What exactly is APR in cryptocurrency? An article clarifying the truth about yield calculations

In cryptocurrency investing, the keyword “что такое apr в криптовалюте” (what is APR in cryptocurrency) is a question every trader must understand. At the same time, the concept of APY also frequently appears; the two are often confused, but they have a significant impact on your final returns. Many investors have fallen into traps when choosing lending platforms, staking products, or liquidity mining due to a lack of proper understanding of these two metrics. This article will help you thoroughly understand the difference between APR and APY and learn how to select the correct metric in different scenarios.

Simple ≠ Accurate: Why APR and APY Should Not Be Confused

Intuitively, APR (Annual Percentage Rate) and APY (Annual Percentage Yield) sound very similar, but their calculation logic is completely different. The difference is like in a bank: one bank tells you “5% annual interest,” while another says “5.12% annual yield”—they seem close, but over a year, the difference becomes apparent.

Why is it important to distinguish these two metrics? In crypto lending, staking, and DeFi mining, the effect of compounding is amplified. Choosing the wrong metric for decision-making can lead you to overestimate or underestimate actual returns. Therefore, understanding APR and APY is not just theoretical knowledge but a practical skill to protect your investment gains.

The True Nature of APR—Annual Percentage Rate Without Compounding

What is APR

APR stands for “Annual Percentage Rate,” and it represents the annualized return without considering the effects of compounding. If you lend out 1 BTC with an annual interest rate of 5%, then the APR is 5%, meaning you will earn 0.05 BTC in interest after one year—nothing more, nothing less, with no interest-on-interest effect.

APR is calculated using simple interest: