needed. DeFi APY to APR Converter works entirely in your web browser on both desktop and mobile devices.

How do I use

Simply enter or paste your input in the tool above, and the result will be generated instantly. No configuration required.