Helping others grow wealth through decentralized finance; that is the mission of OpenSwap. Unique Elegant Design. Ultimate Security. High Reward Staking. Open Liquidity Pools.
Compounding rewards is a strategy allowing you to increase your return percentage with little effort. We operate under the philosophy of “Your Money, Your Rewards”. Promoting healthy farming in crypto through teaching you how to increase your return with unlocked rewards, no staking fees, and no withdraw fees. You are free to use every reward as needed. With compounding, we can put our rewards to work.
One of the smartest tasks to undertake while farming crypto is compounding rewards. This is a strategy that may significantly increase your percentage of returns. While it may sound complex, compounding rewards is rather simple. As you receive rewards from a staked LP, use the rewards to purchase more of both tokens, adding them into LP, and further increasing your staked amount. Since there are no fees for staking or withdrawing a staked LP on OpenSwap, you are not locked in or paying unnecessary fees. As we said earlier…Your Money, Your Rewards.
Here is an example of compounding:
1. A user has 100 LPs staked in the $OpenX / $ONE pool. A period of time later, they collect 50 OpenX tokens as a reward for the staked LP.
2. Take half of the rewards (25) and buy $ONE.
3. Create additional LPs with the new $OpenX / $ONE tokens
4. Stake them.
By increasing the percentage of staked LPs, it will increase the amount of rewards you receive.
How does this increase your return?
Lets discuss the difference between APR (Annual Percentage Rate) and APY (Annual Percentage Yield). When you see an APR%, that is the rate of return assumed if you leave your investment secured with that product for 1 year. When you see APY%, it takes into account compounding any interest received into the original investment. Based on how often you compound, the higher the percentage of increase. There is a significant increase in return rate when you start compounding but there are also drastically reduced benefits the more you compound.
Here is an example:
If the OpenX / ONE LP is being staked for a 100% APR.
· Leaving the initial investment staked for 1 year, you will earn a 100% return.
· Compounding semi-annually, will earn a return of 125%, 25% over APR.
· Compounding monthly will increase the APY to 161%, 61% over the APR.
· Compounding weekly will increase the APY to 169%, 69% over the APR
· Compounding daily will increase the APY to 171%, 71% over the APR
Reward vs. Effort
The frequency of compounding is based on the individual. Compounding rewards takes a small amount of time and cost in transaction fees. With the above example, you can see the diminishing returns from weekly to daily, the time taken vs the reward is minimal. Hence why we suggest compounding weekly.
If you are compounding on Harmony, both the time and fees are not much of an obstacle. However, on other blockchain networks, this is something that needs to be taken into account.
Yield Aggregators: Is it worth it?
There are sites that auto-compound pools for you. These sites compound multiple times a day but as noted above it has a minimal impact on returns. They also charge a 3.5% - 5% fee to do this for you. Always be careful of fees with crypto as they can cut into profits. Using the example above, you could manually compound your rewards weekly and earn 169% or have a yield aggregator site compound them daily for you to earn 166% ( 171 APY% - 5% fee ). In this scenario, it will end up costing you 3%; even though it sounds advantageous, it may not truly be. In the event you cannot handle the effort required to compound weekly, a yield aggregator may be your best option. However, with a little bit of effort, you will be able to out produce these sites on your own.
While OpenSwap is audited and secure, we cannot vouch for other sites. By using a third-party site, e.g. an auto-compounding site, you are subject to any security flaws that may exist on their platform.
Just remember the reason for compounding; higher returns equals more rewards.
OpenSwap (app.openswap.one) is a fast and secure non-custodial decentralized exchange that serves as a one-stop-shop to buy, trade, and earn crypto whether you’re from the Harmony, Ethereum, or Binance Smart Chain networks. OpenSwap allows Harmony users to seamlessly trade peer to peer without the tokens ever leaving the original wallet and through liquidity supplied by other users of the platform. With OpenSwap, users can:
- Exchange Tokens/Coins
- Provide Liquidity to Pools
- Earn Rewards by Staking in Lucrative Incentivized Liquidity Pools
- View ‘Personal Farming Profile’ detailing your rewards including Total Stake Value, Average APR %, Total Current Rewards, and Total Current Rewards in USD
- Simplified Bridge for Tokens/Coins to and from the Harmony, Ethereum, and Binance Smart Chain Network
- Collect Fees on Provided Liquidity Without Staking
- Vote on Governance Decisions, Including Adding New Tokens