How does the Nervos DAO Annual Yield Rate Work?
How does the Nervos DAO Annual Yield Rate Work?
Yes, it does Compound!
I have seen a lot of conversations on Reddit, Telegram, and Discord surrounding how the Nervos DAO APC is calculated. It’s a common topic, but the materials available are long and complicated, and this has led to some confusion
If you are a math genius, you can view the calculations in the documents below:
https://github.com/CipherWang/Nervos-DAO-RFC/blob/master/APC-Calculation.md
https://github.com/nervosnetwork/rfcs/blob/master/rfcs/0023-dao-deposit-withdraw/0023-dao-deposit-withdraw.md#calculation
The rest of us need a simplified answer, which I’ll explain here.
Once you deposit CKB in the Nervos DAO, you lock those funds using a special smart contract, and you begin earning interest immediately based on the displayed rate.
Many people believe you have to Settle and Withdraw those funds at the end of the month and redeposit to gain compounding interest.
The statement above is false.
When your funds are first locked, nothing really seems to happen. If you look in the explorer, nothing is changing. This is because all the magic happens when you withdraw your funds. The smart contract calculates the following:
When you deposited the funds in the Nervos DAO.
When the withdrawal request was made.
Calculate the rewards and compounding interest for the period.
There is no need to withdraw and redeposit your funds monthly. It is automatically compounded, giving you the maximum possible benefit without doing anything.
Using the Nervos DAO in Portal Wallet and Neuron is a great way to earn interest, but there is now a third option. If you use the NexisDAO to lock your CKB, it will deposit it into the Nervos DAO and mint an equal amount of a special tokens called dCKB at the same time.
You will be able to take these dCKB tokens and deposit them into the YokaiSwap DEX (once it goes live) and use them for DeFi trading and liquidity farming. While you’re doing this, your original CKB is still locked in the Nervos DAO and continues to gain compounding interest. When you are ready to withdraw your CKB, return your dCKB to the Nexis DAO and it will return your original CKB + the compounded interest you accrued.