APY
Annual Percentage Yield — yearly return that includes the effect of compounding. With the same nominal rate, APY is meaningfully higher than APR over time.
Aliases: annual percentage yield, compound yield
APY (Annual Percentage Yield) is the annualised return that includes compound interest. If a 10% nominal rate is credited daily and immediately reinvested, the resulting APY is around 10.52%. The more frequent the compounding, the higher the APY for the same APR.
Formula
APY = (1 + r/n)^n − 1Where r is the annual rate (APR) and n is the number of compounding periods per year. With continuous compounding the limit is e^r − 1.
Examples at APR 10%:
- Annual compounding: APY = 10.00%
- Monthly: APY = 10.47%
- Daily: APY = 10.52%
- Per-block (effectively continuous): APY = 10.517%
Where you see it
- Liquid staking (Tonstakers, Hipo, bemo) — APY is the natural metric since the LST/TON rate drifts continuously.
- Lending protocols — often quote both. APY is the better number for deposit returns, APR for borrowing costs.
- Yield farming — quoted APYs are typically optimistic: they assume you reinvest every day, which costs gas and attention.
Caveats
- A 100% APY on a two-week farm campaign is not the annual return; it is “if conditions held for a year”. In practice emissions shrink, the reward token’s price slides, and the realised number is lower.
- When comparing offers, normalise to one metric — APR or APY, not a mix.
- Gas to manually reinvest on TON is trivial, but auto-compounders or protocols that compound on-chain still save attention.