Deciphr Academy
Track 4 · Module 21 · Lesson 5 of 7 · 8 min read

What is the difference between APR and APY, and what is "real" yield?

Short answer

APR is a yearly rate that ignores compounding, while APY includes the effect of earning on your earlier earnings.1,2 A big yield paid in newly created tokens can still leave you owning a smaller share of the network, if the supply grows faster than your holding.3,4

More tokens, smaller slice (made-up numbers)Startsupply 100staker holds 10 = 10%Endsupply +80% = 180; staker +60% = 16, about 8.9%Yield 60%, supply growth 80%: the share still shrinks
Fig. 5. A staker's slice of a growing supply. The number of tokens goes up, but the share of the whole can still shrink.

APR and APY

Two labels look alike but measure different things. US rules for bank accounts give a useful pair of definitions.1

  • APR, an annual percentage rate, is a yearly rate that does not reflect compounding. US savings rules call this the interest rate, and allow banks to label it "annual percentage rate".1
  • APY, an annual percentage yield, shows the total earned over a 365-day year, taking into account how often interest is compounded.1

Compound interest means earning on your original amount and on the interest already added to it.2 So the more often earnings are added and start earning too, the further APY rises above APR.1,2

How we work out APY

APY = (1 + APR ÷ n)ⁿ − 1, where n is how many times a year earnings are added. US rules for bank accounts round APY to two decimal places, and so do the quizzes.1

  • 12% APR, added monthly (n = 12): 1.01¹² − 1 = 12.68%.
  • 12% APR, added daily (n = 365): 12.75%.
  • 12% APR, added once a year (n = 1): 12.00%.

Rates are estimates, not promises

A staking rate is not a fixed interest rate. Lido's documentation says its APR is only a current estimate, worked out as an average over the last 7 days, and makes no forecast.5 Lido's risk disclosure adds that any APR or APY shown is an estimate, and that staking rewards can be lower than expected, or zero.6

Anza's documentation for Solana's validator software says a simple staking yield leaves out validator uptime, commissions and slashing.3 Each of those can make the real result smaller.

How we work out rewards over part of a year

Rewards = amount × APR × days ÷ 365, ignoring compounding.1 64 ETH at 2.5% for 73 days: 64 × 0.025 × 73 ÷ 365 = 0.32 ETH. The quizzes use this method.

What the reward is paid in

Two yields with the same number can be very different underneath.7,8

  • Paid from fees or interest: someone using the service pays it, such as borrowers on a lending app or traders in a pool.7,9
  • Paid in new tokens: the network or project creates more tokens. Solana's staking FAQ says its staking yield comes from inflationary issuance, shared among stakers and validators.8

New tokens add to the supply. Solana's published schedule started inflation at 8% a year, falling by 15% each year to a long-term 1.5%.8 In August 2026 validators voted to make it fall by 30% a year instead; the change applies once a software switch is turned on, and its technical proposal was still marked "Review" on 24 October 2026.10,11,12 For Ethereum, ethereum.org says the balance between issuance and burning sets ETH's inflation or deflation rate, as Module 13 showed.4

Dilution

When new tokens go to stakers, everyone else's share of the supply shrinks. Anza's documentation says a complete view of staking rewards should take this "token dilution" into account.3 It defines an "adjusted staking yield": the change in the share of the total supply that staked tokens own, after the new tokens are handed out.3

How we work out "real" yield (our worked example)

This is our own simple check, not an official formula. Real yield ≈ the staking yield − the growth in the token's supply, in percentage points.3 A token paying 7% while its supply grows 5% gives about 2 points.

The shortcut is close for small numbers but drifts for big ones. The exact change in your share is (1 + yield) ÷ (1 + supply growth) − 1. The quizzes use the subtraction, with small numbers.

Our viewBefore comparing two yields, put them on the same footing: the same compounding, the same asset, and the same question of whether the supply of the reward token is growing.
Sources
  1. Regulation DD (Truth in Savings), 12 CFR part 1030: sections 1030.2 and 1030.3, and Appendix A. Electronic Code of Federal Regulations, US Government (read 24 October 2026, through the eCFR's own content service).
  2. Compound Interest (glossary). Investor.gov, US Securities and Exchange Commission (read 24 October 2026).
  3. Inflation Schedule. Anza (Agave validator client documentation for Solana) (read 24 October 2026).
  4. How The Merge impacted ETH supply. ethereum.org (read 24 October 2026; page last updated 6 June 2026).
  5. Introduction. Lido documentation (read 24 October 2026).
  6. Public Risk Disclosure (PRD). Lido documentation (read 24 October 2026), last updated 20 February 2026.
  7. FAQs. Aave (read 24 October 2026).
  8. Staking and Inflation FAQ. Solana Foundation, solana.com (read 24 October 2026).
  9. Pools (Uniswap v2). Uniswap Developers documentation (read 24 October 2026).
  10. SGP-0002: Double Disinflation Rate. Solana Governance Proposals, Solana Foundation on GitHub (read 24 October 2026; status updated in the repository on 28 August 2026), created 3 July 2026.
  11. Solana vote to double disinflation passes by a hair in dramatic finish. CoinDesk (read 24 October 2026), 28 August 2026.
  12. SIMD-0550: Double Disinflation Rate. Solana Improvement Documents, Solana Foundation on GitHub (read 24 October 2026), created 2 June 2026.
  13. Rev. Rul. 2023-14: staking rewards (Internal Revenue Bulletin 2023-33). US Internal Revenue Service (IRS) (read 24 October 2026), 14 August 2023.
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General education built from the publicly available sources listed above. Not financial, legal, tax or investment advice. Naming a company, project or regulator is not an endorsement either way. Last checked 2026-10-24. Terms and disclaimer.