## First Time Hearing About APY and APR? The Difference in Cryptocurrency Returns

In the world of digital investing, beginners often confuse **APY** (Annual Percentage Yield) with **APR** (Annual Percentage Rate). Both seem similar, but in reality, the difference between the two significantly impacts your profits. This article will help you clearly understand and choose the right one for your crypto investments.

## APY vs. APR: Which Is Better?

If you are an investor, the answer is clear: **APY yields higher returns** because it includes the effects of compound interest. APR does not consider compounding, resulting in a lower calculated return than the actual.

Simple example: Invest 10,000 THB at 5% per year
- **APR**: Only 500 THB in the first year (Simple interest rate)
- **APY** (Monthly compounding): More than 500 THB because interest is calculated on the principal + accumulated interest

If you are a borrower, APR will look more favorable because the rate is lower.

## What is (Simple Interest Rate) (APR)?

**APR** stands for Annual Percentage Rate, which refers to the interest rate per year without considering compounding.

How it works: If APR is 6% on a 100 THB loan, it means after a year, you owe the principal 100 THB + 6 THB interest = 106 THB.

### There are 2 types of APR:

**Fixed APR (Fixed APR)**: The rate remains unchanged throughout the loan period, providing certainty and ease of planning.

**Variable APR (Variable APR)**: The rate fluctuates according to market conditions and may increase or decrease based on interest rate volatility. Borrowers face the risk of rising rates.

### APR in the Crypto Industry

In digital finance, APR indicates that if you stake or lend assets via DeFi for one year, how much interest you will earn. For example, if APR = 24% on 1.0 ETH, you should receive an additional 0.24 ETH after a year (Total: 1.24 ETH).

Advantages of APR in crypto: No hidden fees, straightforward calculation.

## What is (Compound Interest Yield) (APY)?

**APY** stands for Annual Percentage Yield, which includes the effects of compounding interest.

Main difference: With APY, you earn interest on the interest itself, not just the principal.

### APY in Digital Currencies

In crypto, APY is often calculated with more frequent compounding than traditional finance markets. Some platforms compound daily or even hourly.

Example: An interest rate of 6% translates into different APYs depending on compounding frequency:
- Semi-annual compounding: APY = 6.09%
- Quarterly compounding: APY = 6.14%
- Monthly compounding: APY = 6.17%
- Daily compounding: APY = 6.18%

As seen, the more frequently interest is compounded, the higher the return.

## Practical Use of APR and APY in Crypto

### Staking
Staking involves "locking" your tokens in a blockchain to support the Proof-of-Stake mechanism and earning interest as a reward. Many platforms also pay daily yields, which closely resemble compounding.

### Yield Farming
Yield Farming is another passive income method. You provide tokens to a Liquidity Pool via dApp, and the platform rewards you. Both APR and APY can tell you how much you will earn.

## How to Calculate APR and APY Yourself

### Basic APR Formula