Learn / Beginner
Finance foundations: returns, risk and compounding
Learn basic financial measurements before applying them to a crypto product.
The Token Press education desk · Reviewed 2026-09-08
Return needs a definition
A return compares an outcome with a starting value over a stated period. Nominal return uses money amounts; real return accounts for changes in purchasing power. Gross returns can differ from results after fees and other costs.
Volatility measures variation under a chosen method. It does not capture every risk, including inability to withdraw, fraud, custody failure or a market with no willing buyer.
A compounding example
If an illustrative balance of $100 grew by 10% in each of two periods with no costs, it would become $110 and then $121. The second period’s increase applies to the larger balance. This arithmetic does not predict any product’s return.
Losses work differently from equal-sized percentage gains: a 50% fall from $100 leaves $50, which then requires a 100% gain to return to $100. Always use the correct starting base.
Separate product claims
APR and APY depend on how rates and compounding are described. A displayed rate may change, and reinvestment assumptions may not match what users can actually do. Read the product’s terms and calculation method.
Diversification changes exposure across risks but cannot eliminate losses. Before comparing products, write down their time horizon, access restrictions, fees, custody and source of return. This guide explains concepts; it does not select investments or determine an individual’s financial suitability.
Sources & further reading
Educational content. Examples are illustrative. Consult the linked documentation for current details.