From ad3a601e927d74202ff623a462dc6e3f73194127 Mon Sep 17 00:00:00 2001 From: Trent McConaghy Date: Tue, 21 Nov 2023 09:43:45 +0100 Subject: [PATCH] Fix #1380: DF: APYs page should discuss how tx costs affect yield --- data-farming/apys.md | 20 ++++++++++++++------ 1 file changed, 14 insertions(+), 6 deletions(-) diff --git a/data-farming/apys.md b/data-farming/apys.md index bfdbf3bb..b26be5c6 100644 --- a/data-farming/apys.md +++ b/data-farming/apys.md @@ -21,17 +21,25 @@ You can do your own APY estimations. In Passive DF, APY is highly dependent on t ### Definition of Yield, WPY, APY -A **yield** is the relative gain in value compared to the amount you started with. Specifically: +A **yield** is the relative gain in value compared to the amount you started with, minus costs. Specifically: -`yield = (start amount + gained amount) / (start amount) - 1.0` +`yield = (start amount + gained amount - costs) / (start amount) - 1.0` -For example, if you start with 1000 OCEAN and earn 5 OCEAN: +For example, if you start with 1000 OCEAN, have 6 OCEAN gross revenue, and 1 OCEAN costs (net 5 OCEAN): -`yield = (1000 + 5) / (1000) - 1.0 = 0.005` +`yield = (1000 + 6 - 1) / (1000) - 1.0 = 0.005` We can express yield as a percentage simply by multiplying by 100 (%). For example, yield of `0.005` in percentage is `0.005 * 100% = 0.5%`. -The yield for one week is **Weekly Percentage Yield**, or **WPY**. For example, if you started with 1000 OCEAN and earned 5 OCEAN from DF, in one week, then your WPY = 0.005 = 0.5%. +The yield for one week is **Weekly Percentage Yield**, or **WPY**. For example, if you started with 1000 OCEAN and netted 5 OCEAN from DF, in one week, then your WPY = 0.005 = 0.5%. -The yield for one year is **Annual Percentage Yield**, or **APY**. APY can be estimated from WPYs. Assuming no compounding, `APY = WPY*52`. We drill deeper in the [guide to estimate APYs](apys-guide.md). +The yield for one year is **Annual Percentage Yield**, or **APY**. APY can be estimated from WPYs. Assuming no compounding, `APY = WPY*52`. + +**Costs** include: +- Gas fees for transactions (txs) on the various chains. Eg veOCEAN, passive DF rewards, and Volume DF rewards are on Ethereum mainnet. Predictoor DF is on Sapphire mainnet. +- Txs include: locking OCEAN, claiming passive rewards, claiming active rewards, and withdrawing rewards. +- Costs should not be under-estimated. Eg if you're only doing Passive DF, and you lock a small amount of OCEAN for a short time, costs may exceed your gross income. +- To compound returns, these txs need to be repeated. The ideal frequency to compound rate is whatever maximizes your yield - which depends on how much OCEAN you've locked, tx fees, etc. + +The **[guide to estimate APYs](apys-guide.md)** drills deeper into estimating APYs.