Annual Percentage Rate (APR) is a percentage that denotes the interest paid or earned annually for financial activities, such as lending, staking, borrowing, liquidity provision, and yield farming. Unlike annual percentage yield (APY), APR doesn’t account for compounding. As a result, the return of reinvesting interest or other rewards can exceed the originally specified APR.
To better grasp the APR crypto meaning, consider a DeFi protocol offering a 10% APR on the assets deposited. If the rate doesn’t change during the entire year, the user would earn 10% interest, corresponding to the 10% APR on deposited assets.
Because APR percentages are often changeable depending on market conditions, reward schemes, protocol modifications, and liquidity, users should always scrutinize potential returns themselves rather than taking advertised rates at face value.
