> For the complete documentation index, see [llms.txt](https://docs.blacksail.finance/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.blacksail.finance/about-blacksail-finance/compounding-rewards.md).

# Compounding Rewards

**Auto-compounding** refers to the process of no longer having to manually claim and re-stake your staking rewards earned from DeFi (decentralized finance) protocols.

<figure><img src="/files/9p0vA2EoIo1DOgn6RuLj" alt=""><figcaption><p>$1000 Principal Compounded Over Time Example</p></figcaption></figure>

Instead, Blacksail automatically converts your rewards into additional LPs and re-stakes them for you allowing you to compound your rewards exponentially by converting your APR (annual percentage rate) to APY (annual percentage yield) compounded yearly rewards using the compound rate (N).&#x20;

```
APY = (1+APR/N)^N-1
```

**Example Calculation:**

Let's say you have a **250% APR** and the interest is compounded daily, this equates to approximately **1109.35% APY**.

1. **Divide the APR by the number of compounding periods per year:**

```
Periodic Rate (APR/N) = 2.5012/365 = 0.00685260274
```

2. **Add 1 to the periodic rate:**

```
1+0.00685260274 = 1.00685260274
```

3. **Raise the result to the power of the number of compounding periods:**

```
1.00685260274^(365) = 12.0935117
```

4. **Subtract 1 from the result to get the APY:**

```
12.0935117−1 = 11.0935117 or 1109.35%
```

So, the APY for an APR of 250% with monthly compounding is approximately **1109.35% APY**.\
\
[*“Compound interest is the eighth wonder of the world. " - Albert Einstein*](#user-content-fn-1)[^1]

[^1]: