APR is the nominal annual rate with no compounding assumed. APY is the effective annual rate after compounding is applied. They describe the same earnings stream and differ only in whether returns are assumed to be reinvested, so APY exceeds APR whenever compounding happens at all and equals it when it does not. The gap is small at staking rates and large at incentive-program rates, which is precisely why the choice of basis is a marketing decision before it is an accounting one.
Quote costs in APR and rewards in APY and every number moves in your favour without a single false statement being made. Pick one basis, state the compounding frequency next to it, and the comparison becomes honest.
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One formula, and the only input that separates them
APY equals one plus the nominal rate divided by the number of compounding periods, raised to the power of that period count, minus one. APR is that same nominal rate with the period count set to one. Crypto.com's reference material states the relationship directly: APR is the nominal rate and APY the effective rate that includes compounding, and for the same stated rate APY is higher unless no compounding occurs, in which case the two are equal.1
Their worked case is the clearest short version. A credit card advertising 12% APR compounding monthly costs the holder about 12.68% in real terms, and a lending protocol showing 10% APR with daily compounding shows 10.47% as APY.1 Nothing was added. The same cash flow was described on a different basis.
Two consequences follow immediately. Comparing an APR from one product against an APY from another is not a comparison, it is a category error. And a rate quoted without its compounding frequency is not a number a reader can reconstruct, which is the state most crypto yield disclosure is in.
Where the compounding actually happens onchain
Compounding is not an assumption in a spreadsheet. It is an event with a timestamp, and in staking products you can usually name it. Lido states that stETH balances rebase every day at 12:00 UTC and that the balance increases with the current APR.2 That is 365 compounding events a year, and note the wording: the protocol describes the rate it applies as an APR while applying it daily, which is the correct disclosure and also the one most integrators misread.
Rocket Pool's exchange-rate token compounds through a price rather than a balance. The rETH to ETH ratio is updated approximately every 24 hours based on the beacon chain rewards node operators earned, and because consensus rewards, priority fees and MEV keep accruing, the ratio moves in one direction over time.3 Same cadence, entirely different ledger, and the exchange rate token entry works through what that changes downstream.
The base layer is the case where compounding is bounded rather than continuous. Consensus rewards accrue to a validator's balance, but effective balance is capped, so above the ceiling additional rewards stop compounding and start needing to be moved. That constraint is why the maximum effective balance change mattered to large operators, and it is the sort of detail that turns a headline APY into an APR in practice.
A staking rate is an output, not a parameter
There is a deeper problem than basis selection. On Ethereum the consensus reward is computed from a validator's effective balance divided by the square root of total active balance across the network, so issuance rises with the square root of participation while the per-validator reward falls with it, and ethereum.org names these as the factors that influence the APR for a staking node.4 Nobody sets that rate. It is a residual of how many other people are staking.
Execution-layer income behaves differently again. Priority fees and MEV come out of transaction flow, so they rise and fall with network activity rather than with validator count.4 A staking product quoting one blended figure is blending a diluting issuance component with a demand-driven fee component and calling the result a rate.
In our view the honest disclosure separates them. Say what the consensus component is, say what the execution component is, say what window each was measured over, and let a reader see which half survives a quiet quarter. A single blended APY hides the only distinction that predicts whether the number holds.
Selective basis is how a rate gets inflated without a false statement
The pattern is consistent enough to be a checklist item. Borrowing costs and protocol fees get quoted as APR because that is the smaller number. Deposit rewards get quoted as APY because that is the larger one. Both figures are individually defensible. The pairing is not, because the reader assembles a net position out of two numbers computed on different bases.
The same trick works across time windows. An APY annualised from a strong seven-day sample is arithmetically correct and predictively worthless, particularly for any rate containing token emissions or points, where the measurement window and the incentive program's schedule are the same thing.
Design consequence, and it is the reason this page exists. If a mechanism only clears its target return when the rate is quoted as APY, annualised off the strongest window available, the mechanism has not cleared it. That is a finding about the business underneath, not about the disclosure.
What we require in a rate disclosure
Four lines, and they fit in a footnote. State the basis, APR or APY, and use the same one for every figure on the page including costs. State the compounding frequency, because without it the conversion cannot be checked. State the measurement window and its end date, since every realised rate is a historical reading. And split the rate by funding source, separating issuance from fees and, in a restaking product, separating base staking from service revenue and token incentives.
The last one carries the most weight. A rate funded by issuance is a transfer from every holder to the subset that stakes. A rate funded by fees is revenue arriving from people using the product. Both can be defensible; only one keeps paying after the emission schedule ends, and the staking entry works through that split in detail.
This page describes how rates are constructed and disclosed. It is not investment advice, not a projection of any future return, and nothing here should be read as a yield expectation for any specific asset.
Common questions
What is the difference between APR and APY in crypto?
APR is the nominal annual rate with no compounding assumed. APY is the effective rate after compounding, so it is higher for the same underlying rate unless there is no compounding, in which case they match.1 A 12% APR compounding monthly works out to roughly 12.68% APY, and a 10% APR compounding daily to about 10.47%.1 Nothing changes in the cash flow. Only the basis of description changes.
Why do staking platforms quote APY instead of APR?
Because APY is the larger number for the same earnings, and it is the conventional basis for deposit products. That is defensible on its own. It stops being defensible when the same page quotes fees and borrowing costs as APR, since a reader then nets two figures computed on different bases. Quote one basis throughout, and state the compounding frequency so the conversion can be checked.
Is a higher APY always better?
No, because APY says nothing about what funds the rate or how long it lasts. A rate paid from protocol issuance dilutes every holder to pay the subset that stakes, and it ends when the emission schedule ends. A rate paid from fees is revenue from people using the network. Two identical APY figures with different funding sources are different products. Ask what pays it before comparing the number.
How is a staking APR calculated on Ethereum?
It is derived, not set. A validator's consensus reward comes from effective balance divided by the square root of total active balance across the network, so total issuance grows with participation while the reward per validator shrinks, and ethereum.org names these as the factors influencing a staking node's APR.4 Execution-layer income from priority fees and MEV is separate and moves with network activity rather than validator count.
See Tokenomics Design for how this applies in practice.
Sources
- APY vs APR: What Do They Mean?
Crypto.com University, 2025
APR as the nominal rate and APY as the effective rate including compounding, the statement that APY exceeds APR for the same rate unless there is no compounding, and the 12% APR to 12.68% APY and 10% APR to 10.47% APY worked conversions. Published 28 February 2025, read 3 August 2026. - What is stETH?
Lido Help Center, 2024
The daily rebase at 12:00 UTC and the statement that the stETH balance increases with the current APR, giving a named 365-period compounding cadence. - Staking Overview
Rocket Pool Docs, 2026
The rETH to ETH ratio updated approximately every 24 hours from realised beacon chain rewards, priority fees and MEV, giving compounding through a price rather than a balance. - Proof-of-stake rewards and penalties
ethereum.org, Ethereum Foundation, 2026
The base reward formula, the square root relationship between total issuance and validator count, and the statement that these factors influence the APR for a staking node. Page last updated 3 April 2026.
Last reviewed 2026-08
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