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APY vs APR in Decentralized Finance protocols like Pancake Swap

When exploring Defi there are a few things you should probably understand before investing.  One of them is how to compare yields from farm to farm.  You will see that many farms post APY which is annual percentage yield while a few post APR which is annual percentage rate.

The two are different in one simple way.  APR is the real interest rate you get.  APY assumes you plan to earn compound interest by earning interest off of your interest and continually reinvesting.

For example, at the moment Pancake Swap is paying 85% APR in the Cake staking pool.  For every $1000 you stake, you earn approximately .11 Cake coins per day.  Pancake Swap also has an auto Cake staking pool where it will compound your interest 288 times per day automatically on your behalf.  They charge a 2% fee for this service.  The auto Cake staking pool is offering 125% APY.  That means if you keep your coins in the account for a year and the interest doesn't change, you should have 125% more coins than when you started without having to do any harvesting.

How can a protocol like Pancake Swap keep issuing more Cake coins without the value of Cake plummeting?  They have several ingenious ways.  They burn some automatically when they mint.  They use a portion of their lottery proceeds to burn and they use a portion of their online wagering.

Based on the whitepaper, it appears that Pancake Swap issues 530,000 new Cake coins per day.  They also burn about 5 million per week.  With that burn rate, the amount of coins in circulation should decrease.  If you are holding the coin and staking it, your ownership percentage of the total market share should continue to increase each Monday.  As more people learn about wallets and staking and take their coins off exchanges, Dex's like Pancake Swap will continue to thrive.

The Cake coin can continue to increase in value and Pancake Swaps business model should still make sense.  While other protocols are having their liquidity pools attacked, Pancake Swap seems to be the cleanest shirt in the dirty laundry.

Does anyone trust Pancake Bunny for auto yielding anymore?  Cake coin is supported by Binance and Binance is worth hundreds of billions of dollars.  It would make sense for Binance to keep Cake liquid and make sure that Pancake Swap stays safe for using and forking.

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