I just truly understand the difference between APR and APY in crypto. The reason why beginners get confused is because these two look similar, but in fact, they are very different. Let's see what APY is and how it differs from APR.

APR is the Annual Percentage Rate, a number that tells you how much interest you'll earn per year, without considering compounding. For example, if you invest 100 baht at 5% APR, you'll get 5 baht after one year. It's a straightforward calculation, nothing complicated.

But APY is the actual rate of return because it takes into account compound interest. That's the main difference. When using APY, you earn interest on the interest as well, not just on the principal.

Let's look at an example. If you invest 10,000 baht at 5% per year, with APR, you'll earn 500 baht in the first year. But if calculated with APY, compounded daily, the return will be slightly higher because interest accumulates every day, and you'll earn interest on that interest too.

In the crypto world, APY often offers better returns because compounding happens very frequently. Some DeFi platforms compound daily or even more often. Therefore, APY is what investors should look at when choosing where to invest.

There is a formula for calculation, but actually, you don't need to do it yourself. Most platforms display APY for you. You just compare different platforms and choose the one with the highest APY.

The key difference is that APR is good for borrowers (because the number is lower), but APY is better for investors and lenders because you'll earn more money. In crypto, APY is the figure that should be given more importance, especially when doing staking or yield farming.

In simple summary, APY provides the true return considering compounding, while APR is just a basic rate. When choosing a crypto investment, always look at APY because it shows how much you'll actually earn.