Nominal Vs Real APR

Nominal APR is the headline interest rate offered by a platform, while Real APR accounts for the inflationary impact of the reward tokens received. The nominal rate is often inflated by the platform's desire to attract deposits quickly, but it ignores the dilution caused by the increase in the total token supply.

For example, if a protocol offers a 50 percent nominal APR but the total supply of the reward token increases by 40 percent, the investor's actual gain is significantly lower than 50 percent. Real APR provides a more accurate picture of the investment's performance by adjusting for this dilution.

Understanding the difference is crucial for investors to avoid being misled by high headline numbers that hide underlying economic decay.