APY
Annual Percentage Yield — the annualised return on an investment including the effect of compounding.
APY (Annual Percentage Yield) expresses the annualised return on a position, accounting for compound interest. It differs from APR (Annual Percentage Rate), which does not include compounding. If a pool earns 1% per week and rewards are auto-compounded, the APY is higher than 52%.
In DeFi, yields are often split into base APY (from trading fees or interest) and reward APY (from governance token emissions). The reward component is typically more volatile and can disappear if token prices fall or emissions are reduced.
Advertised APYs in DeFi can be misleading: they are often calculated from recent short-period returns annualised, and can change dramatically within hours. 30-day average APY (like that shown in DeFiLlama) is a more stable indicator of sustainable yield.