APY

Share on social media

What does APY mean in crypto terms?

APY, or Annual Percentage Yield, refers to the annual rate of return that an investor can expect to earn from staking, lending, or yield farming with their digital assets.

Just like in traditional finance, the APY takes into account the effects of compounding interest. In the world of decentralized finance (DeFi), cryptocurrency holders can lend their assets to others via smart contracts, or stake their tokens in a liquidity pool to facilitate transactions on the network. In return for providing these services, they earn rewards or interest on their assets. This interest, when annualized and including the effects of compounding, is referred to as the APY.

One unique aspect of APY in cryptocurrency is that the rates can often be significantly higher than those in traditional finance, sometimes even reaching triple-digit percentages. However, it's important to note that these high returns come with a significantly higher level of risk, due to the volatility of the crypto market, potential smart contract vulnerabilities, and other factors.

Did you find this term clearly defined?

Yes

Explore Other Crypto Terms

Altcoin

An 'altcoin' is a blanket term used to denote any digital cryptocurrency that is not Bitcoin, which was the first established cryptocurrency.

Arbitrage

Arbitrage refers to the practice of taking advantage of price discrepancies across different crypto exchanges. This occurs when a cryptocurrency is being sold for different prices on separate platforms.

Airdrop

An 'airdrop' refers to a method in which free tokens or coins are distributed to the holders of a particular cryptocurrency. This is typically done as a strategy to promote a new cryptocurrency or to reward loyal users of a blockchain network.

ATH

In the realm of finance and particularly in cryptocurrency markets, 'ATH' is an acronym standing for 'All-Time High.' It refers to the highest value or price that a particular asset, such as a stock or a cryptocurrency, has ever reached in its entire trading history.

ATL

In financial and particularly cryptocurrency contexts, 'ATL' is an acronym for 'All-Time Low.' It refers to the lowest price point that a specific asset, such as a stock or a cryptocurrency, has ever achieved throughout its entire trading history.