Why is APY always higher than APR?

APY includes the effect of earning interest on previously earned interest (compounding). The more frequently interest compounds, the larger the gap between APY and APR for the same nominal rate.

Which metric should I use to compare DeFi yields?

Use APY when you plan to auto-compound, because it reflects what you actually earn. Use APR when comparing base rates without compounding, such as manual-claim staking rewards.

Does compounding frequency really make a big difference?

At low rates the difference is small. At higher DeFi rates (50%+ APR), daily vs. monthly compounding can change the effective yield by several percentage points. The converter shows the exact impact.

How to Convert APY to APR

4 min readCrypto

DeFi protocols advertise yields as APY or APR, but comparing them directly is misleading because APY includes compounding while APR does not. This guide explains the math behind each metric and shows you how to convert between them so you can make fair comparisons across protocols.

Quick Steps

1
Open the APY/APR Converter
Navigate to the converter tool on Toolin.
2
Select conversion direction
Choose APY to APR or APR to APY.
3
Enter the interest rate
Type the rate as a percentage value.
4
Pick compounding frequency
Select daily, weekly, monthly, or enter a custom period count.
5
Copy the result
Read the converted rate and use it to compare protocols fairly.

APY/APR Converter

Convert between APY and APR for DeFi yield calculations

Open Tool

APY vs. APR: The Core Difference

APR (Annual Percentage Rate) is the simple interest rate over one year without compounding. APY (Annual Percentage Yield) accounts for the effect of compounding interest at a given frequency. Because compounding earns interest on interest, APY is always equal to or higher than APR for the same nominal rate. The gap widens as the compounding frequency increases.

Conversion Formulas

APR to APY:
  APY = (1 + APR / n)^n - 1

APY to APR:
  APR = n × [(1 + APY)^(1/n) - 1]

Where n = number of compounding periods per year
  Daily: n = 365
  Weekly: n = 52
  Monthly: n = 12

Using the Converter

Open the APY/APR Converter

Go to the APY/APR Converter on Toolin.

Choose conversion direction

Select whether you want to convert APY to APR or APR to APY.

Enter the rate

Type the annual rate as a percentage, for example 12 for 12%.

Select compounding frequency

Choose daily, weekly, monthly, or a custom number of periods per year.

Read the converted rate

The tool instantly displays the equivalent rate in the other format.

Practical DeFi Comparison Tips

Always compare APY to APY or APR to APR. Mixing them inflates one protocol's apparent return.
Daily compounding is common in auto-compounding vaults but not in manual-claim staking pools.
Factor in gas costs for manual compounding. Frequent compounding only helps if fees do not eat the gains.
Advertised yields can change rapidly. Treat them as snapshots, not guarantees.

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Frequently Asked Questions

Why is APY always higher than APR?: APY includes the effect of earning interest on previously earned interest (compounding). The more frequently interest compounds, the larger the gap between APY and APR for the same nominal rate.
Which metric should I use to compare DeFi yields?: Use APY when you plan to auto-compound, because it reflects what you actually earn. Use APR when comparing base rates without compounding, such as manual-claim staking rewards.
Does compounding frequency really make a big difference?: At low rates the difference is small. At higher DeFi rates (50%+ APR), daily vs. monthly compounding can change the effective yield by several percentage points. The converter shows the exact impact.