APY (Lending)
The annualized percentage yield in DeFi lending, accounting for interest compounding.
What is APY (Lending)?
APY measures the effective annual return or cost in DeFi lending, factoring in compounding interest. For example, a 5% APR compounded daily yields a higher APY, around 5.13%. Suppliers on Compound earning 4% APR might see 4.2% APY, while borrowers face higher effective costs. Protocols like Aave display APY to reflect real earnings over time.
In 2025, APYs for stablecoin pools average 4–7%, with volatile asset pools reaching 12% during peak utilization, per DefiLlama. APY is critical for long-term yield farmers but can mislead if rates fluctuate rapidly.
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