How to earn on Polkaswap DEX — Passive income strategies:
Pt. 1: Staking
You want to make some passive income from your crypto investment and don’t know where to start? Making the decision to unlock the earning potential of your crypto assets is one that needs some careful consideration, as the possibilities are numerous. Here are your options on Polkaswap DEX, from low-risk staking to higher-risk liquidity provision and farming.
Although we clearly would love everyone to earn well on Polkaswap, these articles are not financial advice and are purely educational content. Please always do your own research.
In this series of articles you will read about:
1. Staking: Low risk earning on a single token — beginner friendly
2. LP & farming stablecoin pools: low risk
3. LP & farming volatile token pools: High risk / high reward strategy
4. Combination example of LP, Farming and staking
Make sure you always have some XOR token in your account since you need this for any transaction on Polkaswap and on the SORA network. Fees vary slightly for different transaction types, but $15 worth of XOR should be more than enough to cover you for at least 7 staking/LPing/farming related transactions.
In each article we will set out some example calculations around the different passive earning opportunities — you may find the “Explore” tab on Polkaswap, with its handy APR calculator, to be a useful resource with the most up to date numbers. Check it out here: — https://polkaswap.io/#/explore
In this first article, our main focus will be on staking tokens on the Demeter farming platform which is integrated into the Polkaswap DEX interface. You should be aware that this form of staking is different to network staking of the native XOR token which serves to help secure the SORA network. Staking XOR via Polkadot.js as a validator or nominator of the network yields you rewards in VAL (SORA Validator Token). To find out more about network staking you can take a look at https://wiki.sora.org/guides/how-to-stake-your-xor
For now, let’s dive in to our single token staking options on Polkaswap DEX:
- Staking Risk: Low
2. Reward: low to high — up to 53% APR (Annual Percentage Reward) at time of writing.
Needed: only 1 of the tokens that is listed for staking on https://polkaswap.io/#/staking/demeter/ and XOR for network fees
Fees: one time SORA Network fee (0.67 XOR) and one time staking fee (2% of your stake amount)
Withdrawal Fees: SORA network reward harvesting fee (0.58 XOR) and SORA network staking withdrawal fee (0.56 XOR)
Staking in farming platforms is a popular way to earn passive income with your crypto investments. When you stake your digital assets, you lock up the coins and in exchange for that, you earn rewards calculated in percentage yields. These returns are typically much higher than any interest rate offered by banks.
Part of the beauty of staking on Polkaswap is that there are no mandatory lock-up periods for your tokens, which means that you have a great deal of flexibility with this strategy.
N.B. It’s important to note that APR % can increase and decrease as money enters or leaves a staking farm and as the token price fluctuates. Be sure to monitor these fluctuations to ensure the farm in question is offering you the best available returns on your investment.
Example:
I have 1000 DEO (c. $150) and want to earn a passive income on this capital.
> I go to https://polkaswap.io/#/staking/demeter/,
> connect my wallet and
> click on Start Staking on the DEO tab
> 2% fee has to be paid to the protocol, and I have to pay a network fee in XOR to complete the transaction. This means that after paying the network fee and completing the transaction I will have staked 980 DEO.
Read more about DEO fees and protocol in the lightpaper
> The APR at the time of writing is 53%. If we theorize that the APR remains the same all year, I will have 1500 DEO after 12 months of staking.
My gains are 500 DEO net of the staking fee.
At the time of writing, deep in a bear market, 1 DEO is worth $0.15.
Your 1000 DEO is worth $150. Your stake of 980 DEO will be worth $147. After one year your total bag of DEO will be 1500 DEO, if the APR remains the same.
Now let’s look at three different price scenarios for DEO to see what our investment might look like in $$$ value at the end of a year’s staking. We’ll also compare returns from staking vs. simply holding the token.
Scenario 1 — static price action
Staking — If the $$$ value of DEO remains at $0.15 after 12 months, after harvesting and unstaking you would have a total of $225–1.81 XOR ($6) = $219
$$$ Profit from staking + $69
Holding — If the $$$ value of DEO remains at $0.15 after 12 months, your 1000 DEO is worth $150.
$$$ Profit from holding + $0
In this static price action scenario, you would be $69 better off by staking your DEO as opposed to simply holding the token.
Charts at Polkaswap.io
Scenario 2 — bullish price action
If you are bullish on DEO, you think the $$$ value of DEO will increase, and your prediction is correct, your return will be a lot higher than 53% in $$$ value.
Staking — If the $$$ value of DEO has risen to $0.50 after 12 months, after harvesting and unstaking you would have a total of $750 — $6 in XOR fees * = $744
$$$ Profit from staking + $594
Holding — If the $$$ value of DEO has risen to $0.50 after 12 months, your 1000 DEO is worth $500
$$$ Profit from holding + $350
In this bullish price action scenario, you would be $244 better off by staking your DEO as opposed to simply holding the token.
*We ought to assume that XOR price would also have gone up if DEO had increased nearly 3.5x! However, network fees will be reduced in XOR terms as the XOR price increases — this is factored in here.
Scenario 3 — bearish price action
Sometimes the markets are illogical! Let’s imagine the DEO price falls.
Staking — If the $$$ value of DEO falls to $0.10 after 12 months, after harvesting and unstaking you would have a total of $150–1.81 XOR ($6) = $144
$$$ Loss from staking — $6
Holding — If the $$$ value of DEO falls to $0.10 after 12 months, your 1000 DEO is worth $100.
$$$ Loss from holding — $50
In this bearish price action scenario, you would be $44 better off by staking your DEO as opposed to simply holding the token.
With these above examples we can see that staking is a very interesting option, not least because of the risk mitigation and upside enhancement it provides versus merely holding a token.
Bear in mind, just staking a couple of hundred $$$ could easily earn back all fees for your SORA Card with a bit of extra leftover that can be used for compounding interest.
Also, to better understand the tokenomics of DEO and understand which factors can influence the price movement, please do your own research starting here!
We hope you enjoyed this first Earn on Polkaswap article all about staking. Next time we’ll be exploring liquidity provision and farming of stablecoin pools — see you then!
Polkaswap.io
