So I have been working on determining which is better: the Coinbase apy seen in coins such as DAI (2%), and Algorand (4%) and a bank's apy, say 0.6%. I have the calculations in Matlab, but wanted to verify that I had my understanding and formula's correct.

When reading on Coinbase.com about the USD coin rewards it states:

What is USDC Rewards Annual Percentage Yield and how is it calculated?
USDC Rewards Annual Percentage Yield (APY) means the percentage rate reflecting the total amount of USDC rewards earned, based on the then-current USDC Rewards Rate and end-of-month compounding for a 365-day period.

What is the current USDC Rewards rate?
USDC Rewards Rate is the annual rate of rewards earned on a USDC wallet, which does not reflect compounding. As of June 3rd, 2020, the USDC Rewards rate is 0.149896%. USD coin rewards

So I want to make sure I understand this right, assuming I figure out from the APY the base compound rate, this is compounded every month, correct? If so why does the second part state that this does not reflect compounding?

1 Answer 1


With reference to the Wikipedia nominal interest rate calculation

The USDC Rewards Rate is a nominal (annual) rate compounded monthly, from which the monthly rate m is obtained by division, i.e.

m = 0.149896/100/12 = 0.000124913

So the USDC Rewards Rate is obtained by multiplication (simple interest)

12 m = 0.149896 %

and the USDC Rewards Annual Percentage Yield is obtained by compounding

(1 + m)^12 - 1 = 0.00149999 = 0.15 %

confirmed here https://help.coinbase.com/...

As of June 3rd, 2020, the APY for USDC Rewards is 0.15%.

See also Wikipedia APR ref. 3

The "Truth in Lending Act" passed in 1968 did not incorporate the mathematically-true annual percentage rate, because the true calculation used compounding (sometime fraction compounding), which was not readily available. The result on expression of the APR on credit cards uses a Nominal (simple interest) method ... which can far from the truth. The Truth in Lending Act should be changed to the mathematically-true (EFFECTIVE) APR from the untrue (NOMINAL) APR, merely by changing the word in act from "multiplied by" to "compounded for".

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