Crypto staking rewards look simple — deposit tokens, earn yield — but the calculation underneath decides whether you earn 8% or 11% on the same stake. The difference is compounding.

The basic formula: rewards = principal × (1 + rate/n)^(n×t) − principal, where n is compounding periods per year and t is years. More frequent compounding always wins when the quoted rate is equal.

The most common mistake is comparing APR to APY directly. A validator advertising 12% APR with monthly compounding actually pays about 12.68% APY. Always convert to the same basis before comparing options.

The second mistake is ignoring token price. A 15% APY means nothing if the token drops 40%. Calculate rewards in both token terms and fiat terms, and never stake money you cannot afford to have locked.