What is compound interest?
Compound interest means your earnings generate their own earnings. Instead of earning interest only on your original deposit (simple interest), you earn interest on your deposit plus all previously earned interest.
The power of compounding
A $10,000 deposit at 10% annual return:
- Simple interest: $10,000 × 10% × 10 years = $20,000
- Compound interest (annual): $10,000 × (1.10)^10 = $25,937
- Compound interest (daily): $10,000 × (1 + 0.10/365)^3650 = $27,179
The more frequently compounding occurs, the greater the effect.
Compounding in DeFi
Many DeFi protocols allow auto-compounding — automatically reinvesting your yield to earn compound returns. Some protocols (like Beefy Finance) specialise in auto-compounding strategies.
Flat ROI vs compounding
TurboLoop's Loop Plans offer flat ROI — a fixed percentage paid at the end of the plan period. This is not compounded during the plan. However, you can compound manually by reinvesting your returns into a new Loop Plan after each period ends.
Manual compounding with TurboLoop
If you complete an Ultimate plan (54% in 60 days) and reinvest the full amount:
- Start: $1,000
- After 60 days: $1,540
- After 120 days (reinvested): $2,372
- After 180 days (reinvested): $3,652