The APR is paid in the coin itself, not dollars, so they just inflate the supply to pay the "yield".

It's the same principle as junk bonds. The less people believe that their principle will be recovered, the higher the APR to incentivize buyers. If some $100 coin offers you 100% APR, you best believe it's not likely that your original coin is still going to be worth $100 at the end of the year. More likely you'll have 2 coins worth $50 each now.

There's a massive bubble with people throwing money into anything and everything.