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# What is APY?

**APY**stands for Annual Percentage Yield. This measures the real rate of return on your principal tokens amount by taking into account the effect of compounding interest. In the case of ES2 Protocol, your $ES2 tokens represent your principal, and the compound interest is added periodically on every Rebase event (Every 15 minutes).

Your new principal amount is then your current token amount, added to your new rebase token amount. This increased amount is what gets calculated for your next rebase rewards cycle.

One interesting fact about APY is that your balance will grow not linearly but exponentially over time! Assuming a daily compound interest of

**2.325%**, if you start with a balance of 1 $ES2 on day 1, then after a year, your balance will grow to about**383,125.80****$ES2**. That is the power of compound interest!