U can lose money in compounding ur yield

A frame work on how regularly u should compound

Wt do u mean by u can lose money if u compound ur yield?

• Should you compound your yield farming?

• Are u missing out gains or getting rekt when u compound?

• Heres a experiment on when should you compound ur yield farm

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Compounding your LP can be damaging if

• You don't have a lot of capital

• APY is not high

• Gas fee is expensive

📍In this thread

we will go thru formula how to think about compounding and find " theoretical best return "

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👨‍🏫Assuming

• Yield APY is 20%

• Staked Value is 1000usd

• Gas fee to compound 0.5usd

The best is to compound every 65 days

❓So how does the math works?

* Google sheet for u in the end

Let's keep things simple

This is equation has a lot of assumption but it basically it calculates

Your compounded APY based on

• Your Yield in a 1 day

• Your staked amount

• Frequency ( how often u will rebalance )

If we break this down more

basically if

The lower "Yield in 1 day" the less amount of times u likely should compound.

" Yield in 1 day" is

Stake amount*yield/365 / frequency - Gas

So the answser is

rebase every 53 days and ur yield will be

21.39% instead of just 20%! haha

Same case by higher yield

Yield APY is 200%

Staked Value is 1000usd

Gas fee to compound 0.5usd

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I will leave this excel table in the end for u to play around.

but the key rule is

The higher the APY

The More Capital u have

The less gas u have to pay.

Likely u need to compound MORE regularly,

if the other way around u should not compound in case it lowers ur APY

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If u read till here

i want to apologize, this post has no value and insight

because in realistic

Ur APY

is NOT constant

APY is affected by

• trading fee

• farm yield token price

• Farm TVL size

Here's a potato

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I wrote this post because i was trying to find out is my

20% apy wbtc/eth pool

worthy of compound or not.

And i thought u guys mind enjoy knowing

• The higher the APY

• The More Capital u have

• The less gas u have to pay.

Likely u need to compound MORE regularly

---

Actually,

like, comment or dm "gimme dat" to get the google sheet.

let me see how many people actually yield farm but not just read n stay sideline

https://debank.com/profile/0x3af0e0cb6e87d67c2708debb77ae3f8acd7493b5

Hope u enjoyed this meaningless post

feel free to find me on debank

DM me if u have any questions!