What is APY (Annual Percentage Yield)?. APY expresses a return as a yearly rate with compounding. In DeFi it varies with volume, incentives, and risk.
How it works
Protocols calculate rewards based on pool fees, emissions, and time. Realized yield may differ from quoted APY.
Why it matters
Comparing APY requires understanding sustainability and token emissions.
Common pitfalls
- Confusing APR and APY
- Ignoring that rewards may be paid in volatile tokens
- Comparing yields across unrelated risk profiles
Quick example
A pool showing 20% APY today can drop to single digits if volume fades or incentives end.
See also
- Yield Farming
- TVL
- Impermanent Loss
TL;DR: What is APY (Annual Percentage Yield)? defined in plain English with practical next steps.
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