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What is the difference between APR and APY for Decentralized Finance Yields

APR means Annual Percentage Rate and is the actual rate that your defi protocol will yield.  If you have $1000 in a protocol with a 70% APR, you will earn $700 in interest.  Now what if you didn't keep the interest to the side and reinvested it.  Let's say that twice a day, you harvested your gains and added them back to the pool.  Your APY or Annual Percentage Yield would be higher than 70 because you are now earning yield on your yield. This is what is known as compound interest.

Most Defi protocols yield or emit additional coins as a reward for staking a liquidity pool or a single asset pool.  As an example if you Stake Cake coin at Pancake Swap, you will receive .17% interest daily.  If you stake in the Auto Cake pool, you will earn about 85 percent annually because they harvest the gains constantly and reinvest them.

If you were to just stake Cake and then take the gains and use them elsewhere, you would only earn 65%.

A high APR is much better than a high APY if you are comparing the two.  Now be careful of protocols that offer yields that are too high.  If you see something offering 10000% be careful.  I havent been able to figure out how to make money with anything other than Panckcake Swap.  For the record I am a holder and staker of both PancakeSwap and Algorand at the moment.

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