APR vs APY: the math that eats your returns
Every staking dashboard quotes one of two numbers, and they are not interchangeable. APR (annual percentage rate) is the raw yearly rate before compounding. APY (annual percentage yield) is what you actually end up with after the interest starts earning interest on itself. On a 10% APR compounded daily, APY is 10.52%. On 20% APR compounded daily, APY is 22.13%. The higher the rate, the bigger the gap. Protocols that want to look competitive quote APY; those running lean quote APR. Always check which you are looking at.
This calculator does the conversion correctly using the standard formula APY = (1 + APR/n)^n − 1, where n is the number of compounding periods per year. Plug in your actual staking rate and see what the compounded outcome looks like over your real holding period.
Validator and protocol fees: where APR leaks
Advertised staking APRs are usually gross. The fee cut happens before rewards hit your wallet. Coinbase takes 25-35% of Ethereum staking rewards. Lido takes 10%. Rocket Pool takes around 15%. Solo staking takes nothing — but requires 32 ETH and operational uptime. Across all major protocols, the effective APR after fees is 60-90% of the headline number. This tool accounts for that by applying the fee percentage to the gross APR before compounding.
Compounding frequency and why it matters less than you think
Going from annual to daily compounding on a 6% APR moves APY from 6% to 6.18% — an 18 basis-point bump. From daily to continuous compounding is another 2 basis points. The real money in compounding comes from time, not frequency. A rate that compounds annually for 30 years crushes a rate that compounds hourly for 5 years. If you are choosing between two staking protocols and one compounds daily while the other compounds weekly, their net yields are nearly identical — focus on the fee structure and validator reliability instead.
Ethereum staking: the real yield breakdown
Ethereum consensus rewards are roughly 3-4% APR at current validator counts. MEV (maximal extractable value) adds another 0.5-2% for validators that capture it. Execution layer tips add a variable amount. Liquid staking tokens like stETH pass most of this through after a 10% fee, yielding 3.5-5% net. If you see Ethereum staking advertised at 8%+, assume DeFi leverage is involved — which adds liquidation risk. Use our DeFi yield calculator to model those composable strategies safely.
Solana, Cosmos, and high-yield chains
Solana staking runs 6-8% APR and auto-compounds at every epoch (~2 days). Cosmos Hub runs 15-20% but has ~20% annual inflation, meaning real yield is closer to 0%. Always check inflation-adjusted yield: a 20% staking APY on a coin inflating at 15% is only 5% real yield. The staking rewards calculator shows inflation drag directly.
Lock-up periods and opportunity cost
Ethereum unstaking takes hours to days depending on queue depth. Cosmos takes 21 days. Polkadot takes 28 days. During that window you cannot sell. If the price drops 30% while you are unbonding, your staking yield has to make up the loss. For volatile assets, factor in a 5-10% opportunity cost on the locked portion — or use liquid staking tokens that can be sold or used as collateral immediately.
Tax treatment
In the US, staking rewards are ordinary income at the fair market value on the day received. This creates a cost-basis mess: every daily reward is a taxable event. At 24% ordinary income, your effective yield drops 24%. When you later sell the staked tokens, you pay capital gains on any appreciation from the receipt-date cost basis. Our crypto tax calculator can sketch the total hit.
Should you even stake?
Staking trades optionality for yield. You give up the ability to sell instantly (during lockup) in exchange for a 3-8% return. If you would not hold the underlying coin anyway, do not stake it — the yield rarely compensates for the price risk. If you are a long-term holder and rarely trade, staking is essentially free money. Compare against just lending stablecoins for similar yield without the price volatility.