Thread by @EconsDesign

Difference between APY and APR

APR

For example, a yield farming program offers an APR of 100%/yr. You use $1000 to join this program. One year later you will receive $2,000, where $1000 is the initial capital and $1000 is APR.

#apr #apy #DeFi #blockchain

Once you see the APR, it is possible to immediately calculate how much profit will be earned at the end of the period. This profit comes from your staking or farming, so just join at the beginning to get the result for APR interest.

Formular

APR = r x N

Where:

r: The interest rate of the year;
N: Interest period (N = 1, means 1 year).

APY

APY is another way of calculating the percentage of real profit you will receive.

What will you get if you receive profit every day from staking and you will add that to your principle and earn interest on that every day?

If you have an APR of 100%/yr with getting daily profit, you have to divide APR by 365 days to calculate the interest received daily (0.27%). Then reinvest this interest continuously every day. The amount you get is $2,714.57,where $1000 is the initial capital and $1714.57 is APY

Assuming you participate in farming pairs on Solana's Raydium application, I also combine Step Finance to know the APR and APY of these farming pairs.

Typically, I am staking $RAY on Raydium (current project APR is 35.33%), with $1,000 your farm at the beginning of the year to the end of the year, the total income will be $1,423.51.

Formular

APY = (1+r)^n - 1

In which:

r: The interest rate of the period;
n: Interest period (n=1 means 1 day).