FoundationsBeginner6 min
What Is APY Really?
Core question
If a pool shows 15% APY, do I actually receive 15%?
Not necessarily.
APY (Annual Percentage Yield) is the annualized return including the compounding effect. It isn't a fixed promise: DeFi APYs move with supply, demand, and token prices — sometimes by the second. The displayed number is a snapshot of the current rate, not a guarantee for the next twelve months.
Look up in the Glossary: APY →APR and APY: interest on interest
Example: 15.00% a year, paid monthly. Each slab is one month's interest.
- APR 15.00%: twelve equal monthly payments that are not reinvested.
- APY 16.08%: every month's interest earns interest too. Over the year that adds up to the orange cap – 1.08 percentage points more.
Schema with computed values, not market data. It assumes the rate stays the same all year – in DeFi it rarely does, as the next section shows.
Work it out yourself
Try it yourself: the compounding effect
Preset to 5% — a round number for illustration, not a market figure. Change it freely.
After 12 months: $1,050.00
A pure projection based on the entered APY — not a guaranteed future return.
Why today's number isn't next year's number
Scenario comparison: constant vs. variable
Both scenarios start at 12% APY — illustrative only, not a live forecast.
Scenario A: constant 12%
$1,120.00
Scenario B: 12 → 8 → 5 → 7%
$1,079.70
With a variable APY, the final amount is $40.30 lower than with constant compounding — same starting value, a different outcome.
Both scenarios are hypothetical. Real APYs change unpredictably.