You see a staking yield advertised, and you assume that's what you'll earn over a year. Often, it isn't — because the label might say APR when the protocol actually pays APY, or the other way around.
The Simple Version of Each
APR (Annual Percentage Rate) is simple interest. If a protocol offers 20% APR and you stake 1,000 tokens, you earn 200 tokens at the end of the year. The math is straightforward because your rewards don't earn anything themselves — they just sit there until you claim them.
APY (Annual Percentage Yield) includes compounding — the process of reinvesting your rewards so they also start earning rewards. With the same 20% rate compounded monthly, you'd end the year with slightly more than 200 tokens, because each month's rewards are folded back into your balance before the next month's rewards are calculated.
The more frequently compounding happens — daily, hourly, even per block — the wider the gap between APR and APY becomes. At modest rates the difference is small. At higher rates, it gets meaningful fast.
Why This Trips People Up
Most protocols display APY because it's the larger number, and larger numbers attract attention. That isn't necessarily dishonest — compounding is real — but it only applies if you actually reinvest your rewards regularly. If you claim and hold your rewards without restaking them, you're effectively earning closer to APR, not APY.
There's also a second catch: staking rewards are usually paid in the protocol's own token. If that token loses value over the period you're holding it, the real-world return shrinks regardless of what the APY label said. APY measures token quantity, not purchasing power.
What to Do With This
Before comparing two yields side by side, check whether each figure is APR or APY, and how often compounding actually occurs. Some protocols autocompound for you; others require manual restaking, which adds gas costs and effort.
The comparison table labels yields where that information is available, which makes it easier to spot when you're comparing an APY against an APR without realising it. That single check can change how two options stack up entirely — and it costs you nothing to look before deciding.