APR on CUB has been bleeding every day since the day it was launched: and for good reason. Every coin that gets minted reenters one of the three farming pools and increases competition in these pools, pushing the APR down with unavoidable persistence.
At over 1000% a year, this yield is still insanely good and unsustainable. I'm making $1000 of magical internet money every day as long as the price holds (big if) and liquidity remains intact. But truly, how unsustainable is it? What can we expect long term?
Well, CUB mints about 1M coins every 5 weeks, but these first two weeks were ramped up and count as 5. On Monday, inflation and yield will be cut 50% from 2 coins per three second block to 1 coin. We're about to see how many weak hands are left to be flushed after this extreme hype is over and the APR's crash further back to Earth.
If we were at the base inflation level, current APR in the main pool would be around 500%. By the time Monday actually rolls around I'm expecting more like 400%-450% from increased competition.
After that we might expect APR to get reduced by 50% every time the supply of CUB gets doubled. That'll take 5 weeks after Monday, reducing the APR on the main pool to around 200% I'm guessing.
5 Weeks at 200% APR stilly sounds pretty damn good if you ask me. That is especially true if the price of CUB catches a bid to the upward direction, as this will increase APR in the farming pools by a proportional amount (100% proportions in non-cub pools, 50% in the CUB LP pools due to underlying collateral being worth 50% more than the new yield increase).
Once we get to that 200% APR level in 5 weeks, it would take 10 weeks after that for total coins to double again: a reduction to 100% APR... theoretically if token price is stable. That's 15 weeks of farming with yields that are absolutely unheard of in the legacy economy. Impossible even. Welcome to crypto.
15 weeks is a good chunk of time, and if Khal launches new functionality by then (he will) and if the token price is higher than $3.50 (it will) then APR will still be higher than 100% in the main LP pool even four months down the line.
APY
Assuming an average APR of 200% over the next 15 weeks, that's still 77% gainz if we compound the farm until then. Again, if $3.50 can be assumed to be a stable price (or undervalued), that's a legendary return for a four month period, and Q2 is likely going to be very good for the alt-market.
Considering many users are publically declaring they will support the $3 level, I'd say it's a safe bet we aren't going much lower than that.
What about LP farm?
It's also easy to overlook the farm we are getting from Pancakeswap LP tokens themselves. That's because the yield on basic LP farming is so tiny compared to the CUB bounty smart-contracts. However, it is there!
0.17% of all money sloshed around the pool gets trapped in the pool and distributed to all LP token holders. CUB got a listing on https://coinmarketcap.com/currencies/cub-finance/ today, and already we see high volumes of up to $500k a day... which is 25% of the total pool itself... being traded every day. Legendary volume.
Doing the math for myself is interesting. I own like 1% of the LP tokens in the pool... 1% of 0.17% of $500k comes out to $8.5 dollars a day. It's not much, but it is something, and this is a yield that many users aren't even going to know exists. It's just there in the background giving free gains to everyone farming the big pools. Imagine $250 being deposited into your bank account every month and you had no idea where it was coming from. It's kinda like that.
Future
Will we have 1000% APR a couple months from now? No... but that hardly matters. Especially in crypto where it's the base token price that matters the most. This community learned that the hard way in 2018. And 2019... and 2020. ROI doesn't mean much when the underlying token price bleeds out.
Regardless of the FUD, it's pretty clear that CUB will continue to have good returns for months even if zero functionality is added to the protocol. As we all know Khal moves pretty fast on these things, and I see no signs of slowing down: only more airdrops and rapid agile development.
Posted Using LeoFinance Beta
Return from How Unsustainable is CUB Yield? to edicted's Web3 Blog
