What is APR?

Annual Percentage Rate (APR) in cryptocurrency is the percentage investors can expect to earn as interest on their investment, for lending their crypto or making it available for loans or to any platform offering such APR.

Essentially, the APR is the ordinary interest rate applied to the principal amount of an investment. Since the APR is an annualized rate, prorated interest will be offered if an investment is held for a shorter period. For instance, a six-month investment with a 5% APR will yield only 2.5% of the principal amount.

The APR is very straightforward. Take, for example, an investment of 1.0 Ether (ETH) in a lending pool on a decentralized finance (DeFi) network. If the expressed APR is 24%, then 0.24 Ether should be earned on top of the initial investment if it is locked in the pool for exactly one year. As a result, the investment should now total 1.24 Ether, made up of the 1.0 Ether principal and the accrued 0.24 Ether in interest (based on 24 % APR).

APR does not offer asset compounding as it is done in APY.

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