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APR Calculation

Introduction​

APR for each pools is a metric that indicates the expected annualized return on investment for liquidity providers. APRs are calculated differently for CL pools and normal pools due to their distinct operational mechanisms.

Concentrated Liquidity Pools​

Calculation:​

  • APR for CL Pools:
CL APR=(Spread Reward per Unit LiquidityBase Price+Incentive Reward per Unit LiquidityBase Price)×Seconds in a YearCalculation Time Duration×100\text{CL APR} = \left( \frac{\text{Spread Reward per Unit Liquidity}}{\text{Base Price}} + \frac{\text{Incentive Reward per Unit Liquidity}}{\text{Base Price}} \right) \times \frac{\text{Seconds in a Year}}{\text{Calculation Time Duration}} \times 100

Where:

  • Spread Reward per Unit Liquidity: This is the reward earned from the spread for providing liquidity, expressed per unit.
  • Incentive Reward per Unit Liquidity: This is any additional incentive reward for providing liquidity, also expressed per unit.
  • Base Price: The standardized value of one unit of liquidity in the pool, used to convert the reward values into a comparable base.
  • Seconds in a Year: Represents the total number of seconds in a year, used for annualizing the return. It's calculated as ( 365.25 \times 24 \times 60 \times 60 ) to account for leap years.
  • Calculation Time Duration: The duration in seconds over which the rewards were calculated

CFMM Liquidity Pools(Balancer pools, Stableswap Pools)​

  1. Standard APR Calculation (for 1 day, 7 days, and 14 days):
    • The APR is calculated for each time frame using the formula:
APRtime frame=(Distributed Amounttime frame/10exponentLiquidity)×Coin Price×365Daystime frame×100\text{APR}_{\text{time frame}} = \left( \frac{\text{Distributed Amount}_{\text{time frame}} / 10^{\text{exponent}}}{\text{Liquidity}} \right) \times \text{Coin Price} \times \frac{365}{\text{Days}_{\text{time frame}}} \times 100
  • Where:
    • Distributed Amount_timeframe is the sum of distributed rewards for the time frame (1 day, 7 days, or 14 days), in base units.
    • exponent is the coin's decimal exponent, so 10^exponent converts base units to display units. Read it from the asset's metadata rather than assuming 6.
    • Liquidity is the total liquidity in USD for the pool, adjusted by the percentage bonded (if applicable).
    • Coin Price is the current price of the coin.
    • Days_timeframe is the number of days the distributed amount covers: 1, 7, or 14.
warning

The annualization factor must match the period the distributed amount covers. Dividing 365 by the period's length in days does this: a 1-day total annualizes by 365, a 7-day total by 365/7 ≈ 52.14, and a 14-day total by 365/14 ≈ 26.07. Applying a flat 365 (or the combined 36500 with the × 100 folded in) to a multi-day total overstates the APR by exactly the number of days in the period, so a 7-day figure comes out 7× too high and a 14-day figure 14× too high.