MUT is a game token of Muterra - a retro style RPG game on Hive. A few weeks back Muterra announced airdrop and staking rewards to people holding Muterra NFTs. The rewards are being distributed every day to the players. Many people would have already calculated the returns on MUT staking rewards. I thought I should share the calculation and more details on the same.
Before we start with the rewards, we have to know that compound interest is the 8th wonder of the world and many people under estimate the power of coumpounding. Here is an amazing video that explains how compound interest is powerful.
Now that we are done watching that video. I would like to show how the MUT staking rewards work. The staking rewards is not a constant value every year. Only the first year gives more staking rewards and later it will gradually reduce. It is an assumption that early birds get more pray. If investment is done now, the rewards will be higher. It is not like later the rewards will be low but later there will be more usecases for MUT and other ways to earn MUT.
1st year - 0.925% per day
2nd year - 0.3% per day
3rd year - 0.2% per day
4th year - 0.15% per day
5th year - 0.1% per day
Based on the above data, we might think that the APY for the first year would be 0.925 * 365 = 337.625%. This is the simple interest calculation. But if we compound the interest by assuming that the players can stake more MUT tokens as and when they get it, the calculation becomes like this. Imagine the player is starting with 100 MUT tokens as their balance. now the 0.925% is applied on that MUT token and the reward is given every day. Let's assume that staking reward is also again staked.
I used this website to calculate the returns. So a 100 MUT staked will become 1958.98 MUT in one year if you stake the staking rewards earned every day. This gives the APY as 1858.981% compared to the 337.625% that we would otherwise be getting if it was just a simple interest. Below is the yearly breakdown of what would happen for the above calculation.
In addition to the staking rewards, there is going to be airdrop as well and if we stake the airdrop, the overall staked MUT value towards the end of the years would be even higher.
MUT is going to be one of the important things for playing Muterra. The reason being, there is a lot of MUT required to level up the cards and improve the gaming expeirence. There will be perks inside the game that can be unlocked by burning MUT tokens. It is wise to accumulate lot of MUT tokens now itself when there is still opportunity.
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