Crypto Calculator Methodology

Last updated: February 2025

Overview

Our cryptocurrency calculators use industry-standard DeFi (Decentralized Finance) formulas for yield calculations, staking rewards, and liquidity pool analysis. We follow mathematical conventions established by major protocols and verified by the broader DeFi community.

Core Formulas Used

APY to APR Conversion

APR = n × [(1 + APY)^(1/n) - 1]

Where n = compounding periods per year. This converts Annual Percentage Yield (compound) to Annual Percentage Rate (simple), essential for comparing DeFi yields to traditional finance.

Impermanent Loss (IL)

IL = 2 × √(price_ratio) / (1 + price_ratio) - 1

The standard formula for calculating impermanent loss in constant-product AMMs (like Uniswap v2). Price_ratio = new_price / original_price.

Staking Rewards (Proof of Stake)

Annual Rewards = Staked Amount × (Network Inflation Rate / Total Staked %)

Simplified staking reward calculation. Actual rewards vary by network parameters, validator performance, and protocol-specific rules.

DeFi Yield Farming

Daily Yield = (Reward Token Price × Daily Emissions) / TVL

Basic yield farming calculation. Does not account for reward token price volatility, which can significantly impact actual returns.

Data Sources & References

AMM formulas verified against Uniswap and Curve Finance whitepapers
Impermanent loss calculations match DeFi industry standard implementations
Staking reward formulas based on Ethereum 2.0 and major PoS network documentation
APY/APR conversions follow standard financial mathematics

Important Limitations

Price Volatility: Crypto prices are highly volatile. Calculator projections assume stable prices, which rarely reflects reality.

Smart Contract Risk: DeFi protocols carry inherent smart contract risks not captured in yield calculations.

Variable Rates: DeFi yields change constantly. Displayed rates are illustrative, not guaranteed.

Risk Disclaimer

High Risk Warning: Cryptocurrency investments are speculative and involve substantial risk of loss. DeFi protocols can fail, be hacked, or experience "rug pulls." Never invest more than you can afford to lose. Our calculators are educational tools only — not financial advice.

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