✔️ What do beginners need to understand about APY?

⚫️ In early May, we wrote about the tgUSD project and immediately noticed that the "over 60% APY" figure would surely drop significantly soon. This is exactly what happened: it now reports an APY of 9%.

⚫️ This reminds us that newcomers should generally approach APY values with caution: they can be misinterpreted, and then you might get upset when inflated expectations don't come true. Therefore, in the #howtoton section, we'll figure out how to avoid this.

⚫️ The concept of APY (annual percentage yield) is usually applied to cases where funds can be deposited somewhere for interest. Roughly speaking, if a certain service's APY is always 5%, you can deposit 100 USDT there, and after a year, withdraw 105 USDT. (Here, we could also talk about the difference between APY and APR, but we'll save that for a separate post.)

⚫️ So, is it just "annual interest" like on a bank deposit? It seems so, but there's a nuance. If you see a service reporting an astonishingly high APY, like 100%, it doesn't mean you'll be able to double your savings there in a year. Sometimes, scammers use such numbers to lure people in, while other times, perfectly legitimate services will show them, but with important caveats like these:

1. Deposits are only possible for very short terms. For example, back in 2022, the bit.com exchange offered to stake Toncoin for 8 days with 100% APY. Yes, during those 8 days, investments would grow much faster than if they were in "regular" staking. But at 100% annual interest over 8 days, they only manage to grow by 2.19%. For some, this is a nice quick bonus, but it won't make you rich.

2. The deposit can be long-term, but the APY value can change significantly over time. Let's say a new service wrote, "We have 100% APY", and you deposited funds. At first, they grew at that stated rate. But when, for example, those same 8 days passed, and the sum had already increased by 2.19%, the APY dropped to 2%, and all further growth proceeded at that snail's pace.

⚫️ If you don't understand this beforehand, you might get upset: "They promised 100%, but they lied." But if the service didn't declare "fixed APY," then it didn't promise to maintain it like that all year. For example, on the Ethena website, the APY indicator honestly states: "This is based on last week's data, it may be different in the future."

💡 And there's also a "happy way" of looking at it. Where does surprisingly high APY even come from? If we're not talking about scammers, it could be a marketing campaign: a new service, at launch, invested funds to temporarily create a high APY and attract users. And if you look at it that way, it turns out that whoever managed to participate in the promotion got a bonus. Yes, they absolutely didn't double their savings, but they "caught free money." And that sounds much better than "broken promises," right? The main thing is to be realistic and not expect "free money" to be given out indefinitely.

@thedailyton