How to maximise staking returns using daily compound interest

I know what you’re thinking… Compound interest… Come on, are you for real? You’re going to lecture me on the power of compound interest? Well, yes, I am. That’s because I claimed to understand compound interest too, but it wasn’t until I came across this opportunity and I crunched the numbers, that I truly understood how powerful compound interest could be. This opportunity is made possible due to $0 transaction fees, high annual percentage rate (APR) and the foresight to compound daily rather than weekly or any other frequency.

When possible, I’ve always done my best to compound my yield farming returns as frequently as I can, but it hasn’t always been easy to do when working on Blockchains like Ethereum, due to the astronomical gas fees. Claiming $50 worth of yield farm returns can cost you that or more in gas. So, it’s always been more economically viable for me to accumulate a more sizeable reward before claiming.

The Opportunity:

The opportunity in this case is Osmosis. This is just my opinion, but I believe Osmosis is a golden opportunity because:

  1. It’s new. This project is only 2 weeks old so we are at the beginning.
  2. It’s relatively unknown. With 12k followers on Twitter, I believe this project is flying under the radar at the moment and is probably undervalued compared to PancakeSwap and UniSwap.
  3. Has a high annual percentage rate (APR). The APR for this project is sits at 517.26% at the time of writing. This APR decreases based on the total value *locked for staking.
  4. Has $0 transaction fees. This makes is viable to compound your rewards daily!
  • Staked tokens take 14 days to become liquid again once undelegated.

How much can you earn compounding your gains?

I first worked this out by hand, inputting my desired values into the compound interest formula shown below:

A = $1,000(1+5.10/365)^365(1)

Where;

P = $1,000 investment

r = 517.26% as a decimal

n = 365 (compounding once daily)

t = 1 year

And you won’t believe this, but it works out that…

A = $170,083.73

By compounding daily, you’ve effectively turned a 517.26% APR into a 16,908.373% APR!

A month-by-month breakdown illustrating the almighty power of compound interest

Now, a few things to note:

  1. This APR will go down. I’m not sure how quickly it will decrease, because that all depends on how much and how quickly it gains traction, but it’s imperative to note that it will go down.
  2. On the flip side, this figure ($170,083.73) does not account for the value of the token appreciating in value. The best project to compare this to is UniSwap because both these projects have the same Max Supply, being 1,000,000,000 tokens. At present, UniSwap’s market cap is $11,967,304,919 USD. In comparison, Osmosis’ market cap is $345,054,815 USD. For Osmosis to catch Uniswap, its market cap would need to increase by 34.87 times! In a perfect world where APR remains the same, the true value of your investment, due to compound interest and the appreciation of the Osmosis token, would actually be a staggering $5,930,819.67.
  3. Now of course you shouldn’t expect to make this because there are validator fees that average approximately 5% and the APR will decrease, but this is an idealistic illustration to highlight the potential upside of this ecosystem.

The above calculations are all hypothetical and are intended to help you realise the potential of compounding your crypto rewards. None of this information is investment advice.

If you wish to pursue this investment opportunity, I recommend you use Osmosis Analytics by Smart Stake to help you anticipate more accurate projected rewards.

Inputting the amount of $OSMO you’ve delegated, along with the validator you’ve delegated to (in the ‘Rewards Calculator by Validator’ section), you’ll be able to accurately anticipate your projected rewards at the time you run the calculator. Remember, this will change as APR changes.

Additionally, I also recommend you track your daily rewards in a spreadsheet so you can track progress and trends etc.

➡️ Feel free to follow me on my other socials for interesting crypto projects I’m investing into and to stay up to date on my strategies: linktr.ee/Chad2P0 🐦📸🎧📝

Disclaimer: This blog post was inspired by my own opinions, observations and experiences. I am not a licensed financial advisor and this is not financial advice. You should not buy, sell, or invest in any asset based on what I say. You should know that investing carries extreme risks. You could lose your entire investment. This is not trading advice and I am in no way liable for any losses incurred. Always do your own research.

Hey! I'm Chad. A 27 year old that's passionate about investing and helping others around me. I wish to share my quest for entrepreneurship with you here.