DEP staking methodology
・Explaining how DEP staking works and earning rewards by staking
In this article, I will explain how the DEP staking methodology works based on the following anouncement.
Overview:
I. What is Staking?
II. How can I participate?
III. Staking Pool
IV. Earning Projection
V. Reward Calculation Methodology
VI. Application of the parameter calculation
VII. Let’s start DEP Staking!
I. What is Staking?
Earn crypto while you eat, sleep, and playing games.
Staking is a term used to pledge your crypto asset to a cryptocurrency protocol to earn rewards in exchange. Staking allows users to participate in securing the network by locking up the tokens and in return, users are rewarded in the form of native tokens for contributing to the ecosystem. More native tokens you pledge, more rewards you receive in return.
II. How can I participate?
Look at the article here for walkthrough guides. Simply create Playmining ID, verify KYC, start staking DEP from the DEP wallet.
You can begin staking once you have DEP in your DEP wallet and KYC ready to Auctioneer level.
Don’t worry, you will always maintain control of your assets and accounts within Playmining platform.
III. Staking Pool
Below table is the DEP staking rewards by APR. There are three plans you can choose from with 50,000,000 DEP rewards to be distributed in total. The staking program finishes when it reaches to the threshold for the maximum distribution.
The maximum number of plans that one account could apply is five with the maximum amount of DEP to stake per account is 1,000,000 DEP. The minimum staking amount is from 3,000 DEP.
The reward rate is indeed quite competitive comparing with other crypto staking program as well as your banking interest rate.
The rewards come from the PlayMining Ecosystem Incentive that are reserved every year for distribution to the participant of our platform.
IV. Earning Projection
Once you stake your DEP, the DEP is locked in the staking account within your DEP wallet. The DEP is locked until the maturity date and rewards to be allocated automatically to your DEP wallet account. Users have choice to cancel and withdraw at any time by waiving the right to earn rewards. No matter how long the DEP was staked, the reward will be 0.
Staking reward APR will vary based on the amount of DEP staked and from the market condition such as volatility and trading volume. Once you have register the plan, the APR will continue until the maturity date even if the rate changes during your staking period.
V. Reward Calculation Methodology
Following are the parameters to consider the staking rewards.
・Annual inflation rate
・Inflation rate is calculated by Token economics deflator
・Token economics deflator is calculated same as GDP deflator
・Annual inflation rate in PlayMining ecosystem is 31.646%
・Profit on potential loss
・Profit on potential loss is the parameter which is consider the compensation to the DEP holder for the fact that actual, potentially abandoned profit arise
・One of the important parameters of Profit on potential loss is the volatility of DEP calculated by historical prices
・The cashflow of short-strangle position is equivalent to acquiring fixed income by holding DEP
・Risk Free Rate (RFR)
・USD RFR of each staking terms should be applied
・Theoretical strike price in standard normal distribution
・Both call & put theoretical strike price is calculated based on Binomial model
・Historical volatilities corresponding to each period are applied to calculate theoretical strike price
This staking reward program is held to compensate inflation risk and profit on potential loss only by holding DEP. DEA will compensate for 50% of theoretical inflation risk and potential loss.
As the cash flow to acquire fixed income by holding DEP is equivalent to short-strangle premium, profit on potential loss is calculated by applying Black-Scholes model.
VI. Application of the parameter calculation
<Volatility>
Volatility of DEP is the parameter which is computated by calculating the log return from the historical data of the DEP, calculate the standard deviation of the log return, and convert it annual rate. Following are the formula of each parameter constitute of volatility.
・Log return = logℯ(x2/x1)
・Estimated standard deviation = √1/(n-1)∑i=1~n(xi−x^)²
・Expected value = 1/n∑i=1~n xi
<DEP price to apply Short-strangle>
Before applying Black-Scholes model, both upper bound and lower bound of DEP price should be identified. To identify both of them, probability rate of upper and lower bound are multiplied to current spot price. Followings are formula of each parameter to consider the upper and lower bound of DEP price.
・Risk-neutral probability(upper) = 1/2{1−√dt (μ+1/2σ²−r /σ)}
・Risk-neutral probability(lower) = 1–1/2{1−√dt (μ+1/2σ²−r /σ)}
・Upper bound of DEP price = Spot DEP price(S)1/2{1−√dt (μ+1/2σ²−r /σ)}(Per each terms)
・Lower bound of DEP price = Spot DEP price(S){1-{1/2{1−√dt (μ+1/2σ²−r /σ)}}(Per each terms)
・Total expected return = {Spot DEP price(S)1/2{1−√dt (μ+1/2σ²−r /σ)}(Per each terms)+ Spot DEP price(S){1-{1/2{1−√dt (μ+1/2σ²−r /σ)}}(Per each terms)-2S}
<Premium of Short-strangle>
Based on the above, theoretical upper bound of short call and theoretical lower bound of short put has calculated to apply Black-Scholes model. This model can be applied only when d1= ln(S/K)+rt/σ√t+σ√t/2, d2 = d1-σ√t are satisfied. Based on the Black-Scholes model, call and put premium can be computed by the following ways.
・Call premium = S×N(d1)-ｅｰr･t×K×N(d2)
・Put premium = S×{N(d1)-1}-ｅｰr･t×K×{N(d2)-1}
The table below shows the factor of Black-Scholes model.
Staking reward APR was derived after applying Black-Scholes model in the following way.
・Staking reward APR = {{(Call premium + Put premium)/2S}-Total expected return}/Inflation rate on each terms
VII. Let’s start DEP staking!
Time is running out, you can start your DEP staking immediately by acquiring DEP from following exchanges. You can sign up for a PlayMining DEP wallet here to start DEP staking rewards today!
Bittrex Global：https://global.bittrex.com/Market/Index?MarketName=BTC-DEP
INDODAX：https://indodax.com/market/DEPIDR
OKEx： https://www.okex.com/spot/trade/dep_usdt#type=1
Bithumb Global：https://www.bithumb.pro/en-us/spot/trade?q=DEP-USDT
Bitrue：https://www.bitrue.com/trade/dep_usdt
DigiFinex： https://www.digifinex.xyz/zh-cn/trade/USDT/DEP
Uniswap v2：https://app.uniswap.org/#/swap
1inch：https://app.1inch.io/
Sushi：https://sushi.com/
DeFiPie：https://defipie.com/
Loopring：https://exchange.loopring.io/
Anyswap：https://anyswap.exchange/swap
