Crypto Staking Rewards: APR vs APY and Compounding

The Number a Staking Product Advertises Is Not What You Earn

A staking product quotes you an APR — say 10% — and you assume that’s your return. Sometimes it is. But if the rewards are automatically restaked, or the underlying protocol compounds them for you, you actually earn more than the headline figure, because each reward starts earning its own reward. The true return has a different name: effective APY. Confusing the two, in either direction, leads to mis-projected earnings and bad comparisons between products.

This guide explains the difference between APR and APY for staking, shows exactly how compounding frequency and lock length change the outcome, and walks through projecting your earnings. The staking rewards calculator runs the math below for any principal, rate, lock period, and compounding schedule.

APR vs APY: Simple Rate vs Compounded Return

APR (Annual Percentage Rate) is the simple, non-compounded yearly rate a product advertises. Stake $1,000 at 10% APR for one year with no reinvestment and you earn a flat $100.

APY (Annual Percentage Yield) accounts for compounding — rewards that are reinvested so they too earn rewards. For the same rate, APY is always equal to or higher than APR, and the gap widens the more frequently rewards compound. The relationship for a compounded product is:

• Effective APY = (1 + APR ÷ n)ⁿ − 1, where n is the number of compounding periods per year

The projected balance at the end of a lock period follows directly:

• With compounding: ending balance = principal × (1 + APR ÷ n)^{(n × years)}
• Simple interest (“None”): ending balance = principal × (1 + APR × years)

where years = lock period in days ÷ 365. Choose “None” for products that pay a fixed reward at the end of a lock with nothing reinvested along the way; choose a compounding frequency that matches how often the protocol actually restakes.

How Compounding Frequency Changes the Outcome

The table below stakes $1,000 at 10% APR for one year and varies only the compounding frequency. Notice how much — and how little — the frequency matters:

Compounding	Ending balance	Reward earned	Effective APY
None (simple)	$1,100.00	$100.00	10.00%
Monthly	$1,104.71	$104.71	10.47%
Weekly	$1,105.06	$105.06	10.51%
Daily	$1,105.16	$105.16	10.52%

Two lessons stand out. First, compounding genuinely adds return: daily compounding turns a 10.00% APR into a 10.52% effective APY, an extra $5.16 on $1,000 here. Second, the gains from more frequent compounding shrink fast — the jump from none to monthly is far bigger than from monthly to daily. At moderate rates, monthly and daily are nearly indistinguishable; the gap only becomes dramatic at very high APRs. A key subtlety: for a compounded product, the effective APY depends only on the rate and the frequency, not on the lock length — a longer lock earns more total reward but the annualized yield is the same.

Worked Example

Stake $1,000 at 10% APR for a 365-day lock with daily compounding (n = 365, years = 1):

• Ending balance = $1,000 × (1 + 0.10 ÷ 365)³⁶⁵ = $1,105.16
• Reward earned = $1,105.16 − $1,000 = $105.16
• Effective APY = (1 + 0.10 ÷ 365)³⁶⁵ − 1 = 10.52%

The same position with compounding set to None would pay simple interest: $1,000 × (1 + 0.10 × 1) = $1,100, a flat $100 reward and a 10.00% effective yield. The $5.16 difference is entirely the work of compounding — each day’s reward is added to the principal so the next day earns on a slightly larger base.

How to Use the Staking Rewards Calculator

Four inputs describe any staking position:

1. Principal (Amount Staked) — the amount you are staking, in dollars or token units. This scales the reward but not the percentage yield.
2. APR (Annual Rate) — the advertised annual rate as a percentage (e.g. 10 for 10%).
3. Lock Period (days) — how long the position stays staked. Longer means more total reward accrues.
4. Compounding — how often rewards are reinvested: Daily, Weekly, Monthly, or None (simple interest). Match this to how the protocol actually pays out.

The tool returns your Ending Balance, the Reward Earned (ending balance minus principal), and the Effective APY — the true annualized yield after compounding, which is the number to compare across products rather than the advertised APR.

How This Fits Your Workflow

Use the calculator to compare offers on a like-for-like basis and to set realistic expectations before committing capital. A few things to keep in mind:

• Compare on effective APY, not APR. Two products quoting the same APR can pay different real returns if they compound at different frequencies.
• Match the compounding setting to reality. Many liquid-staking and auto-compounding pools effectively compound daily; fixed-term products that pay a lump reward at the end use “None.”
• A longer lock always earns more total reward at the same APR — but your capital is committed for longer and can’t respond to a change in conditions or a better opportunity. That is the real trade-off.
• APR itself is not guaranteed. Staking rates on many protocols float with network participation, so treat any projection as a snapshot at today’s rate.

If you already know a product’s APY and want to work backward to the equivalent APR (or vice versa) without a principal or lock period, the APR to APY converter guide covers that conversion directly.