Compounding Rewards

Auto-compounding refers to the process of no longer having to manually claim and re-stake your staking rewards earned from DeFi (decentralized finance) protocols.

$1000 Principal Compounded Over Time Example

Instead, Blacksail automatically converts your rewards into additional LPs and re-stakes them for you allowing you to compound your rewards exponentially by converting your APR (annual percentage rate) to APY (annual percentage yield) compounded yearly rewards using the compound rate (N).

APY = (1+APR/N)^N-1

Example Calculation:

Let's say you have a 250% APR and the interest is compounded daily, this equates to approximately 1109.35% APY.

1. Divide the APR by the number of compounding periods per year:

Periodic Rate (APR/N) = 2.5012/365 = 0.00685260274

1. Add 1 to the periodic rate:

1+0.00685260274 = 1.00685260274

1. Raise the result to the power of the number of compounding periods:

1.00685260274^(365) = 12.0935117

1. Subtract 1 from the result to get the APY:

12.0935117−1 = 11.0935117 or 1109.35%

So, the APY for an APR of 250% with monthly compounding is approximately 1109.35% APY.