Sample article placeholder.
Crypto Lending Rates and APY: Where the Yield Comes From
A high APY is the first thing most lending platforms show you. Before comparing numbers, it helps to know what APY means, who pays it and why it can change overnight.
Latest in this topic
APR vs APY
APR is the simple annual interest rate. APY includes compounding: interest earning interest. An APR of 10% compounded daily gives an APY of about 10.5%. Platforms often show APY because it looks higher.
Where the yield comes from
- Borrower interest: the most sustainable source, paid by people who borrow your assets.
- Token incentives: rewards paid in a platform’s own token, which can fall in value or end suddenly.
- Real-world income: in on-chain credit, interest paid by businesses; see on-chain credit.
- Credit risk premium: higher rates for lending with less collateral.
Why rates change
In most DeFi pools, rates follow demand. When traders borrow more, rates rise; when they repay, rates fall. Incentive programmes start and end. On centralized platforms, the company can change rates whenever it wants.
How to read an advertised rate
- Is it APR or APY?
- Which part is base interest and which part is incentives?
- Is it fixed or variable, and over what period?
- What is the date of the rate you are looking at?
- What risk am I taking to earn it?
Red flags
Very high, stable “guaranteed” rates are a warning sign. Legitimate lending yields move with the market. See crypto lending scams.
Back to the crypto lending hub or read about stablecoin yield.
Frequently asked questions
Not necessarily. Higher yield usually means higher risk or temporary incentives.
Market-based rates are not. A platform promising a guaranteed high return should be treated with caution.
Continuously, as borrowing demand and pool liquidity change.
This page is for educational purposes only and is not financial, investment or tax advice. Crypto assets are volatile; you can lose all of your money.