Author: Azuma, Odaily Planet Daily
The new entrant in the stablecoin space, Usual (USUAL), has recently performed well, and alongside the significant increase in coin price, the astonishing yield rates presented by the official staking channel of USUAL have also attracted the attention of many users.
As shown in the figure below, the Usual official website displays the current real-time APY for staking USUAL at a staggering 22037%.
Odaily note: Staking USUAL grants governance rights and earns 10% of newly issued USUAL, which is also a source of staking yield for USUAL.
After opening the staking homepage and entering the pre-stored amount of USUAL, the simulated calculation results become even more exaggerated and intuitive — assuming a stake of 10,000 USUAL, the expected amount after one year could be 2,203,752 USUAL, with daily earnings of 6037 USUAL...
Many users' initial reaction to seeing these numbers is, 'Isn't this just picking up money?' But is that really the case? In the following text, we will unveil the numerical magic of USUAL staking yields through a series of calculations.
APR and APY
Older generation DeFi players may be more aware that although APR and APY are two similar metrics commonly used to measure cryptocurrency investment yields, the impact of yields differs greatly.
In short, APR does not take into account the effects of compounding, while APY includes the compounding effect in its calculations, which often results in APY yields appearing higher.
For example, if you deposit $1000 into a pool with an APR of 100%, then at the end of the year, your principal plus earnings would be $2000; however, if the pool uses a daily compounding mechanism, where interest is accrued and reinvested daily, then at the end of the year, your principal plus earnings would be approximately $2718, corresponding to an APY of 171.8%.
The conversion between APR and APY can be calculated based on the following consensus, where n is the compounding frequency. If a daily compounding model is adopted over 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 is the APY yield, and it is officially mentioned that it compounds automatically every day.
Using the formula shown in the above image, if APY is set to 22037% and n is set to 365, the resulting APR calculation is 543.65%, corresponding to a daily yield rate of approximately 1.49%.
Some friends may ask why the staking mechanism of USUAL, which clearly provides a daily compounding mechanism, is being overlooked. The reason is that in a compounding model, daily yields gradually increase over time, and when assessing short-term yield situations, APR numbers are actually more reliable.
Using the previously mentioned example of 'assuming staking 10,000 USUAL, expecting to receive 6037 USUAL daily over the course of a year' for a brief expansion.
If you truly stake for a full year, under the premise that the yield situation remains unchanged, this calculation result indeed holds, but in reality, after staking 10,000 USUAL, users will not receive 6037 USUAL daily.
The reality is that after staking 10,000 USUAL, users will only receive about 149 USUAL on the first day (daily yield rate of 1.49%), and the earnings will gradually increase with compounding, as the staked principal continues to grow with reinvestment. The number 6037 is just an average daily yield over a year — note that all of this is based on the premise that the yield situation remains unchanged.
Potential risks
Setting aside users who are staking long-term for other needs, if you are only rushing to buy and stake due to the high interest of 22037%, please be sure to understand the following risks.
Risk of unstaking wear and tear
It is worth mentioning that USUAL's unstaking requires a mandatory fee of 10%, which means that with a daily yield rate of 1.49%, users need at least a week of staking to recover this 10% unstaking cost.
Risk of expanding staking scale
The staking scale of USUAL may further expand, thereby diluting the yield rate.
The current scale of USUALx (the staking version of USUAL) is approximately 26 million, corresponding to a staking quantity of about 27.81 million USUAL; 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 considerable growth potential, which may severely dilute the real-time yield rate of the staking pool.
Odaily note: The APY figures for staking USUAL on the official website are not updated in real-time, and the update frequency is currently unknown.
Risk of price decline
We cannot predict the market, but the current buying power attracted by high interest may be a significant buying force for USUAL.
All the above calculations are based on the USUAL coin standard. If we take into account the risk of price decline, there may be a significant reduction in actual yields or even a loss of principal.
