Original | Odaily Planet Daily (@OdailyChina)
Author | Azuma (@azuma_eth)
The new player in the stablecoin track, Usual (USUAL), has performed well recently. While the price has risen significantly, the astonishing yield presented by the official USUAL staking channel has also attracted the attention of many users.
As shown in the figure below, the official Usual website indicates that the current real-time APY for staking USUAL is as high as 22037%.
Odaily Note: Staking USUAL can unlock governance rights and earn 10% of newly issued USUAL, which is also the source of USUAL staking rewards.
After opening the staking homepage, the simulation results obtained by entering the pre-stored amount of USUAL are exaggeratedly more intuitive — assuming staking 10,000 USUAL, the expected yield in a year could be 2,203,752 USUAL, with a daily yield of 6,037 USUAL...
Many users react to these figures at first glance with 'isn't this picking up money?' But is that really the case? In the following text, we will unveil the mathematical magic of the USUAL staking yield figures through a series of calculations.
APR and APY
Older generation DeFi players may be more aware that although APR and APY are two seemingly similar metrics commonly used to measure cryptocurrency investment returns, the actual impact on returns can be vastly different.
In short, APR does not consider the effects of compounding, while APY includes the compounding effect in the calculation, which usually results in APY yields appearing to be higher.
For example, if you deposit $1,000 into a pool with an APR of 100%, then at the end of the year your return would be $2,000; but if the pool adopts a daily compounding mechanism, meaning interest is calculated daily and reinvested, then at the end of the year your return would be approximately $2,718, corresponding to an APY of 171.8%.
The conversion between APR and APY can be calculated based on the following consensus, where n represents the compounding frequency. If a daily compounding model is adopted within a one-year period, n would be 365.
APY = (1 + APR/n)^n - 1
The mathematical magic of USUAL
Returning to the staking scenario of USUAL, the 22037% here represents the APY yield, and it is clearly stated that it will be compounded daily (automatically compounded every day).
According to the formula shown above, with APY set at 22037% and n set at 365, the calculated APR result is 543.65%, corresponding to a daily yield rate of approximately 1.49%.
Some friends may ask why, despite the USUAL staking mechanism providing a daily compounding feature, it should be ignored? The reason is that under the compounding model, daily returns will gradually increase as the timeline extends, while when evaluating short-term return conditions, the APR figure is actually more reliable.
Taking the previously mentioned example of 'assuming staking 10,000 USUAL, expecting to earn 6,037 USUAL daily within a year' for further elaboration.
If truly staked for a year, under unchanged APY, the calculation result indeed holds, but in reality, users who stake 10,000 USUAL will not receive 6,037 USUAL daily.
The reality is that after staking 10,000 USUAL, the user will only receive about 149 USUAL on the first day (daily yield rate of 1.49%), and thereafter, the daily yield will gradually increase due to compounding, since the principal will continuously grow with reinvestment, and the figure of 6,037 is just an average daily yield over a year — note that all this is still based on the premise of unchanged APY.
Potential risks
Aside from users who stake for long-term needs for other reasons, if you are rushing to buy and stake merely because of the high interest of 22037%, please be sure to understand the following risks.
Risks of unstaking wear and tear
It is worth mentioning that the unstaking of USUAL mandates a 10% fee, which means that with a daily yield rate of 1.49%, users will need at least a week to recover this 10% unstaking cost.
Risks of expanding staking scale
The staking scale of USUAL may further expand, thereby diluting the yield.
The current scale of USUALx (the staked version of USUAL) is approximately 26 million, corresponding to about 27.81 million USUAL staked; while the initial circulating supply of USUAL is 494.6 million, and Binance has also not yet opened USUAL withdrawals. This means that the subsequent staking scale of USUAL is expected to have significant growth potential, which may severely dilute the real-time yield of the staking pool.
Odaily Note: The APY figures for staking USUAL on the official website are not updated in real-time, and the frequency of updates is currently unknown.
Risks of price decline
We cannot predict the market, but the current buying power attracted by high interest may be an important buying force for USUAL.
All calculations above are based on the USUAL currency standard. If considering the risk of price decline, there may be a significant reduction in real yields or even a shrinkage of the principal.
