Free Calculator

DeFi APY Calculator

Calculate your potential returns from DeFi lending or the cost of borrowing. Understand compound interest and compare different time periods.

APY Calculator

Calculate your DeFi lending returns with compound interest

Current Supply APY: 4.20%

$

DeFi protocols typically compound continuously or per block

Final Balance After 1 Year
$10,428.94
Principal:$10,000.00
Interest Earned:+$428.94
Nominal APY
4.20%
Effective APY
4.29%

Effective APY accounts for compounding frequency

Interest Breakdown

Daily:~$1.18
Monthly:~$35.75

Earnings Projections

1 Month:+$35.06
3 Months:+$105.55
6 Months:+$212.22
1 Year:+$428.94
Note: APY rates shown are typical values and change frequently based on market conditions. Higher utilization = higher supply APY.

Understanding APY in DeFi

APY (Annual Percentage Yield) is the most important metric when evaluating DeFi lending opportunities. Unlike simple interest, APY accounts for compound interest - earning interest on your interest. In DeFi, this compounding typically happens continuously, maximizing your returns.

APY (Annual Percentage Yield)

  • • Includes compound interest
  • • Higher than APR (same rate)
  • • Standard in DeFi protocols
  • • More accurate for earnings

APR (Annual Percentage Rate)

  • • Simple interest only
  • • Lower than APY (same rate)
  • • Common in traditional finance
  • • Easier to calculate

How Compound Interest Works

The Compound Interest Formula

A = P × (1 + r/n)n×t
A
Final Amount
P
Principal
r
Annual Rate
n
Compounds/Year
t
Time (Years)

Example Calculation

Supplying $10,000 USDC at 5% APY for 1 year with continuous compounding:

Principal (P):$10,000
APY (r):5% = 0.05
Time (t):1 year
Final Amount:$10,512.71
Interest Earned:+$512.71

Impact of Compounding Frequency

How often interest compounds significantly affects your returns. Here's how $10,000 at 5% APR grows differently based on compounding frequency over 1 year:

FrequencyCompounds/YearFinal AmountEffective APY
Yearly1$10,500.005.00%
Monthly12$10,511.625.12%
Daily365$10,512.675.13%
Continuous (DeFi)∞$10,512.715.13%

DeFi protocols compound continuously (or per block), giving you the maximum possible returns for a given APR. This is why DeFi lending often displays higher APYs than traditional banks.

Typical DeFi APY Rates

APY rates vary by asset type and market conditions. Here are typical ranges you'll see on major protocols like Aave:

Stablecoins

3-8% APY

USDC, USDT, DAI - Higher rates due to strong borrowing demand

Major Crypto

0.1-3% APY

ETH, WBTC - Lower rates as most holders want to hold, not borrow

Liquid Staking

~0.05% APY

wstETH, rETH - Very low supply APY (you're earning staking rewards instead)

Remember: Higher APY often means higher risk. Extremely high APYs (20%+) usually indicate risky protocols, low liquidity, or temporary incentive programs that won't last.

Frequently Asked Questions

What is APY in DeFi?
APY (Annual Percentage Yield) represents your total return over a year, including compound interest. In DeFi, APY accounts for how often interest is compounded - typically continuously or per block, which is approximately every 12 seconds on Ethereum.
What is the difference between APY and APR?
APR (Annual Percentage Rate) is the simple interest rate without compounding. APY includes the effect of compound interest. For example, 5% APR compounded daily equals approximately 5.13% APY. DeFi protocols typically display APY because interest compounds automatically.
Why do supply and borrow APYs differ?
Borrow APY is always higher than supply APY because: 1) The protocol takes a spread as revenue, 2) Not all supplied assets are borrowed (utilization is below 100%), and 3) Part of the interest goes to a reserve fund. The difference funds protocol operations and provides a safety buffer.
How is DeFi interest compounded?
DeFi protocols like Aave compound interest continuously - your balance increases with every block (approximately every 12 seconds on Ethereum). This means interest is earned on interest almost immediately, resulting in slightly higher returns than traditional finance.
Why do APY rates change?
APY rates are dynamic and change based on supply and demand. When more people borrow, utilization increases, pushing both supply and borrow APYs higher. When borrowing decreases, rates fall. This creates a self-balancing market for lending capital.
Are the APY rates shown accurate?
The rates shown are typical values for educational purposes. Actual rates change every block based on market conditions. For real-time rates, check the protocol directly or use our Aave Simulator which pulls live data.

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