Author: Azuma, Odaily
The rising star of the stablecoin track, Usual (USUAL), has recently performed well. As the coin price has risen significantly, the amazing yield rate presented by the official USUAL staking channel has also attracted the attention of many users.
As shown in the figure below, the Usual website information shows that the current real-time APY for staking USUAL is as high as 22037%.
Odaily Note: Staking USUAL can unlock governance rights and obtain 10% of the newly issued USUAL, which is also the source of the USUAL staking income.
After opening the staking page, the calculated simulation results obtained by entering the pre-stored USUAL amount are even more exaggeratedly intuitive - assuming staking 10,000 USUAL, it is expected to obtain 2,203,752 USUAL in one year, and 6,037 USUAL per day...
Many users' first reaction when seeing these numbers is "Isn't this just free money?", but is it really the case? In the following text, we will reveal the mathematical magic behind the USUAL staking yield rate through a series of calculations.
APR and APY
Old-generation DeFi players may be quite familiar with the fact that although APR and APY are both commonly used to measure the yield of cryptocurrency investments, the impact on earnings is vastly different.
In simple terms, APR does not consider the impact of compound interest, while APY incorporates the compound interest effect, often making the yield appear much 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 earnings will be $2,000; but if the pool uses a daily compound interest mechanism, where interest is settled and reinvested every day, then at the end of the year your principal plus earnings 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 compound frequency. If a daily compound interest mode is adopted within a one-year time period, then n is 365.
APY = (1 + APR/n)^n - 1
The Mathematical Magic of USUAL
Returning to the USUAL staking scenario, the 22037% here is the APY yield, and the official clearly states that it will be compounded daily (automatically compounded every day).
Using the formula in the above figure, with an APY of 22037% and n of 365, the calculated APR result is 543.65%, corresponding to a daily yield rate of approximately 1.49%.
Some friends may ask, since USUAL's staking mechanism clearly provides a daily compound interest mechanism, why ignore it? The reason is that under the compound interest mode, the daily earnings will gradually increase as the timeline is extended, while when evaluating the short-term earnings situation, the APR figure is actually more reliable.
Taking the example mentioned earlier, "Assuming staking 10,000 USUAL, it is expected to obtain 6,037 USUAL per day for a year", let's expand on it a bit.
If it really lasts for a year, and the earnings situation remains unchanged, this calculation result is indeed valid. But in reality, after a user stakes 10,000 USUAL, they will not receive 6,037 USUAL every day.
The real situation is that after a user stakes 10,000 USUAL, they will only receive about 149 USUAL on the first day (daily yield rate of 1.49%), and the daily earnings will then gradually increase with compound interest, because the staked principal will continue to grow with reinvestment, and the 6,037 figure is just the daily average over the one-year cycle - note that all of this is based on the premise that the earnings situation remains unchanged.
Potential Risks
Leaving aside users who stake for long-term needs, if you are hastily buying and staking coins solely due to the attraction of the 22037% high yield, please be sure to understand the following risks.
Unstaking Attrition Risk
It is worth mentioning that USUAL has a mandatory 10% fee for unstaking, which means that at a daily yield rate of 1.49%, users need to stake for at least a week to recoup this 10% unstaking cost.
Staking Scale Expansion Risk
The scale of USUAL staking may further expand, diluting the yield rate.
Currently, the scale of USUALx (the staked version of USUAL) is about 26 million, corresponding to a USUAL staking amount of about 27.81 million; while the initial circulating supply of USUAL is 494.6 million, and Binance has not yet opened USUAL withdrawal. This means that the future USUAL staking scale is expected to have a large growth space, which may severely dilute the real-time yield rate of the staking pool.
Odaily Note: The staking APY figure on the USUAL website is not updated in real-time, and the update frequency is currently unclear.
Coin Price Decline Risk
We cannot predict the market, but the current buying driven by high yields may be an important buying force for USUAL.
All the above calculations are based on the USUAL coin price. If the coin price risk is taken into account, there may be a possibility of a significant decrease in real yield or even principal shrinkage.
