APY Explained: How Annual Percentage Yield Works in Crypto and Why It Matters

When you hear someone say they’re earning APY, Annual Percentage Yield, which measures how much you earn on crypto over a year, including compound interest. Also known as annual yield, it’s the number that turns a small deposit into a serious return — if it’s real. But here’s the catch: not every APY you see is trustworthy. Some projects promise 100% APY to lure in cash, then vanish. Others are legit but unsustainable. Understanding APY isn’t just about math — it’s about survival in crypto.

APY isn’t the same as APR. APR, Annual Percentage Rate, shows simple interest without compounding — think of it as the base rate. APY, includes the effect of compounding, meaning you earn interest on your interest. If a DeFi platform pays daily rewards, your APY will be higher than its APR. That’s why you see 15% APR but 16.2% APY — the difference is compounding. But compounding also hides risk. High APYs often come from new, unaudited protocols with shrinking liquidity. If the pool runs out of money, your APY doesn’t matter — your funds are gone.

Real APY comes from proven sources: staking Ethereum, lending stablecoins on platforms with audits, or locking tokens in well-established liquidity pools. But look at the posts below — you’ll see plenty of cases where APY is a trap. Projects like Kalata Protocol or Sphynx Labs offered sky-high yields with zero transparency. Meanwhile, platforms like STON.fi v2 and Changelly Pro don’t even offer APY — they’re exchanges, not yield farms. The key is knowing where APY belongs and where it’s fake. Some airdrops, like SUNI or CHIHUA, promise rewards that don’t exist. Others, like Gamestarter’s $GAME, tie APY to real activity — staking, playing games, completing quests. APY isn’t magic. It’s a signal. High APY can mean innovation, or it can mean a dying project trying to attract one last wave of investors. The best way to tell? Look at the underlying asset, the liquidity, the team, and the history. If the APY sounds too good to be true, it’s not just a warning — it’s a red flag flashing in bright neon.

What follows are real-world examples of APY in action — and in failure. You’ll find reviews of exchanges that offer staking, deep dives into DeFi farms that collapsed, and warnings about fake yield opportunities. No fluff. No hype. Just what you need to know before you lock your coins in and hope for the best.