DeFi Annual Percentage Yield (APY)

What is DeFi Annual Percentage Yield (APY)?

DeFi Annual Percentage Yield (APY) is a compounded rate of return earned for cryptocurrency deposits, staking, or providing liquidity. For example, if you deposit 1000 USDT at 20% APY, it means your deposits return an estimated 220 USDT interest in one year when compounded monthly.

All Decentralized Applications (dApps) have independent methods to calculate APY. Moreover, the APYs change frequently depending on market conditions. That is why the APY is an estimate based on previous returns rather than a guaranteed return.

If the transaction fees are high (say USD 20 and above), APY isn’t quite profitable for a small amount of deposit (say below USD 1000). So higher the amount invested, the higher are the returns.

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