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DeFiA
APY
Annual Percentage Yield — the real rate of return earned on an investment, taking into account the effect of compounding interest. Shows what you would earn over one year if returns are reinvested. APY is particularly important in DeFi, where rewards are often compounded frequently, making the effective yield significantly higher than the quoted APR.
Example
“The staking pool advertised a 15% APY, but daily compounding meant the actual returns exceeded what a simple interest rate would suggest.”