UPDATE 9/29/2021 - FYI, the Flash pool is at TVL over $15 million. Please be aware that at the current level, expected ILV per day is less than 0.0002 per staked LINK. Watch out for transaction fees exceeding your potential rewards. I also added an APY calculator below. While I do not like APY as a measurement metric, it remains popular and consistently used, so I shared how APY is calculated for this pool.
The latest Flash Pool for Illuvium has been announced and goes live on September 29! Here’s a quick review of what Flash pools are, and a quick calculator to assess if you should participate.
What’s the LINK Flash Pool?
Flash pools are cross promotional staking opportunities where token holders of another crypto project are able to stake their tokens on Illuvium.io to earn rewards. This is a marketing strategy of the Illuvium DAO to attract other crypto communities to the project. From September 29 through October 29, a staking pool will open for Chainlink ($LINK), which can be staked to earn rewards. Past Flash Pools included SNX, AXS, and XYZ.
What is Chainlink?
Chainlink is a Top 15 crypto project, considered an abstraction layer to provide off-chain data to smart contracts. Many projects and Layer 1 solutions apply Chainlink oracles to securely connect smart contracts to external data feeds. Chainlink is connected with Illuvium and other blockchain gaming applications, as one of their solutions is providing verifiable randomness to applications.
What’s different this time?
The biggest change is that the Flash pool will last for four week, rather than the previous pools running for two weeks. This gives a longer opportunity to earn for those participating, though the total number of rewards per day has also decreased. In total, 2% of yield farming rewards for the next month will be committed to the LINK pool. This is a total of a little over 3500 ILV issued as rewards for LINK staking. The rewards are deducted from the typical core pools of ILV and SLP, so these pools will earn a bit less over the next month than if the Flash pool wasn’t running.
What’s the same this time?
Flash pools only run for a limited time, so while the APY may appear quite high, remember you will only earn rewards for about a month. A better estimate is your daily expected rewards, and I have a calculator here to help you understand potential value.
Transaction fees are the biggest impact to small investors, as you will need to pay both a staking and unstaking fee to participate in the pool. Be sure to watch for low gas to minimize this, however at small investments, your rewards may be lower than your transaction fees.
I’ve added a new tab to my Illuvium Staking Daily Rewards dashboard, and updated the sheet to account for the flash pool in core pool rewards for the next month. You can find the sheet here. To access the Chainlink Flash Pool calculator, go to the “LINK” tab.
Walking through the inputs, you’ll need to add the current LINK price, your number of staked LINK, your transaction fees (estimated at $120, depending on gas), a predicted ILV price, the current TVL of the flash pool, and the current ILV price.
Cell B8 will estimate from today how many ILV you can expect at the current TVL. As more people join the pool TVL will increase and rewards will decrease. At the bottom of the sheet, I added a model of expected rewards at various TVL levels from $2.5 million to $40 million. If the pool is extremely popular, I’ll adjust these to add higher estimates.
Columns D and E of the model take either your predicted ILV price or the current ILV price from above, multiply by your expected ILV rewards and subtract your transaction fees to show net value of participating.
Like other yield farming pools for Illuvium, rewards are issued either in ILV, the governance token of the Illuvium DAO, or sILV, synthetic ILV, which is essentially a “gift card” for future use in transactions with Illuvium, such as the upcoming land sale or game play in the future. Each claiming transaction requires you to select only one type of reward, either ILV or sILV.
If you select ILV, your rewards will be moved to the ILV core pool and staked for a 12 month vesting period. During this time, they will earn rewards at the current 2x pool weight, currently around 67% APY.
If you select sILV, you will receive the sILV token immediately for use.
While I do not personally like APY as a measurement technique for rewards in pools such as this, it remains a commonly used metric. For this specific pool, here is how the APY is calculated.
APY = (Reward ILV anticipated today x Current ILV Price x 365) / $ Value of your staked LINK
For example, if you are staking 1000 LINK, the current LINK price is $23.68, the current expected daily rewards are at 0.00018 ILV per LINK per day, and the current ILV price is $485, here is your APY.
APY = (0.00018 ILV/LINK x $485 x 365 ) / ($23.68 x 1000 LINK) = 134.6%
Remember, APY is only a snapshot of your current rewards and is not indicative of the overall expected return. This pool only lasts for about a month. My preferred metric for analyzing return in such pools is rewards per day per staked token. You can calculate that from the stated APY by reorganizing the above equation. This uses the same theoretical 1000 LINK as above.
Anticipated Rewards Today = ( APY x $ Value of your staked LINK ) / (Current ILV Price x 365)
Anticipated Rewards Today = ( 134% x $23.68 x 1000 LINK ) / ( 365 x $485 ) = 0.18 ILV
How APY works for this pool - if the value of your stake increases due to LINK price rising, APY will decrease. If the value of ILV increases, APY will increase. If more people join the pool, APY will decrease. Hopefully that clears up confusion on what APY means and how to use it to calculate anticipated rewards.
Given the limited duration of the pool, I strongly recommend you assess your transaction fees and potential value. I’ll do my best to keep the TVL updated (at least daily) as we evaluate participation in the flash pool.
Disclaimer: This article and video are for educational purposes only and are not investment advice. Do your own research before investing in any project. The author is an investor in both Illuvium and Chainlink.