DeFi Calculator: APR, APY and Compound Interest (Free)

An APR of 50%, 100% or 200% on a DeFi platform gets everyone's attention. But what actually happens to capital placed at that rate after a week, a month or a year?

The answer depends on one key mechanism: compound interest, meaning the reinvestment of gains.

This free DeFi calculator lets you simulate it. Enter your capital and the APR, choose the compounding frequency and get your projection at 1 day, 1 week, 1 month, 3 months, 6 months and 1 year.

How to Use This DeFi Yield Calculator

The tool takes a few seconds to master.

The Inputs to Fill In

First, enter the capital placed in the pool. Next, enter the APR displayed by the platform, as a percentage.

Finally, choose whether you reinvest your gains (compounding) and how often: several times a day, once a day, once a week or once a month.

The Results You Get

The table shows the final capital, the gain and the number of compounds completed for each period. A "No compounding" column serves as a reference.

The effective yield after 1 year is the APY.

APR vs APY: What Is the Difference?

APR (Annual Percentage Rate) is the simple annual rate. It does not include the reinvestment of gains.

APY (Annual Percentage Yield) is the effective annual rate. It includes compound interest.

The APY Formula

The formula is: APY = (1 + APR / n)^n - 1, where n is the number of compounds per year.

With daily compounding, n equals 365. An APR of 200% then gives an APY of about 635%. Without compounding, the annual yield stays at 200%.

How Compounding Works in DeFi

Compounding means adding your gains to the productive capital. Those gains then generate gains of their own.

At first, the effect looks small. Over time, it becomes very significant.

Daily, Weekly or Monthly Compounding: What Is the Impact?

Take an APR of 200% over 1 year, assuming a constant rate. Here is how many times the capital is multiplied:

• No compounding: about x3
• Monthly compounding: about x6.4
• Weekly compounding: about x7.1
• Daily compounding: about x7.3
• Compounding 4 times a day: about x7.4

Going from "no compounding" to "monthly" changes everything. Going from "daily" to "4 times a day" changes very little.

Compounding more than once a day adds little. Each compound can also cost gas fees, which can exceed the extra gain.

An Example With a More Realistic APR

With a 20% APR compounded daily, the effective yield after 1 year is about 22%. The gap with the APR stays modest.

The higher the APR, the more spectacular the effect of compound interest. That is also why caution matters.

Why Real Results Almost Always Differ From the Simulation

This calculator gives a theoretical result. Here are the main reasons reality moves away from it.

The Rate Is Not Fixed

A high APR usually drops quickly. The more capital enters the pool, the more the yield is diluted.

The Yield Is Often Paid in Tokens

Many platforms pay rewards in their own token. If that token loses 50% or 80% of its value, the real yield collapses, even if the advertised APR stays high.

Gas Fees

Frequent compounding has a cost. Depending on the network, these fees can sharply reduce the benefit of daily or multiple-times-a-day compounding.

Impermanent Loss

When you provide liquidity to a volatile pair, the value of your position can end up below the value of the same tokens simply held.

Smart Contract Risk

A bug, a hack or a rug pull can cause a total loss of capital. No APR compensates for that risk.

Good Habits Before Putting Capital Into DeFi

A very high yield almost always signals a very high risk.

Use the calculator to understand the mechanisms, and treat every gain as a possibility, not a fact. Compare several scenarios: for example 200%, then 100%, then 20%.

Check where the yield comes from, the nature of the reward token, the protocol's audit and the network fees. Commit only capital you will not need in the short term.

Key Takeaways

• APR is the simple annual rate. APY includes compound interest.
• Compounding frequency matters most when moving from none to monthly. Beyond daily, the extra gain is small.
• A high APR usually falls over time and often comes paid in a volatile token.
• Gas fees, impermanent loss and smart contract risk are not included in any simple projection.

This calculator and article are provided for educational purposes. They do not constitute financial advice.

FAQ: DeFi Calculator, APR and APY

What is the difference between APR and APY?

APR is the simple annual rate, without reinvestment. APY is the effective annual rate, which includes compound interest. APY is higher than APR as soon as gains are reinvested.

How do I calculate APY from APR?

Use the formula APY = (1 + APR / n)^n - 1, where n is the number of compounds per year. With daily compounding, n equals 365. The calculator does it automatically.

Is it better to compound daily or weekly?

Daily compounding earns a little more, but the difference is often small. When gas fees are high, weekly or monthly compounding can be more profitable in practice.

Is a 200% APR realistic?

Rarely over time. An APR that high usually drops very fast. It also comes with high risk: a volatile reward token, impermanent loss and smart contract risk.

Does the calculator include fees and risks?

No. It is a theoretical projection at a constant rate. Gas fees, falling rates, reward token price changes, impermanent loss and smart contract risk are not included.

What is impermanent loss?

Impermanent loss is the gap between the value of tokens deposited in a liquidity pool and the value of the same tokens simply held, caused by price changes between the two tokens.

Is this calculator investment advice?

No. It is provided for educational purposes. Each person is responsible for their own decisions.