Lending APY Calculator
Compare crypto lending rates across Aave, Compound, and MakerDAO by token and duration. Enter values for instant results with step-by-step formulas.
Calculator
Adjust values & calculateFormula
Earnings are calculated using daily compound interest. The principal (P) grows each day by the daily rate (APY / 365), compounded over the total number of days. This formula accounts for the compounding effect that makes APY higher than simple interest APR.
Last reviewed: December 2025
Worked Examples
Example 1: Stablecoin Yield Comparison
Example 2: ETH Lending for 6 Months
Background & Theory
The Lending APY Calculator applies the following established principles and formulas. Cryptocurrency and Web3 systems are built on distributed ledger technology, most commonly implemented as blockchains. A blockchain is an append-only sequence of blocks, where each block contains a set of transactions and a cryptographic hash of the preceding block. This chaining structure means altering any historical record requires recomputing all subsequent blocks, making tampering computationally prohibitive on sufficiently large networks. Cryptographic hash functions are deterministic algorithms that map arbitrary-length inputs to fixed-length outputs called digests. Bitcoin uses SHA-256: a tiny change in input produces a completely different 256-bit hash. Digital signatures based on elliptic-curve cryptography allow users to prove ownership of funds without revealing private keys. A wallet address is derived from the public key through hashing, providing a publicly shareable identifier while keeping the private key secret. Proof of Work (PoW), used by Bitcoin, requires miners to repeatedly hash candidate blocks until the resulting digest falls below a difficulty target. This process is computationally expensive and energy-intensive, but the cost of attack scales with the honest network's total hash rate. Proof of Stake (PoS), adopted by Ethereum in 2022, replaces computational work with economic collateral: validators lock up native tokens as a security deposit and are chosen to propose blocks proportional to their stake. Misbehavior results in slashing — destruction of part of the deposit — aligning incentives without large energy expenditure. Market capitalization is calculated as the circulating supply of tokens multiplied by the current unit price, analogous to equity market cap. Fully diluted market cap extends this to all tokens that will ever be issued under the protocol's emission schedule. Decentralized Finance (DeFi) protocols replicate financial services — lending, borrowing, trading, and derivatives — using self-executing smart contracts on programmable blockchains, eliminating traditional intermediaries. Total Value Locked (TVL) is the standard measure of capital deployed in DeFi, capturing the aggregate value of assets deposited into protocols. Non-fungible tokens (NFTs) apply the same smart-contract infrastructure to represent unique digital or physical assets, with ownership recorded on-chain and verifiable by any participant without a central registry.
History
The history behind the Lending APY Calculator traces back through the following developments. The conceptual foundations of digital cash were laid through decades of cryptographic research. David Chaum proposed blind signatures for untraceable electronic payments in 1982, and his DigiCash company launched eCash in the early 1990s before filing for bankruptcy in 1998. The cypherpunk movement of the 1990s produced a community committed to using cryptography for individual privacy and financial sovereignty, with contributors including Wei Dai (b-money proposal, 1998) and Nick Szabo (bit gold proposal, 1998). On October 31, 2008, the pseudonymous Satoshi Nakamoto published a whitepaper titled Bitcoin: A Peer-to-Peer Electronic Cash System, proposing a solution to the double-spend problem without a central authority. The Bitcoin genesis block was mined on January 3, 2009, embedding a reference to a newspaper headline about bank bailouts. Nakamoto's identity remains unknown. By 2010, the first commercial transaction occurred when Laszlo Hanyecz paid 10,000 BTC for two pizzas, a date now celebrated annually as Bitcoin Pizza Day. Mt. Gox, at its peak handling approximately 70 percent of all Bitcoin trading volume, suffered a catastrophic hack that was disclosed in February 2014, resulting in the loss of approximately 850,000 BTC and the exchange's subsequent bankruptcy. The incident highlighted custody risks and spurred demand for regulated custodial services. Vitalik Buterin published the Ethereum whitepaper in 2013 and the network launched in 2015, introducing Turing-complete smart contracts and enabling programmable financial applications. The DAO hack of 2016 drained roughly 60 million dollars from a decentralized autonomous organization and led to a controversial hard fork of the Ethereum blockchain. The DeFi summer of 2020 saw total value locked in DeFi protocols surge from under one billion to over fifteen billion dollars. NFTs reached mainstream awareness in 2021 with high-profile sales at Christie's and Sotheby's. Regulatory scrutiny intensified globally through 2022 and 2023, with the collapse of the FTX exchange in November 2022 accelerating calls for comprehensive crypto asset legislation.
