Article source: Odaily Planet Daily
Author: Azuma, Odaily Planet Daily
The new player in the stablecoin sector, Usual (USUAL), has recently performed well, and along with the significant rise in price, the astonishing yield presented by the official USUAL staking channel has attracted the attention of many users.
As shown in the figure below, the Usual official website indicates that the current real-time APY for staking USUAL has reached 22,037%.
Odaily Note: Staking USUAL can unlock governance rights and earn 10% of newly issued USUAL, which is also a source of USUAL staking rewards.
After opening the staking homepage and entering the pre-stored amount of USUAL, the calculated simulation result is exaggeratedly more intuitive—assuming a stake of 10,000 USUAL, you can expect to earn 2,203,752 USUAL in a year, with a daily return of 6,037 USUAL...
Many users' first reaction upon seeing these numbers is 'Isn't this picking up money?', but is that really the case? In the following text, we will unveil the numerical magic of USUAL staking returns through a series of calculations.
APR and APY
Older generation DeFi players may be quite clear that although APR and APY are two similar metrics commonly used to measure cryptocurrency investment returns, the impact on returns is actually vastly different.
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 returns appearing higher.
For example, if you deposit $1,000 into a pool with an APR of 100%, then after one year, your principal plus returns would be $2,000; but if the pool adopts a daily compounding mechanism, where interest is calculated daily and reinvested, then at the end of the year, your principal plus returns 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 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 USUAL staking scenario, the 22,037% here represents the APY return, and the official clearly mentions that compounding occurs daily (automatically compounded every day).
Using the formula in the above figure, with APY set at 22,037% and n set at 365, the resulting APR calculation is 543.65%, corresponding to a daily yield rate of about 1.49%.
Some friends may ask why the USUAL staking mechanism, which clearly provides a daily compounding mechanism, would be overlooked. The reason is that under the compounding model, daily returns will grow gradually over time, and when assessing short-term yield conditions, the APR figure is actually more reliable.
Taking the previously mentioned example of 'assuming a stake of 10,000 USUAL, with an expected daily return of 6,037 USUAL over one year' and expanding on it slightly.
If you really stake for a full year, this calculation holds true under unchanged yield conditions; however, in reality, after staking 10,000 USUAL, users will not receive 6,037 USUAL every day.
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 daily earnings will gradually increase with compounding, as the staked principal grows with reinvestment, while the number 6,037 is just an average daily figure over a year—note that all of this is still based on the premise of unchanged yield conditions.
Potential risks
Aside from users who have long-term staking needs for other reasons, if you are just hastily buying and staking because of the attractive 22,037% high interest, please be sure to understand the following risks.
Risk of unstaking wear and tear
It is worth mentioning that the unstaking of USUAL incurs a mandatory fee of 10%, meaning that at a daily yield rate of 1.49%, users will need at least a week to recover the 10% unstaking cost after staking.
Risk 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 a staked amount of about 27.81 million USUAL; while the initial circulating supply of USUAL is 494.6 million. Additionally, Binance has not yet opened USUAL withdrawals. This implies that the staked amount of USUAL is expected to have significant growth potential, which may 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 unknown.
Risk of price decline
We cannot predict the market, but the current buying driven by high interest may be an important buying force for USUAL.
All calculations above are based on the USUAL currency standard. If we consider the risk of price decline, there is a possibility of a significant reduction in real returns or even a loss of principal.
