Supply APY is the return you earn for depositing crypto in a lending service in DeFiDeFi (decentralised finance)Financial services, such as lending, saving and trading, that run on smart contracts on a blockchain instead of through a bank or other middleman., such as Aave. Your crypto goes into a shared pool that others can borrow from. The rate is variable and not guaranteed. APY means that compounding is included.
Where does the interest come from?
Supply APY comes from the borrow APRBorrow APRThe interest you pay on a loan from a DeFi lending service. It is usually variable and depends on supply and demand. that borrowers pay. That is why it is usually lower than the borrowing rate, for two reasons:
- Only part of the pool is lent out and earning interest. That share is the utilisation rateUtilisation rateThe share of the money in a lending pool that is lent out. A high utilisation rate pushes rates up and can delay withdrawals..
- Part of the interest goes into the project's reserve, known as the reserve factor.
Example: the borrowing rate is 5%, 80% of the pool is lent out and 10% of the interest goes to the reserve. The supply rate is then 5% × 0.8 × 0.9 = 3.6%. This is how Aave calculates it.
On Aave you receive tokensTokenA digital asset created with a smart contract on another cryptocurrency's blockchain, rather than on a blockchain of its own. as a receipt for your deposit, and the number of tokens grows as interest builds up.
What to keep in mind
Supply APY is not like interest on a savings account. There is no deposit guarantee, and you carry the risk of bugs in smart contractsSmart contractA program that runs on a blockchain and automatically carries out what it was written to do once certain conditions are met. and of loans that go bad if the collateral falls short. If the utilisation rate is very high, you may also have to wait before you can withdraw.
The interest is paid in the same crypto you deposited. Swings in its price can therefore matter more than the interest itself.
Everything in Myntkaup Learn is written and regularly reviewed by the Myntkaup editorial team. It is for education and is not investment advice. Editorial policy. Updated 18 October 2026.