APR vs APY in Crypto Staking: What's the Difference?

APR vs APY in crypto staking: APR ignores compounding, APY includes it. Learn the conversion formula, when the gap matters and how to compare offers fairly.

What is the difference between APR and APY?

APR, or annual percentage rate, is the simple yearly rate: the rewards you would earn on your original stake if nothing were reinvested. APY, or annual percentage yield, is the effective yearly rate once rewards are added back to the stake and start earning rewards of their own. For the same underlying rate, APY is always equal to or higher than APR, and the gap depends on how often compounding happens.

The idea comes from banking. In the US, Regulation DD, the Truth in Savings rule, sets out exactly how banks must calculate APY so savers can compare accounts with different compounding. Crypto yield pages do not all follow the same conventions, so a yield label tells you little until you know which rate it is and how it compounds.

On Ethereum, for example, validators earn rewards for proposing blocks and attesting to other validators’ work, and ethereum.org displays the network’s current reward rate as an APR. APY plays the same role for a quoted rate that CAGR plays for a realized return: both express growth as one compounded yearly figure.

How do you convert APR to APY?

You need the number of compounding periods per year, called n:

• APR to APY: APY = (1 + APR ÷ n)^n − 1
• APY to APR: APR = n × ((1 + APY)^(1/n) − 1)

Example: Suppose a staking program quotes an 8% APR. Compounded yearly, the APY is 8.00%. Quarterly gives 8.24%, monthly 8.30%, weekly 8.32% and daily 8.33%. Continuous compounding, the mathematical ceiling, also rounds to 8.33%, so beyond weekly compounding the extra is tiny at this rate.

Converting a daily or weekly reward rate

Some dashboards show rewards per day or per week instead of per year. Multiply by the number of periods to get the APR, and compound to get the APY. A reward of 0.15% per week is 0.15% × 52 = 7.8% APR, and 1.0015^52 − 1 = 8.11% APY if every weekly reward is restaked. A reward of 0.02% per day is 7.3% APR and 7.57% APY.

When does the gap between APR and APY matter?

At single-digit rates, barely. At high rates, a lot. This table applies the same formula at different APRs:

Compounding inflates a large rate far more than a small one, which is one reason eye-catching yields tend to be shown as APY. Taken to an extreme, “1% a day” is a 365% APR but a 3,678.34% APY. Promises like that are a classic warning sign, covered in our guide to spotting crypto scams.

How to compare two staking offers fairly

First, put both offers on the same basis. Suppose Offer A advertises a 12% APY with daily compounding, while Offer B advertises an 11.5% APR paid monthly and automatically restaked. Converting B gives (1 + 0.115 ÷ 12)^12 − 1 = 12.13% APY. Converting A back gives an APR of 11.33%. The offer with the smaller headline number is actually the higher yield.

Then adjust for what you will really receive:

1. Commission. Many validators and platforms keep a share of rewards. At a 12% commission, an 8% APR becomes 7.04% net, or a 7.29% APY with daily compounding.
2. Compounding you actually get. An APY assumes rewards are restaked at the stated frequency. If rewards are paid out and not restaked, your yield is the APR. If you restake by hand, each transaction costs a network fee, which can cancel the benefit on a small balance.
3. Variable rates. A quoted rate is a snapshot, not a promise. On Ethereum, the base reward per validator is inversely proportional to the square root of the number of validators, so the rate falls as more ETH is staked.
4. Lockups and exit delays. A higher rate that locks funds or takes days to unstake is not directly comparable with a flexible one.
5. Counterparty risk. The SEC’s investor bulletin on crypto interest-bearing accounts warns that they are not insured like bank deposits and that the company holding your assets could fail. A higher yield often reflects higher risk.

Why APY is measured in tokens, not dollars

Staking rewards are paid in the token you stake, so APY measures token growth, not dollar growth. Suppose you stake 1,500 units of Token X at a hypothetical $4.00, or $6,000, at an 8% APR compounded daily. After a year you hold 1,624.92 units, 124.92 more than you started with. If Token X falls 20% to $3.20, the position is worth $5,199.73: a 13.34% loss in dollars despite an 8.33% gain in tokens.

The dollar break-even in this example is a price of about $3.69, a 7.69% drop. Any bigger fall and the yield no longer covers it. Staking rewards on many networks also come from newly issued tokens, which grows the circulating supply and dilutes holders who do not stake.

To judge the full result, run your start and end values through the crypto ROI formula, and include the trading and network fees covered in our guide to crypto profit and loss.

Questions to ask before trusting a quoted yield

Use this list whenever you see a staking or savings-style rate:

• Is the number an APR or an APY, and does the page say so clearly?
• How often do rewards compound, and does that happen automatically?
• Is the rate shown before or after the validator’s or platform’s commission?
• Is the rate fixed, variable or a limited-time promotion?
• Which token are rewards paid in, and how volatile is its price?
• How long are the lockup and unstaking periods?
• Who holds your tokens while they earn, and what happens if that party fails?

If you cannot answer the first three, you cannot compare the offer with anything else. If you cannot answer the last one, the yield figure is the least important number on the page.

The bottom line

APR is the simple rate; APY is what that rate becomes when rewards compound. Convert every offer to the same basis, after commission and at the compounding you will really get, before comparing. Then remember the yield is counted in tokens, so the token’s price can outweigh it in either direction.

This content is for education only and is not financial, investment, tax or legal advice. Crypto assets are volatile and you can lose money. Examples use hypothetical numbers. See our disclaimer and editorial policy.