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Formula & Calculator

Yield Farming APY (Auto-Compounded)

Calculates the effective annual yield from a farming pool that automatically compounds rewards at a given frequency.

Written by the Vorzep Team

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Yield Farming APY Calculator Auto-Compounded Returns

APY = (1 + APR/n)n – 1
APY = annual percentage yield  ·  APR = annual percentage rate  ·  n = compounding frequency
⟹ Solve ⟷ APY, APR, n
%
×/yr
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Presets:
Compounding:
APY —
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APY: — APR: — n: —
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APY = (1 + APR/n)n – 1  ·  APR is expressed as a decimal in the formula. Higher compounding frequency increases APY.
APY = (1 + APR/n)^n - 1
Yield Farming APY (Auto-Compounded)

Variables

SymbolQuantityUnit
APYAnnual percentage yield
APRNominal annual reward rate
nCompounding frequency per year

What it means

In DeFi, yield farming often involves auto‑compounding rewards. This formula calculates the effective annual yield. It is used to compare different farming strategies and to estimate returns. Understanding this helps farmers choose the best protocols and to understand the power of compounding. The compounding frequency n is crucial; more frequent compounding gives higher APY.

Worked example

Yield Farming APY (Auto‑Compounded) – Two Detailed Examples

Real‑World
Scenario: A farming pool offers an APR of 40% with daily compounding (n=365). APY = (1 + 0.40/365)^365 - 1 = (1.001096)^365 - 1 = 1.4915 - 1 = 49.15%. This higher APY reflects the effect of compounding. The farmer compares this to other pools.
ParameterValue
APR40%
Compounding Frequency365 (daily)
1APY = (1 + 0.40/365)^365 - 1 = 1.4915 - 1 = 49.15%
Result 49.15% ✓ Effective yield
Scenario: A pool offers 100% APR with weekly compounding (n=52). APY = (1 + 1.00/52)^52 - 1 = (1.01923)^52 - 1 = 2.680 - 1 = 168%. This extremely high yield is attractive but comes with higher risk. The farmer uses APY to compare across protocols.
ParameterValue
APR100%
Frequency52 (weekly)
1APY = (1 + 1.00/52)^52 - 1 = 2.680 - 1 = 168%
Result 168% ✓ High APY
Insight: Auto‑compounding increases effective yield. APY = (1 + APR/n)^n - 1. Higher compounding frequency leads to higher APY, which is why yield farmers prefer pools with frequent compounding.

Common mistakes

  • Yield farming APY with compounding: APY = (1 + APR/n)^n − 1.
  • APR: The nominal annual percentage rate.
  • n: Number of compounding periods per year.
  • Auto‑compounded: Many protocols auto‑compound rewards.

Applications

Yield farming APY (auto‑compounded) converts the periodic APR to an effective annualised yield that accounts for compounding. This is used by DeFi protocols to display the true annual return on liquidity provision or staking. Investors use it to compare different yield farming opportunities and to assess the impact of compounding frequency. Understanding auto‑compounded APY is crucial for maximising returns in DeFi.

  • Comparing yield farming and staking opportunities
  • Estimating true annual returns with compounding
  • Evaluating the effect of compounding frequency
  • Selecting protocols with favourable compounding mechanics
  • Educational understanding of DeFi yields