Annual Percentage Rate (APR)

In DeFi (Decentralized Finance), annual percentage rate (APR) represents the annualized yield or interest rate that users can earn through contributions to the network’s operations, such as liquidity provision, staking, or lending.

APR is calculated as “Total Annual Earnings / Total Investment * 100.” For example, suppose you provide tokens to a liquidity pool on DEX (decentralized exchange) or liquidity bridge, and over a year, you earn $400 in trading fees and $200 in additional token rewards. If your initial investment was $4,000, the APR would be:

APR = (400 + 200) / 4000 * 100 = 15%

A similar concept to APR is Annual Percentage Yield (APY). While APR is the annual rate of interest without considering compounding, APY includes the effects of compounding to show the real annual return.

Arbitrum

Arbitrum, developed by Offchain Labs, provides a suite of Layer 2 scalability solutions for Ethereum. Since launching its token, ARB, in March 2023, Arbitrum ha...