APR
APR (Annual Percentage Rate) is the annual interest rate without taking into account the reinvestment (compounding) of interest. It shows how much you would earn over a year if you did not reinvest interim payouts.
Difference from APY:
| Metric | Includes Reinvestment | Formula |
|---|---|---|
| APR | No | Income / Deposit × 100% |
| APY | Yes | (1 + APR/n)ⁿ − 1 |
Example: An APR of 12% with monthly compounding results in an APY of approximately 12.68% — the difference increases with the compounding frequency and interest rate.
In DeFi protocols, APR and APY are often used interchangeably or without clearly specifying the calculation method. Always check which metric is being displayed and how frequently the income is accrued.