Forecasts passive income growth with daily compounding at up to 35% APY, showing capital growth over time
Initial investment amount
Annual percentage rate (up to 35% typical for DeFi)
How often interest compounds
Investment duration in years
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest, which only calculates on the principal, compound interest creates "interest on interest," leading to exponential growth over time.
Albert Einstein allegedly called compound interest "the eighth wonder of the world." Those who understand it, earn it; those who don't, pay it. In crypto and DeFi, daily compounding at 10-35% APY can turn modest investments into significant wealth over time.
How often interest compounds matters significantly. Daily (365x): Maximum growth.Monthly (12x): Good balance. Quarterly (4x): Basic compounding. More frequent compounding = higher returns, though the difference narrows at higher frequencies.
Compound interest's exponential nature means the longer you invest, the more dramatic the growth. A 5-year investment doesn't just earn 5x a 1-year investment - it can earn 8-10x more due to compounding acceleration. Start early and stay invested!
Traditional savings accounts offer 0.5-2% annual interest. Crypto and DeFi protocols commonly offer 5-35% annual rates, with stablecoins providing 5-15% and riskier assets offering 20-35%+. This 10-30x difference makes crypto compound interest incredibly powerful for wealth building.
DeFi platforms like Aave, Compound, Yearn Finance, and Curve automatically compound your interest. This is superior to manual compounding because it happens continuously, saves gas fees, and ensures you never miss a compounding opportunity.
Enter the initial amount you're investing. Example: $10,000 worth of stablecoins or crypto assets. This is your starting point - compound interest will grow this exponentially over time.
The annual percentage rate offered. DeFi protocols typically offer 5-35% for various assets. Stablecoins: 5-15%, Staking: 5-20%, Liquidity pools: 15-35%+. Find rates on protocol websites or DeFi aggregators like DefiLlama.
Select how often interest compounds: Daily (365x) for maximum growth,Monthly (12x) for good balance, Quarterly (4x) for basic compounding, or Annually (1x) for simple yearly compounding. DeFi protocols typically compound daily or continuously.
How long you'll invest, in years. Can use decimals: 0.5 = 6 months, 1.5 = 18 months, etc. Longer periods dramatically amplify compound interest effects - try 3-5 years to see exponential growth!
You'll see: Final Amount (principal + interest), Total Interest Earned (pure profit),Annual Rate (your APY), and ROI (return on investment percentage). The calculator also shows insights about compound growth and optimization strategies.
Invest $10,000 at 12% annual rate for 3 years with daily compounding:
• Principal: $10,000 | Rate: 12% | Period: 3 years | Frequency: Daily
• Result: ~$14,333 final amount | ~$4,333 interest earned | 43% ROI
A = P × (1 + r/n)^(n×t)
A = Final amount | P = Principal | r = Annual rate (decimal) |n = Compound frequency | t = Time (years)
Principal: $10,000 | Rate: 10% | Frequency: Daily (365) | Time: 1 year
A = 10,000 × (1 + 0.10/365)^(365×1) = $11,051.56
Interest = Final Amount - Principal
Example: $11,051.56 - $10,000 = $1,051.56 earned
Rate = r / n
Dividing annual rate by frequency gives the rate per compounding period. Example: 10% ÷ 365 = 0.0274% daily rate
Periods = n × t
Multiply frequency by years to get total compound periods. Example: 365 × 1 = 365 compounding events in 1 year
ROI = (Interest ÷ Principal) × 100
Return on Investment as a percentage. Example: ($1,051.56 ÷ $10,000) × 100 = 10.52% ROI
$10,000 at 10% for 1 year: Annual = $11,000 | Monthly = $11,047 | Daily = $11,052
The $52 difference seems small, but over 5 years, daily compounding earns $270+ more than annual! The longer you invest, the more dramatic the frequency impact becomes. Always choose protocols with daily or continuous compounding for maximum returns.
The more frequently interest compounds, the more you earn. Compare $10,000 invested at 10% annual rate for 1 year:
$10,000 → $11,000 (exactly 10% gain)
Interest paid once at year-end. Simple interest only. Baseline comparison.
$10,000 → $11,038 (+$38 vs annual)
Interest paid every 3 months and reinvested. 0.38% boost from compounding.
$10,000 → $11,047 (+$47 vs annual)
Interest paid monthly. Common in DeFi. 0.47% compound boost.
$10,000 → $11,051 (+$51 vs annual)
Interest paid weekly. Accelerates compound growth significantly.
$10,000 → $11,052 (+$52 vs annual)
Maximum practical compounding. Best for long-term wealth building.
$10,000 → $11,052 (same as daily)
Mathematical limit using e^(rt). Daily approaches this practically.
