What is APY in crypto?
APY, short for annual percentage yield, is the total return you earn on money or crypto over one year, including the effect of compound interest. In crypto, APY is the number exchanges and wallets show for staking, lending and savings-style products, and it’s almost always variable. A high APY tells you what you could earn in coins, not what you’ll earn in euros.
What is APY in crypto?
APY in crypto is the yearly rate a platform expects to pay you for locking up or lending your crypto, with compounding included. If a platform shows 5% APY on a coin, holding 100 coins for a year should leave you with about 105 coins, assuming the rate stays the same.
The term comes from banking. A savings account or other deposit accounts at a bank show an APY so you can compare offers, because interest paid monthly earns more than the same rate paid once a year. Crypto platforms borrowed the idea for staking rewards, crypto lending and yield farming.
Three things make crypto APY different from a bank’s:
- It’s paid in the coin. You earn more of the same asset, not euros.
- It’s usually variable. Staking rewards depend on network activity and how many coins are staked, so the rate can change daily.
- It isn’t protected. EU deposit guarantee schemes cover bank deposits up to €100,000; they don’t cover crypto.
APY vs APR: what’s the difference?
The difference between APY and APR is compounding. Annual percentage rate (APR) is the simple yearly rate. Annual percentage yield (APY) adds the interest you earn on earlier interest, so APY is higher than APR whenever rewards are paid more than once a year and reinvested.
| APR | APY | |
|---|---|---|
| Includes compounding | No | Yes |
| Typical use | Loans, credit cards, some staking quotes | Savings, staking, crypto lending |
| Same rate, paid monthly | 5.00% | about 5.12% |
When you borrow money, a lower APR is better. When you earn interest, compare APY and APY, never APY against APR, or one offer will look better than it really is.
How to calculate APY
To calculate APY, take the yearly rate, split it into compounding periods, and see what one euro grows to after a year. The formula is:
APY = (1 + r ÷ n)ⁿ − 1
Here r is the APR as a decimal and n is the number of compounding periods per year: 12 for monthly, 4 for quarterly, 365 for daily.
A worked example with an initial deposit of €1,000 at 5%:
| Compounding | Calculation | Value after 1 year | APY |
|---|---|---|---|
| Annually | €1,000 × 1.05 | €1,050.00 | 5.00% |
| Quarterly | €1,000 × (1 + 0.05 ÷ 4)⁴ | €1,050.95 | 5.09% |
| Monthly | €1,000 × (1 + 0.05 ÷ 12)¹² | €1,051.16 | 5.12% |
| Daily | €1,000 × (1 + 0.05 ÷ 365)³⁶⁵ | €1,051.27 | 5.13% |
Compounding helps, but the difference between monthly and daily is small. The rate itself and the risk behind it matter far more than how often interest earned is added.
Where you see APY in crypto
You’ll see crypto APY on four kinds of products. Each pays you for a different reason, which is why the risks differ too.
Staking APY
Staking APY is the reward for helping secure a proof-of-stake blockchain. Your coins are used by a validator, and the network pays new coins and fees as rewards. On an exchange, the platform stakes for you and keeps a commission, so the APY you see is usually after that cut. Staking APY also differs per coin, because each network sets its own reward rules, and it tends to fall when more holders stake. Read our explainer on staking and the risk of slashing.
Lending
Some platforms lend your crypto to traders and pay you part of the interest. The APY depends on demand for loans. The risk is that the borrower or the platform can’t pay back, and several large crypto lenders have gone bankrupt in the past.
Yield farming and liquidity pools
In DeFi, yield farming means moving crypto between protocols to earn rewards. The APYs can look very high because they include new tokens printed by the protocol, and those tokens often fall in value. Smart contract bugs and impermanent loss can wipe out the yield.
Savings-style accounts
Some brokers and apps pay interest on cash or stablecoin balances. Under MiCA, licensed crypto platforms may not pay interest on e-money tokens such as regulated euro or dollar stablecoins, so a “stablecoin APY” offered to EU residents deserves a careful look at how it is structured.
Why a higher APY is not always better
A higher APY is not always better because the yield is paid in a coin whose price can fall faster than the rewards add up. The rate is only half of the sum; the coin’s price is the other half.
Here’s the maths. You stake €1,000 worth of a coin at 5% APY. After a year you have 5% more coins. If the coin’s price fell 30% in that year, your stake is worth €1,000 × 1.05 × 0.70 = €735. You earned rewards and still lost €265.
Before you chase a higher APY, check:
- Is the rate fixed or variable? Most are variable, and “up to” rates often apply only to small amounts or new customers.
- Is there a lock-up? Some staking products lock your coins for days or weeks, so you can’t sell in a crash.
- What are the fees? Platform commissions and withdrawal fees reduce your real yield.
- Who holds your coins? On a custodial platform, its solvency is your risk.
APY, tax and investor protection in the EU
For EU residents, rewards counted in APY are not tax-free and not protected like bank savings. In the Netherlands, your coins, including rewards, count towards box 3 assets on 1 January. In Germany, staking and lending rewards are generally taxed as income when you receive them. Rules differ per country, so consult your tax office or an adviser if the amounts matter.
On protection: the EU deposit guarantee covers bank deposits, and investor compensation schemes cover failed investment firms, but neither covers crypto-assets. A MiCA licence means the platform is supervised and must keep your crypto separate from its own, which helps, but it doesn’t guarantee the APY or your capital. See our list of staking platforms for EU-licensed options and how compound interest and interest work in general.
The bottom line
APY is the yearly yield with compounding included, which makes it the fairest way to compare earning products. In crypto, read it as “extra coins per year”, then ask what the coin itself might do, how long your funds are locked, and who is holding them.
Related terms
Questions people ask
What is the difference between 5% APR and 5% APY?
5% APR is the simple yearly rate without compounding. 5% APY already includes compounding, so it is what you actually end up with. A 5% APR paid out monthly and reinvested works out at about 5.12% APY.
What is 5% APY on €1,000?
After one year you would have €1,050, so €50 in interest or rewards. In crypto staking the reward is paid in coins, so the euro value at the end also depends on the coin's price.
Is APY paid out monthly?
It depends on the platform. APY is always shown as a yearly figure, but rewards can be paid daily, weekly or monthly. The more often they're added to your balance, the closer your real return gets to the quoted APY.
Which crypto gives the highest APY?
The highest APYs usually come from small tokens, new DeFi protocols or promotions, and they carry the highest risk. A double-digit APY on a coin that falls 50% still loses you money, so compare risk before rate.
Is staking even worth it?
Staking can be worth it if you were going to hold a proof-of-stake coin anyway, because it adds coins over time. It doesn't protect you from price drops, and lock-up periods or platform risk can make it a poor fit for money you might need soon.