What is the difference between APY and APR?
First, let's understand what decentralized finance (DeFi) is, then we will explore the terms APY and APR.
DeFi is a general name for analogues of traditional financial instruments implemented in a decentralized architecture. These services are publicly available, are open-source projects and are most often based on smart contracts.
APY (Annual Percentage Yield) is the (income) i.e. the return on the investment that users put into lending and farming yield protocols.
APR (Annual Percentage Rate) is an estimate of the reward you will earn over a selected period of time in cryptocurrency. The calculation is not the actual or projected according to APR in fiat currency.
What is the main difference between APY and APR? The answer is simple - annual percentage yield (APY) takes into account interest accrued on a quarterly/monthly/weekly or daily basis while annual percentage rate (APR) does not.