📚 DAY 13 - Learn all Crypto terms in 30 days
🔹 1. APR (Annual Percentage Rate)
→ Annual interest rate when depositing coins, not accounting for compound interest.
💡 Example: APR for staking $ATOM is 12% → if held constant, will yield ~12%/year.
📌 Used for comparison when staking or farming.
⚠️ A high APR is not always good; you need to consider if the received token is going to be heavily dumped.
🔹 2. APY (Annual Percentage Yield)
→ The annual interest rate that includes compound interest, meaning you auto reinvest the rewards received.
📌 APY is always > APR if the terms are the same.
💡 Example: staking 12% APR but auto-compounding every week → APY could become ~12.68%.
🔹 3. Lending
→ Send tokens to a platform (like Aave, Compound) for others to borrow, and you earn interest.
💡 You lend USDC → someone else borrows it to get ETH → you earn interest in USDC.
⚠️ If the borrower gets liquidated → the platform handles it, but there is still a smart contract risk.
🔹 4. Borrowing
→ Use tokens as collateral → borrow other tokens to use (or farm).
📌 Usually must be overcollateralized (collateral is more than the amount borrowed).
💡 Borrowing 100 USDC typically requires collateral of 150 USDT/BTC/ETH depending on the platform.
⚠️ If the collateral value drops significantly → liquidation occurs, losing the original coins.
📌 In summary:
APR/APY: Measure interest, consider compound interest carefully
Lending/Borrowing: Deposit coins → earn interest / pledge coins → get capital
