Compounded Rebases

Understanding APY

The APY measures the real rate of return on your principal by taking into account compounding interest. As we have seen with all other OHM forks, the APY has always been set very high. This is unsustainable, and these high APYs are used as a marketing ploy to attract holders once the protocols have launched.

D3 Protocol is not designed to give absurd APYs from the offset. It is designed to give users the highest APY that is possible over the longest time period possible. Part of the sustainability equation has been addressed by adding in our unique [3.3.3.3] tokenomics layer but there may be a way to further increase the sustainability of the protocol by making tweaks to the APY formula.

Understanding the formula for APY

For those of you that do not wish to go deep into the formulas, you can scroll down to understand the end result and benefits in simple terms. The general formula for APY is calculated as follows:

$APY = [1+ (i_{nom}/N)]^{N}-1$

Where;

**inom**is the nominal interest rate and**N**is the number of compounding periods per year

The way this formula translates to D3 Protocol is as follows:

$APY=[(1+RewardYield)^{1095}] -1$

Then **rewardYield **is calculated with the following formula:

$Reward Yield = DEFI_{distributed} ÷ DEFI_{staked}$

To calculate **rewardYield **we must understand **DEFIdistributed**, calculated as follows:

$DEFI_{distributed}= DEFI_{totalsupply}* rewardRate$

Compounded rebases

Given the variables within our control, our solution is to reduce the occurrence of the compounding event (rebases). In doing so we can have a direct impact on the APY straight away, in order to make it far more sustainable. We have tapered rebases over 4 week repeating cycles. The longer you stake DEFI, the more you are rewarded.

Week

Daily Rebases

Annual Rebases

1

2.00

730.00

2

2.25

821.25

3

2.60

949.00

4

3.00

1,095.00

The average rebase over the 4-week period will be 2.46 rebases per-day. Once the 4-week cycle is complete (when daily rebases are at 3), the protocol will reset the rebase amount to 2 for week 5, and begin a new 4 week increasing rebase cycle. This encourages long-term staking of DEFI as individuals benefit from more rebases the longer they hold whilst helping to control inflation.

Last modified 7mo ago

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Outline

Understanding APY

Understanding the formula for APY

Understanding the variables

Compounded rebases