Article reprinted from: Odaily Planet Daily
Author: Azuma, Odaily Planet Daily
The new player in the stablecoin track, Usual (USUAL), has performed well recently, and the astonishing yield presented by the official USUAL staking channels has attracted the attention of many users while the price of the currency has surged significantly.
As shown in the figure below, the Usual official website indicates that the current real-time APY for staking USUAL is as high as 22,037%.
Odaily Note: Staking USUAL unlocks governance rights and earns 10% of newly issued USUAL, which is also the source of USUAL staking yield.
After opening the staking homepage and entering the pre-stored amount of USUAL, the calculated simulation result becomes even more exaggeratedly intuitive—assuming to stake 10,000 USUAL, you can expect to earn 2,203,752 USUAL in a year, with 6,037 USUAL earned daily...
Many users' first reaction upon seeing these numbers is 'Isn't this picking up money?', but is it really so? In the following text, we will reveal the numerical magic of USUAL staking yield 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 indicators commonly used to measure cryptocurrency investment yields, the difference in yield impact is actually significant.
In short, APR does not take into account the impact of compounding, while APY incorporates the compounding effect into the calculation, which often results in APY yields appearing higher.
For example, if you deposit $1,000 into a pool with an APR of 100%, then at the end of the year, your principal plus yield will be $2,000; but if the pool adopts a daily compounding mechanism, that is, interest is accrued and reinvested daily, then at the end of the year, your principal plus yield will 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 is the compounding frequency. If a daily compounding mode is adopted over a one-year period, then n is 365.
APY = (1 + APR/n)^n - 1
The mathematical magic of USUAL
Returning to the USUAL staking scenario, the 22,037% here is the APY yield, and the official clearly mentions that compounding occurs daily (automatically compounded every day).
According to the formula in the figure above, with APY taken as 22,037% and n as 365, the calculated APR result is 543.65%, corresponding to a daily yield rate of about 1.49%.
Some friends may ask, since USUAL's staking mechanism clearly provides for daily compounding, why ignore it? The reason is that under the compounding model, daily earnings will gradually increase as the timeline extends, while when assessing short-term yield conditions, the APR figure is actually more reliable.
Taking the previously mentioned example of 'assuming to stake 10,000 USUAL, expected to earn 6,037 USUAL daily over a year' for further elaboration.
If truly stored for a year, under unchanged yield conditions, this calculation result holds true, but in reality, after staking 10,000 USUAL, users will not receive 6,037 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 subsequent daily earnings will gradually increase with compounding, as the principal will continue to grow with reinvestment, while the 6,037 figure is just the daily average over a year—note that all of this is still based on the premise of unchanged yield conditions.
Potential risks
Leaving aside users who stake for long-term needs, if you hurriedly buy coins and stake just because of the high interest of 22,037%, please be sure to understand the following risks.
Un-staking wear risk
It is worth mentioning that the un-staking of USUAL requires 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% un-staking cost after staking.
Risk of expanded staking scale
The scale of USUAL staking may further expand, diluting the yield.
The current scale of USUALx (staked version of USUAL) is about 26 million, corresponding to a staked amount of about 27.81 million USUAL; while the initial circulating supply of USUAL is 494.6 million, and Binance has also temporarily not opened USUAL withdrawals. This means there is expected to be significant growth potential for subsequent USUAL staking, which could severely dilute the real-time yield of the staking pool.
Odaily Note: The staking APY figures on the USUAL official website are not updated in real time, and the update frequency is currently unclear.
Risk of price drop
We cannot predict the market, but the current buying power attracted by high interest may be an important buying force for USUAL.
All of the above calculations are based on USUAL as the currency benchmark. If considering the risk of price decline, there is a possibility of significantly reduced actual yields or even a shrinkage of the principal.
