Definition
Annual percentage rate (APR) expresses a rate on an annual basis without including the effect of compounding. In crypto products, it is commonly used to describe estimated lending costs or rewards, but the exact fee treatment depends on the product.
How It Works
Under a simple-interest assumption, interest equals principal multiplied by APR multiplied by the fraction of a year. For example, 1,000 units at a constant 10% APR for half a year produce 50 units before fees. This example assumes an unchanged principal, no reinvestment and the stated time convention.
Key Considerations
APR is not the same as APY, which incorporates compounding assumptions. A variable APR is a snapshot, not a promise for the next year. Compare rates using the same currency, period and fee basis. Reward tokens may change in price, so a positive token-denominated APR can coexist with a loss in portfolio value.