APY vs APR: The Difference That Changes Your Numbers

Two words. One letter different. Massive difference in meaning. When evaluating any yield product — especially in DeFi — knowing the difference between APR and APY is the single most important thing after understanding the protocol itself.

APR (Annual Percentage Rate)

The simple interest rate, not accounting for compounding. If you earn 1% per day for 365 days without compounding, your APR is 365%.

APR assumes no reinvestment of yield.

APY (Annual Percentage Yield)

The effective annual return WITH compounding. If you earn 1% per day and compound daily, your APY after 365 days is $(1.01)^{365} - 1 = 3678%$. Or roughly 3,678%.

APY assumes you reinvest your yield — and the frequency of compounding matters hugely.

The practical difference

For a 10% APR, here are the APYs at different compounding frequencies:

• No compounding: 10%
• Monthly: 10.47%
• Weekly: 10.51%
• Daily: 10.52%
• Continuous: 10.52%

For a 100% APR:

• No compounding: 100%
• Monthly: 161%
• Weekly: 169%
• Daily: 171%
• Continuous: 171%

The higher the rate, the bigger the APR-to-APY gap. At high APRs, compounding makes a dramatic difference.

Turbo Loop's numbers

When you see "up to 54% ROI" on Turbo Loop, that's the cycle-level return (7-60 days, depending on the plan). Annualized and compounded across a full year of Re-Loops, the effective APY is significantly higher. The math compounds exponentially.

Why this matters when comparing protocols

Some projects quote APR to look conservative. Others quote APY to look attractive. Always check which one is being shown, and do your own math for the compounding frequency you actually plan to use.

Bottom line

APR is what you earn with lazy money. APY is what you earn with active compounding. Always compound. Always know which number you're comparing.