Good evening, today we will be considering the merits of DRIP NETWORK as a possible staking type of investment. This came up after viewing the video "High Yield, High Risk Defi: Drip Finance" on Youtube.
Before I dive into my analysis, let's break down my notes.
deposit/stake action cost 10%
withdraw action cost 10%
converting DRIP back to BNB would cost 10%
at 1:31 he notes that to BE (be profitable) must stake for atleast one month
I have had experience with evaluating schemes like these and I found out the hard way that staking coins in hopes of great profitability will pose a risk similar with all crypto staking where the price of the investment plumets prior to your staking duration. This is similar to the conondrum faced by bond investors where as in hopes of before you can redem the face value, the value of the bond devalues to a point where the interest earned does not break even the initial capital deployed. This investment (if you can call it that), both in characteristic and in risks will be similar to buying penny stocks and hoping the price will go up. This is not a lending model. I say this for two reasons, (1) Unlike other lending platforms, this DRIP community platform offers payout of (the 1% promised interest) in DRIP itself, thus whereas you can recieve regular daily 1% "income" to your overall holdings, you face a possibility of incurring a price reduction risk, it doesn't matter if it is 1% a day if your underlying falls 50%. I illustrate this below with an example of a 10,000 hypothetical investment:
Firstly, you pay a 10% tax meaning 10,000 becomes 7,000 and it is that sum that is compounded onwards. Where from there, DRIP offers 1% compounded annualy
======================================|
Rate=1% |
Compound period = Every 1 day |
Actual T = 12 = 365 days * 1 year |
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The formula then becomes
7,000*(1+(0.01/1))^30
Staking One Month Returning 9434.94 dollars
BE on (cost of staking) in 36 days 10,015.38 dollars 7,000*(1+(0.01/1))^30
Staking Two Month Returning 18,166 dollars
BE on (cost of staking+withdraw) in 47 days 10,056.45 dollars (7,000*(1+(0.01/1))^47)*0.9)
BE on (cost of staking+withdraw+convert) in 59 days 10,072.77 dollars (7,000*(1+(0.01/1))^59)*0.8)
Staking Three Month Returning 17,140 dollars
10% Profitability on Initial Deposit 11,126.60 dollars (7,000*(1+(0.01/1))^69)*0.8)
20% Profitability on Initial Deposit 12,169.01 dollars (7,000*(1+(0.01/1))^78)*0.8)
30% Profitability on Initial Deposit 12,169.01 dollars (7,000*(1+(0.01/1))^85)*0.8)
Few things to note about above, first BE does not occur in 30 days like he erroneously mentioned, nor does it occur in 36 days, as you must take into account an additonal 20% reduction (7,000*(1+(0.01/1))^36)*0.8 to redeem and convert your DRIP earnings back into your currency of choice. So he messed up. Further, remeber that payout of interest and redemption is calculated in DRIP NETWORK's own token, meaning the "profits" could return as significantly less than the model calculations.
You need to return to the website and click "compound" button to stake it for 69 days before you even see a 10% "return", think about it, given the conditions in this volatile enviourment, are you willing to hold for two whole months before you see any positive cash flow?
I would talk about the token holders themselves, but at this point, I'm already talking too much, simply knowing that I need to stake 69 days before I break even, exposing myself to unlimited drawdown risk. I know this will be a absurdly idiotic investment.
Custom Terminology:
BE Break Even
deposit/stake ("stake") action: when you deposit your earnings and initiate staking process
redemption/withdraw ("withdraw") action: when you withdraw your earnings
convert action: when you swap DRIP token back to BNB binance token
Personal Notes:
see 08Mar22(finance-tempwritingpads) for in-depth breakdown
General rule:
drip liquidity order book depth
you must rely on thesevaluation strategies (Google these terms)
how to model portfolio profitability as an option
how to model lending risk and price reduction in currency
For number of holders, use BITTIMES, query bittimes + "name" token
https://thebittimes.com/liquidity-0xfb4BA3d6F0f7302e02a1D0a23BE4b121f48e331B-BSC.html
For liquidity or available supply measures
https://coinmarketcap.com/currencies/probit-token/
