What's the difference between APR and APY in staking?
APR is the simple annual rate; APY assumes rewards are restaked and compound. At low single-digit rates the gap is small (3.6% APR ≈ 3.66% APY), but at 15%+ it becomes material.
Project staking rewards across ETH, SOL, ADA, DOT and ATOM with compounding, validator commission, and the difference between headline APR and true APY.
APY = (1 + APR/n)^n − 1, where n = compounding periods per year. Net yield = APY × (1 − validator commission) − token inflation rate.
32 ETH staked at a 3.6% APR compounding daily gives an APY of 3.66%. After a 10% validator commission the net is 3.30%, so one year yields ~1.06 ETH — but if network issuance runs at 0.8%, the real (dilution-adjusted) yield is closer to 2.5%.
APR is the simple annual rate; APY assumes rewards are restaked and compound. At low single-digit rates the gap is small (3.6% APR ≈ 3.66% APY), but at 15%+ it becomes material.
Validators and exchanges take 5–25% of your rewards. On a 4% APR, moving from a 25% commission provider to a 5% one lifts your net yield from 3.0% to 3.8% — a 27% improvement in income for no extra risk.
Validators penalised for double-signing or extended downtime lose part of their stake. Correlated slashing on Ethereum can cost up to the full 32 ETH in the worst case; solo stakers carry this directly, while pools socialise it.
Ethereum exits queue in days to weeks depending on validator churn; Cosmos is 21 days, Polkadot 28 days, Solana is roughly one epoch (~2–3 days). Your capital is illiquid and price-exposed throughout.
Liquid staking tokens (stETH, jitoSOL) keep capital usable in DeFi but add smart-contract risk and can trade at a discount to the underlying during stress. Native staking maximises yield and minimises counterparty layers.
In the US, rewards are ordinary income at fair market value when you gain dominion and control, with that value becoming the cost basis for a later capital gain.