APR is the acronym for Annual Percentage Rate, which indicates the annual percentage size of the cost or profit for the process of borrowing or lending money. Within the context of blockchain and digital currencies, the term “APR” is mainly used to indicate an interest rate at which people may earn money by lending, turning coins into stocks, or putting their money into a DeFi platform without, however, considering the factor of compounding.
To illustrate, a staking pool with a 12% APR states that one year later, you will have 12% of your original deposit as rewards, provided the rate remains the same and you don’t use any of the profits for further investments or compounding purposes. In contrast to APY (Annual Percentage Yield), APR keeps things simpler and is, therefore, a little less exact in terms of reflecting the actual returns by not taking compound interest into account.
Crypto lending or borrowing is another area where APR finds its application, with the latter indicating the amount of interest a borrower has to pay for using the funds or the amount a lender gets as a reward for providing the money. This rate is not fixed and can change according to demand, token supply, and other market factors.
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In a nutshell, APR instantly tells you how much annual interest you will earn or owe, and it does so without the added complexity of compounding calculations. It is a primary metric for the comparison of lending or investing options in the traditional and crypto-financial domains.