Annual Percentage Yield (APY) refers to the returns compounded per year in percentage figures. Just as traditional assets have an annual percentage rate (APR), APY is a more common terminology in crypto. Through APY, investors can even earn interest on their interest payments over time.
APY is more like a crypto savings account, helping the depositors earn a certain rate of interest on their deposits. Investors often receive a fixed amount or rate of return over a certain time period. Annual percentage yield (APY) is the process by which the amount of money earned by the investor in a year is calculated. In simple terms, it helps to track the interest accumulated over time.
Investors earn compound interest on their funds which is nothing but an accumulation of principal amount and the accumulated interest. Crypto investors who want to hold on to their crypto assets and yet earn a passive income on them apart from the portfolio growth often open a crypto savings account that has a good APY. There are crypto projects that offer APY greater than 1% while a few DeFi platforms such as PancakeSwap, UniSwap, and Sushiswap offer an APY of more than 100%.