Lending Protocol APY Calculator
Decentralized lending protocols like Compound and Aave allow token holders to deposit assets and earn interest. The protocol's interface typically shows a supply APR, but the actual yield you receive is higher due to compounding. Compound Finance, for example, accrues interest every Ethereum block, meaning interest compounds thousands of times per year. This calculator converts any nominal supply APR into the true APY using the standard compound interest formula: APY = (1 + r/n)^n - 1, where r is the annual rate and n is the number of compounding periods per year. Enter the supply APR and compounding periods to find your annualized yield.
Lending APY formula
APY = (1 + APR / n)^n - 1
Annual Income = Principal * APY
Where APR is the annual percentage rate (as a decimal, e.g. 0.05 for 5%) and n is the number of compounding periods per year. Common values: 365 (daily), 52 (weekly), 12 (monthly), 2,628,000 (per Ethereum block).
Compounding frequency reference
- Daily compounding (n=365): standard for most DeFi calculations and traditional savings accounts.
- Hourly (n=8,760): used in some protocol APY displays.
- Per Ethereum block (n=2,628,000): Compound Finance accrues interest each block at roughly 12 seconds per block.
- Continuous compounding (n to infinity): APY = e^(APR) - 1. At 5% APR, continuous compounding gives 5.127% APY vs 5.126% for daily. The difference is negligible at low rates.
Lending protocol APY: frequently asked questions
What is the difference between APR and APY in DeFi lending?
APR (Annual Percentage Rate) is the simple rate before compounding. APY (Annual Percentage Yield) includes the effect of compounding interest over the year. If interest compounds continuously or many times per year, APY will be noticeably higher than APR.
How often does DeFi lending interest compound?
It varies by protocol. Compound Finance compounds every Ethereum block (roughly every 12 seconds, or about 2,628,000 times per year). Aave uses a per-second rate. This calculator lets you enter the exact compounding periods per year used by your protocol.
What supply rate should I enter?
Enter the per-period rate your protocol states. Most protocols display an annualized supply APR in their interface. To get the per-period rate, divide that annual rate by the number of compounding periods. Alternatively, enter the annual supply rate directly and set periods to 1.
Why does compounding frequency matter less at low rates?
At a 1% annual rate, the difference between monthly and daily compounding is tiny (roughly 0.005%). At a 50% annual rate, the difference is much larger. The formula (1 + r/n)^n - 1 grows more sensitive to n as r increases.
Does this account for utilization rate changes?
No. This calculator computes APY from a fixed supply rate. In practice, DeFi lending rates fluctuate continuously as utilization changes. The APY shown is accurate only for the rate and period you enter.
Official sources
- Compound Finance: Compound Protocol Documentation.
- Ethereum Foundation: Decentralized Finance (DeFi).
Reviewed by the CalculatorHub team, edited by James Graham, 15 June 2026. See our methodology.