Quick Summary
- Benefit: Maximize staking ROI for Elrond, Cosmos and Kusama
- Method: Optimal duration to restake (compound) rewards
- Limitations: Calculation considers current reward rate and fees. Both are subject for change over time
Stakingrewards.com is proud to present a new set of information fresh out of the research labs: The Optimal Staking Frequency.
How often should you restake if rewards do not auto-compound?
This information is relevant for Staking mechanisms that do not auto compound staking rewards. The staking rewards have to be either actively claimed, as in Cosmos for example, or get transferred to the wallet from which the delegation originated, as in Kusama for instance. In any case, the staking rewards accrue in a certain place, and users have to take action to put it to work again.
The benefits of restaking in the optimal staking frequency
To restake your accrued rewards, you need to claim them first and/or (re-)delegate to a validator via an on-chain transaction. These transactions incur a cost.
The optimal staking frequency calculates your cost to reward ratio, and indicates which time interval will optimize your total staking returns. It tells you after how many days of accruing rewards you should restake to gain the maximum possible reward, taking your staking duration and estimated network fees into consideration.
Elrond optimal staking example:
In expressed numbers, take a look at the following Elrond example:
- Staking time: 1 year
- Staking amount: 100 tokens (approximately 5824 USD)
- The optimal staking frequency: 6 days 18h
- The optimal restaking frequency for a $5,824 stake and a subsequent transaction fee of 0.00014 eGLD ($0.01) is 6d 18h. Restaking every 6d 18h will increase your annualized reward rate from 10.33% to 10.86%. This translates into an extra 0.53 eGLD ($31.08) over 365 days.
Cosmos optimal staking example:
- Staking time: 1 year
- Staking amount: 100 tokens (approximately 1032 USD)
- The optimal staking frequency: 33 days 4h
- The optimal restaking frequency for a $1,032 stake and a subsequent transaction fee of 0.007 ATOM ($0.08) is 33d 4h. Restaking every 33d 4h will increase your annualized reward rate from 18.15% to 19.66%. This translates into an extra 1.52 ATOM ($15.63) over 365 days.
Kusama optimal staking example:
- Staking time: 1 year
- Staking amount: 100 tokens (approximately 6253 USD)
- The optimal staking frequency: 5 days 10h
- The optimal restaking frequency for a $6,253 stake and a subsequent transaction fee of 0.00018 KSM ($0.01) is 5d 10h. Restaking every 5d 10h will increase your annualized reward rate from 13.74% to 14.7%. This translates into an extra 0.96 KSM ($60.05) over 365 days.
Limitations you should consider
The calculation takes the current reward rate by face-value and does not take into account any changes to the reward rate going forward. The value presented is an average optimal period but, since different validators have different uptimes, performance fees and reward rates, this period may differ slightly in each individual case. We will address this issue later down the Staking Rewards’ Roadmap as we will allow you to pick a validator as part of the calculation and showing individual rewards per operator.
The optimal staking frequency takes an average network transaction fee into account that our research team has calculated themselves. If this changes in the future or the user transacts while fees are substantially higher than the number used in the calculation, then the user might experience different results to what we have calculated.
We are not advising on investment, but providing a reference point for users to optimize staking ROI via optimal restaking intervals.
Let us know your feedback
If you have any questions please feel free to post it on the r/staking subreddit, twitter, telegram or discord. Our team will be more than happy to answer your questions.