Compound yield
The yield realised when interest is reinvested at the same rate it's earned, producing exponential growth.
Compounding turns nominal APR into APY (annual percentage yield). In on-chain lending, compounding happens automatically per-block in the supply-rate accrual; on protocols where rewards are emitted as separate tokens (e.g., COMP, OP), the user must manually re-deploy to compound.
Related terms
- APR (annual percentage rate)A simple annualised yield rate that does not account for compounding.
- APY (annual percentage yield)An annualised yield that accounts for compounding — the standard quote for variable-rate lending.
- Simple yieldYield that doesn't reinvest interest — equivalent to [[apr]] without compounding.