Understanding the APYs for Staking 3.0

Dear Ferrum Community,

We could not be more excited about the upcoming launch of Staking 3.0! With four staking pools and rewards as high as 80% APY, there is something for everyone to enjoy.

To keep the process moving, we prepared this helpful guide to understanding the APYs (Annual Percentage Yield) for staking FRM and earning FRMx as rewards. Multi-Token Staking presents some unique challenges and opportunities when it comes to structuring the rewards. However, with the ingenuity of the Governance Committee, we have developed something that is fair and valuable to the stakers, and is sustainable for FRM/FRMx.

In this article, we explain the core concepts and provide some useful examples so our community can understand the risks and the benefits of Staking 3.0. Enjoy!

Core Concepts

The term “APY” (Annual Percentage Yield) indicates the rewards that you would receive for a staking duration of one complete year. Since the pool staking periods are all factors of 360 days we have chosen to use 360 days as the complete APY period rather than 365 days. By taking this approach, this simplifies things and makes them more understandable. The bonus is that this equates to slightly higher rewards earned.

To calculate the amount of rewards (paid in FRMx) that you will receive at the end of the staking period, three factors are taken into account:

• Staking duration;
• The APY; and
• The prices of FRM and FRMx at the beginning of the staking period.

We have prepared some helpful examples to show how we made the calculations and what users can expect in terms of rewards.

Example 1: Staked 100K FRM in Moon Pool

• The APY is 20%. For purposes of this calculation, 20% of 100,000 = 20,000 FRM
• Moon pool’s duration is 90 days, therefore the APY for the staking period is: (90/360) x 20,000 = 5,000 FRM
• The value of 5000 FRM at today’s price is 5,000 x 0.035* = $175 USD
• The cost of 1 FRMx at today’s price is $260* USD
• Rewards in FRMx are calculated as a ratio of the value of the APY (in USD) for the given duration to the value of 1 FRMx (in USD)
• For this example, here’s the calculation: 175/260 = .67
• This means that if you stake until full maturity (90 days); you will get your initial 100k FRM back, and you will receive .67 FRMx in rewards.

For those wondering why APY in Moon Pool is lower than the other pools, this is simply because tokens staked there are locked for a shorter period of time.

Example 2: Staked 50,000 FRM in Saturn

• The APY is 80%, for purposes of this calculation, 80% of 50,000 = 40,000 FRM
• Saturn pool’s duration is 360 days, therefore the APY for the staking period is: (360/360) x 40,000 = 40,000 FRM
• The cost of 40,000 FRM at today’s price is 40,000 x .035* = $1,400 USD
• The cost of 1 FRMx at today’s price is $260 USD*
• Rewards in FRMx are calculated as a ratio of the value of the APY (in USD) for the given duration to the value of 1 FRMx (in USD).
• For this example, here’s the calculation: 1,400/260 = 5.38
• This means if you stake until full maturity (360 days); you will get your initial 50,000 FRM back, and you will receive 5.38 FRMx in rewards.

Essentially, rewards are calculated as a ratio of FRM to FRMx at the beginning of the period in accordance with the above calculation. The calculation which takes into account the price of both FRM and FRMx at the time staking begins, provides certainty for the stakers and Ferrum, but it also provides some additional upside (or risk) if the price of FRMx appreciates (or depreciates) during the staking period.

How are Rewards Affected by Future Price?

It is critical to understand that the amount staked FRM tokens and FRMx reward tokens you receive does not change (except if others unstake early in which case those who stake until the full maturity date get a share of their rewards). However, what can, and probably will change is the value of each token (in USD). At maturity, if the price change of FRM and FRMx is proportional, the actual APY you receive will not change — however if the price change of the tokens is not proportional, then the actual APY, in terms of USD value is affected, i.e.:

• If the price of FRMx throughout the staking period appreciates more (or depreciates less) than FRM, your actual APY (in USD) will be higher.
• If the price of FRMx appreciates less (or depreciates more) than FRM, your actual APY (in USD) will be lower.

There is always a general market risk with staking regimes (and cryptocurrencies in general), but with liquidity staking it is also relevant how prices of the two tokens change relative to each other. This can play out in favor or in disadvantage of stakers, so it’s important to highlight this.

What’s Next

We continue to prepare behind the scenes for the launch of Staking 3.0 such that we can launch a web-based version and UniFyre Wallet version of the same pools. We will also continue to publish guides and further information so stakers will be fully prepared for the staking round when it opens. Finally, a countdown to when staking opens will be released soon.

Thank You

We want to give a special thank you to the Governance Committee for helping to put together this helpful overview. We hope everyone now has a greater understanding of how we will calculate the APYs for Staking 3.0.

Thank you,

The Ferrum Network Team

About Ferrum Network

Ferrum Network is building a DeFi ecosystem that interoperates across chains and removes barriers to mass adoption with user-friendly products for swapping, staking, and transferring cryptocurrencies. Its cross-chain DAG will enable the transfer of any digital asset in milliseconds for near-zero network fees, unlocking tremendous value for the entire industry. Ferrum’s non-custodial UniFyre Wallet has already revolutionized the way people send crypto with its “Link Drop” technology, and is transforming the OTC market with risk-free OTC swaps embedded in a shareable link. Ferrum’s Staking-as-a-Service is now used by dozens of projects, and our Token Bridge is the fastest, and most secure means of moving assets between Ethereum and Binance Chain. Look for Ferrum to launch more transformative DeFi technology throughout 2020 and beyond.

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UniFyre Android: https://play.google.com/store/apps/details?id=com.ferrum.unifyre

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*Note: Prices used in this guide reflect the date of this writing (rounded). The actual ratios will be calculated before staking opens to reflect the conditions at the time of staking.