Frequently Asked Questions
Formula
A = P × (1 + APY/365)^days
Earnings are calculated using daily compound interest. The principal (P) grows each day by the daily rate (APY / 365), compounded over the total number of days. This formula accounts for the compounding effect that makes APY higher than simple interest APR.
Worked Examples
Example 1: Stablecoin Yield Comparison
Problem: You have 10,000 USDC to lend for 365 days. Compare earnings across Aave (4.5% APY), Compound (4.2% APY), and MakerDAO DSR (5.0% APY).
Solution: Aave: 10,000 × (1 + 0.045/365)^365 - 10,000 = $460.25\nCompound: 10,000 × (1 + 0.042/365)^365 - 10,000 = $428.93\nMakerDAO: 10,000 × (1 + 0.05/365)^365 - 10,000 = $512.67\nDifference: MakerDAO earns $84.42 more than Compound
Result: MakerDAO best at $512.67/year | Compound lowest at $428.93/year
Example 2: ETH Lending for 6 Months
Problem: Lend 5 ETH for 180 days on Aave at 2.1% APY vs Compound at 1.8% APY.
Solution: Aave: 5 × (1 + 0.021/365)^180 - 5 = 0.05178 ETH\nCompound: 5 × (1 + 0.018/365)^180 - 5 = 0.04438 ETH\nDifference: 0.00740 ETH more on Aave\nDaily Aave earnings: 0.000288 ETH
Result: Aave: +0.0518 ETH | Compound: +0.0444 ETH over 6 months
Frequently Asked Questions
What is APY in DeFi lending?
APY stands for Annual Percentage Yield and represents the real rate of return earned on a deposit when compounding interest is taken into account. In DeFi lending, APY reflects the annualized return you earn by supplying your crypto assets to a lending protocol's liquidity pool. Unlike APR (Annual Percentage Rate), which only considers simple interest, APY includes the effect of compound interest — meaning your earned interest itself earns interest over time. DeFi APYs are highly variable because they depend on supply and demand dynamics within each protocol; when borrowing demand is high relative to available supply, lending rates increase, and vice versa.
How does Aave lending work?
Aave is a decentralized lending protocol where users deposit cryptocurrency into liquidity pools to earn interest. When you supply assets to Aave, you receive aTokens (like aETH or aUSDC) that represent your deposit plus accrued interest. These aTokens continuously increase in value as interest accumulates in real-time. Borrowers pay interest to borrow from these pools, and that interest is distributed to lenders proportionally. Aave supports variable and stable interest rates, flash loans, and rate switching. The protocol uses an algorithmic interest rate model that automatically adjusts rates based on pool utilization, ensuring competitive yields while maintaining sufficient liquidity for withdrawals.
Are DeFi lending rates safe and reliable?
DeFi lending carries several risk categories that traditional savings accounts do not. Smart contract risk means bugs in the protocol code could lead to loss of funds, though major protocols like Aave and Compound have undergone extensive audits. Market risk includes the possibility of liquidation if collateral values drop sharply. Regulatory risk is evolving as governments develop frameworks for DeFi. Rate volatility means yields fluctuate constantly — a 5% APY today might be 1% tomorrow. Despite these risks, leading protocols have maintained strong track records over years of operation and billions in total value locked, making them reasonably reliable for informed users who understand the risks involved.
How are DeFi lending rates determined?
DeFi lending rates are determined algorithmically based on the utilization ratio of each lending pool, which is the percentage of deposited assets currently being borrowed. When utilization is low (lots of supply, few borrowers), rates are low to incentivize borrowing. When utilization is high (most assets are borrowed), rates increase to attract more deposits and discourage additional borrowing. Each protocol uses its own interest rate model — for example, Aave uses a kinked rate curve that increases gradually up to an optimal utilization point, then rises sharply beyond that threshold. These models run entirely on-chain via smart contracts, adjusting every block without any human intervention.
What is APY vs APR in crypto yield?
APR is the simple annual rate without compounding. APY includes the effect of compounding. A 10% APR compounded daily equals roughly 10.52% APY. Always compare APY to APY for accurate yield comparisons.
How do I get the most accurate result?
Enter values as precisely as possible using the correct units for each field. Check that you have selected the right unit (e.g. kilograms vs pounds, meters vs feet) before calculating. Rounding inputs early can reduce output precision.
References
Reviewed by Daniel Agrici, Founder & Lead Developer · Editorial policy