What is Annual Percentage Rate (APR)?

Annual Percentage Rate (APR) is the annual interest rate charged by a lender or earned through an investment, without taking into account interest compounding during that period.

In the crypto context, APR is the annual interest rate earned from various financial activities, such as staking, lending, or yield farming. APR gives an idea of ​​the expected income from a crypto investment in a year, without taking interest compounding into account.

Here are some important aspects of APR in the crypto context:

1. Income Measurement: APR measures the annual rate of return from a crypto investment, such as how much interest you will receive on the crypto assets you lend or stake in a year.

2. Excludes Compounding: Unlike APY, APR does not take into account the effects of compounding. This means the APR provides an estimate of the basic return without considering the interest earned on previously earned interest.

3. Importance in DeFi: In the DeFi (Decentralized Finance) ecosystem, APR is an important metric that helps investors understand the return potential of various DeFi protocols, such as lending, staking, or farming platforms.

4. Financial Product Comparison: Understanding APR helps users compare different crypto financial products to assess which offers the best return on their investment.

5. Accuracy of APR: APR may change depending on market conditions and other factors. Therefore, it is important to monitor the APR periodically to get an accurate picture of potential returns.

In practice, crypto investors and users often compare the APRs of various DeFi projects to determine where they want to place their assets to get the best returns. Understanding APR and how it differs from APY is essential in making the right investment decisions in the crypto world.

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