Utilix knowledge base
APY vs APR in Crypto — What Validators and Protocols Report
Published May 3, 2026
Staking dashboards and DeFi protocols report returns in two ways: APR and APY. They are related but different, and confusing them leads to inaccurate yield estimates.
Definitions
APR (Annual Percentage Rate) — The simple annual rate without accounting for compounding. If a staking protocol pays 1% per month, the APR is 12% (1% × 12).
APY (Annual Percentage Yield) — The effective annual rate after accounting for compounding. The same 1% per month, when compounded monthly, produces an APY of 12.68%.
APY = (1 + APR/n)^n − 1
Where n is the number of compounding periods per year.
Why the Difference Matters
With annual compounding (n=1), APR = APY. The gap grows with compounding frequency:
| APR | Compounding | APY |
|---|---|---|
| 5% | Annually | 5.000% |
| 5% | Monthly | 5.116% |
| 5% | Daily | 5.127% |
| 10% | Monthly | 10.471% |
| 20% | Daily | 22.134% |
At moderate rates (5–10%), the difference is small. At higher DeFi rates (20%+), the gap becomes meaningful.
What Ethereum Staking Reports
Ethereum consensus rewards are calculated per epoch (~6.4 minutes), effectively continuous compounding. Most validator dashboards and services report the effective annualized rate:
- Etherscan and Rated.network display APR — the simple annualized rate before compounding
- Many staking services advertise APY to show the higher figure
When comparing two staking options, make sure you are comparing the same metric.
What DeFi Protocols Report
Decentralized lending and liquidity protocols (Aave, Compound, Uniswap) typically:
- Display APY for supply yields (the rate you earn as a lender)
- Display APR for borrow rates (the rate borrowers pay, without compounding the debt)
Always check the label. A 10% APR supply rate and a 10.5% APY supply rate are describing roughly the same yield, not different ones.
Converting Between APR and APY
APY = (1 + APR/n)^n − 1
APR = n × ((1 + APY)^(1/n) − 1)
Example: An ETH staking service reports 4.5% APR with daily compounding. What is the APY?
APY = (1 + 0.045/365)^365 − 1
= (1.0001233)^365 − 1
= 1.04603 − 1
= 4.603%
The difference at 4.5% is about 0.1 percentage points — small in practice.
Practical Guidance
- For staking rate comparisons, use the same metric across all options
- For long-term projections (years), use APY with the correct compounding frequency
- High advertised APY rates in DeFi often include inflationary token rewards that can decrease as token price falls
- On-chain data always reflects actual earned rewards; advertised rates are projections