What is APR?
APR (Annual Percentage Rate) is the simple annualised return on an investment, without accounting for the compounding effect of reinvesting earnings. It is the rate you'd earn if you withdrew your yield at the end of each period rather than reinvesting it.
APR vs APY: the key difference
If a protocol pays 1% per week:
- APR = 1% × 52 weeks = 52%
- APY = (1 + 0.01)^52 - 1 = 67.8% (with weekly compounding)
The difference grows larger with higher rates and more frequent compounding.
When APR is more relevant
APR is more relevant when:
- You plan to withdraw earnings regularly rather than reinvest
- The protocol pays a flat ROI (not continuously compounding)
- You're comparing protocols with different compounding frequencies
Reading DeFi yield quotes
Always check whether a protocol quotes APR or APY. Many DeFi protocols display APY (the higher number) to make returns look more attractive. For honest comparison, convert all rates to the same basis.