Definition
Supply APR is a quoted annual percentage rate that indicates how much interest a depositor earns for supplying assets to a decentralized finance lending protocol. It measures the base rate of return on the supplied principal over one year, without assuming that interest is periodically reinvested. In platforms such as a Lending Pool on Aave or Compound, the Supply APR is typically expressed as a variable rate that adjusts based on market conditions. It serves as a straightforward metric for comparing the nominal earning potential of different supply markets in DeFi.
As a concept, Supply APR focuses on the gross rate paid by borrowers to suppliers before considering compounding, token incentives, or protocol-specific reward mechanisms. It is distinct from yield metrics that incorporate additional rewards from Yield Farming or distributions that may be categorized as Real Yield. Because it is standardized on an annual basis, Supply APR provides a common reference point across assets, pools, and protocols, even when underlying interest accrues block-by-block or per second.
Context and Usage
In DeFi lending markets, Supply APR is typically determined algorithmically by the utilization of a Lending Pool, with higher utilization often leading to higher rates for suppliers. Protocols such as Aave and Compound display a separate Supply APR for each supported asset, reflecting the current borrowing demand and available liquidity. This rate is usually variable and can change frequently as deposits and loans move in and out of the pool.
Supply APR is often used as a base input when evaluating more complex return profiles that include incentive tokens, fee sharing, or other mechanisms that contribute to Real Yield. In yield dashboards and analytics tools, it is commonly shown alongside borrowing APR, total value locked, and other metrics to give a snapshot of the lending market’s conditions. While related to broader Yield Farming strategies, Supply APR itself refers specifically to the interest component earned on supplied assets, independent of any additional reward layers.