Crypto Real Returns: APY vs APR - How to Choose for Maximum Profit?

When entering the DeFi world, you’ll encounter terminology that confuses many: APY and APR. Both relate to annual returns, but when choosing to invest in Staking or Yield Farming, you need to know which one will give you real profits. This article will help you understand the differences and make smart choices.

APY is your actual return

APY (Annual Percentage Yield) stands for “annual percentage yield,” and this is the number investors should pay attention to. The simple reason: APY includes compound interest (Compound Interest), meaning you earn interest not only on the principal but also on the accumulated interest.

Imagine this: if you invest 1 ETH at an APY of 24% on a DeFi platform that compounds daily, you won’t just receive 0.24 ETH once. Instead, the interest is calculated repeatedly, so after one year, you’ll have more than 1.24 ETH.

How does APY work in the crypto world

In DeFi, when you stake tokens or enter a liquidity pool for Yield Farming, you’re temporarily sacrificing the use of your assets. The platform rewards you, and these rewards may compound more frequently than naturally—often daily or even hourly.

More frequent compounding = more profit. Therefore, APY is the most accurate figure.

APR: straightforward calculation

APR (Annual Percentage Rate) is the “percentage rate per year” in a simple form, with no compounding. If the APR is 24%, you’ll get 0.24 ETH per year, and that’s it.

In which cases is APR useful? Mostly for borrowers—if you borrow 1 ETH at 6% APR, you know you’ll need to repay 1.06 ETH after a year. Simple, with no complications.

But for investors? APR gives a “lower” picture because it doesn’t account for compounding.

Comparing: APY vs APR

Let’s use real numbers:

• Investment amount: 10,000 THB
• Interest rate: 5% per year
• Duration: 3 years

If calculated with APR only: Year 1: 500 THB Year 2: 500 THB Year 3: 500 THB Total = 11,500 THB

If compounded daily (APY): You will get 11,576.25 THB

The difference of 76.25 THB may seem small for a small amount, but imagine staking with 1 million THB—the difference could be hundreds of thousands of THB.

What’s the real difference between APR and APY?

How to calculate APR and APY yourself

Simplest APR formula(