While daily compounding adds only $52 more than annual for 1 year at 10%, over 5 years at the same rate, daily compounding earns $270+ more! Over 10 years, that difference grows to $700+. The power of compound frequency multiplies over time. DeFi protocols with continuous or daily compounding maximize your returns automatically.
DeFi protocols like Aave, Compound Finance, Yearn Finance, and Curve automatically compound for you. This is superior to manual claiming because it happens continuously, saves gas fees, and optimizes timing perfectly.
Compound interest is exponential. 5 years doesn't earn 5x what 1 year earns - it can earn 8-10x more! The final years add more than all previous years combined. Time is your most powerful wealth-building tool.
USDC, USDT, and DAI offer 5-15% yields in DeFi without price volatility risk. Perfect for predictable compound growth. Once comfortable, explore higher-yield options with crypto assets.
Always choose daily (365x) or continuous compounding when available. The difference seems small short-term but compounds to 5-10% more profit over 5+ years. Every compounding cycle accelerates future growth.
If your protocol doesn't auto-compound, manually reinvest earned interest as soon as economical (considering gas). Delaying even one week reduces your compound potential. Set calendar reminders if needed.
Don't put everything in one platform. Spread across 2-3 reputable protocols (Aave + Compound + Curve) to reduce smart contract risk while maintaining compound growth across your portfolio.
Traditional Savings: $10,000 at 1% annually, no compounding, 5 years = $10,500
DeFi Compound Interest: $10,000 at 12% with daily compounding, 5 years = $18,221
That's $7,721 more profit - over 15x better! The combination of higher rates AND compound frequency in crypto/DeFi creates unprecedented wealth-building opportunities compared to traditional finance.
Earning 20% compound interest means nothing if your crypto asset drops 50% in value. Compound interest protects against modest volatility but not major crashes. Use stablecoins to eliminate this risk.
DeFi protocols use smart contracts that can contain bugs or be exploited. Only use audited, battle-tested platforms with 2+ years track record (Aave, Compound, Curve, Yearn). Never invest more than you can afford to lose.
High APYs (25-35%+) may not be sustainable long-term. Rates can drop without notice as market conditions change. Conservative 5-15% rates on stablecoins are more predictable. Budget for rates declining over time.
Some protocols lock funds for days or weeks. You might not access capital during crashes or emergencies. Always understand withdrawal processes and any lock-up periods before depositing.
Crypto regulations are evolving. Future laws might restrict DeFi access, tax treatments could change, or platforms might face restrictions. Stay informed about regulatory developments in your jurisdiction.
Compound interest may be taxable as income when received, not just when withdrawn. This creates tax liability even if you haven't cashed out. Track all earnings and consult a crypto tax professional.
Centralized platforms can become insolvent (see Celsius, BlockFi). Prefer decentralized protocols where you maintain custody, or only use centralized platforms with strong balance sheets and transparency.
Funds earning compound interest can't be used for trading or other opportunities. If better options emerge, you might miss out. Balance stable compound growth with maintaining some liquid capital for opportunities.
Rates: 2-8% (stablecoins) | Compound: Continuous (per block) | Liquidity: Instant |Risk: Low. Industry-leading DeFi lending platform with $10B+ TVL.
Rates: 2-8% (stablecoins) | Compound: Continuous (per block) | Liquidity: Instant |Risk: Low. Original DeFi lending protocol, highly trusted.
Rates: 5-15% (stablecoin pools) | Compound: Auto/Manual options | Liquidity: Instant |Risk: Low-Moderate. Best for stablecoin yield.
Rates: Variable (5-20%) | Compound: Automatic optimization | Liquidity: Instant |Risk: Moderate. Automated yield strategies.
Rates: 8-25% | Compound: Automatic | Liquidity: Instant |Risk: Moderate. Boosted Curve yields with auto-compounding.
Rates: Variable (10-35%+) | Compound: Automatic | Liquidity: Instant |Risk: Moderate-High. Multi-chain yield optimizer.
Compound interest earnings are typically taxable as income when received or accrued, not just when withdrawn. This means each compounding event may create taxable income, even if automatically reinvested. Tax rates, rules, and reporting requirements vary significantly by jurisdiction and your individual circumstances.
Cryptocurrency compound interest taxation is extremely complex and rapidly evolving. Different countries treat crypto income differently - some as capital gains, others as ordinary income, some with special DeFi rules. The IRS and other tax authorities are actively developing new guidance. Consult with a crypto-specialized tax professional or CPA to ensure compliance, optimize your tax strategy, minimize liability, and avoid costly penalties. The cost of professional advice ($200-500 typically) is far less than potential fines, back taxes, or audit problems.