Staking Illuvium ILV - Part 3: Estimating Future Value (Examples updated for new data Aug 28, 2021)

By Deraji | ILVFi | 23 Aug 2021


UPDATED 8/28/2021 - These examples have been updated from their original release due to new data on pool growth over time.  Please refer to my more recent posts and updated calculator to understand the most recent analysis on the Illuvium staking pools.

 

Welcome to part 3 of my series on staking with Illuvium.  In part 1, we looked at how to stake, in part 2 we looked at the different rewards of staking, including earning more ILV, revenue distribution, and sILV for in-game use.  Today, let’s look at the future and estimate how much your ILV stake may be worth over time.

Disclosure & Disclaimer -  I am long ILV, and this is for entertainment and educational purposes only, not financial advice.  The examples presented below include a number of assumptions of growth of the ILV staking pools and value of the ILV token, and are subject to change.

How much will my rewards be worth over time?

If you are staked in the pools, I’ve put together a calculator here that you can use to estimate your total returns over time.  Just enter the pool you are joining (tabs at the bottom - ILV or SLP), the current APY, and your staked amount.  If you’d like, you can also add your price predictions for the token and possible monthly revenue distribution to see a potential vision of the staking value.  Note, this is just an estimate, as the exact reward amount will be based on the popularity of the pools over time. 

Using this calculator will enable you to avoid the mistake I see a lot of people making of just multiplying their initial APY by their staked amount, neglecting the 3% decrease every two weeks and the impact of increasing pool population.  While certainly not perfect, it’s better than just guessing what your ILV investment could be worth over time.

My current estimates are that the SLP will have a 2% volume increase over time as Illuvium gains popularity, and the ILV pool will have a 3% volume increase over time.  These are total shots in the dark, and I’ll continue to track over time and adjust the calculators as more data emerges.  The ILV pool population will also increase over time, as all rewards claimed from the SLP pool are automatically added to the ILV pool. during their vesting period  I plan to share updated versions here and in the calculator, so check back if you have any questions or want to see an updated estimate.

Some Scenarios for Fun (UPDATED 8/28/2021)

Let’s suppose you’re interested in investing $500 in Illuvium.  Likely, your best option is to stake in the ILV pool due to lower fees to both Sushi and Illuvium.  You can expect to pay around $15-25 for your swap to get ILV, and then a bit more to stake that into the ILV core pool.   You manage to snag 1 ILV from Sushi.com and stake it on Illuvium for 52 weeks locked.  Starting at the max APY today (8/28/2021) of 80.25%, after 1 year, you can expect to have earned about 0.278 ILV in interest if you claim your rewards monthly, however, you’ll be paying about $745 in gas fees to do so.  You actually get a better return with less wasted money on gas by claiming every three months.  You’re bullish on the project, estimating a ILV price of $2500 in three years, and thanks to staking, you will be able to claim about an extra 0.283 ILV, making your initial investment of $500 worth over $2458 in three years, net of gas fees.  Beyond just the token value, since you are staked, you are eligible for revenue distribution.  You estimate a $50 per ILV revenue in 2024, meaning you’ll be earning an extra $700 per year in ILV thanks to in-game revenue.  Overall, this would mean a return on investment (ROI) of over 490% in three years, with ongoing income.  Not too bad!

Example 1: Staking $500 in the ILV pool

Moving up a bit, we’ll stay with the ILV pool, and presume you managed to get about 14 ILV tokens at an average price of about $350 each.  Staking that in the ILV pool, your best value is actually to claim rewards using my hybrid claim timing, initially claiming rewards every two weeks for about 6 months, then adjusting to monthly for year, then switching to every three months.  This will cost you about $660 in gas fees over the three year yield farming period.  Across the three years, your initial 14 ILV will turn into around 18.50 ILV.  Presuming the same price predictions as above, at $2500 value in 2024, your initial $5000 investment will turn into $40,000 (after gas fees), and you’ll be receiving an extra $11,000 per year in revenue distribution.  Your overall ROI (not including rev dis) would be over 800%!

Example 2: Staking in the ILV pool

What if you took that same $5000, and decided to be riskier and put it into the Sushi Liquidity Pool, currently rewarding over 600% return?  You get your $2500 in ILV and ETH, pool them on Sushi, and then take them to the SLP core pool on Illuvium.  You receive 1.9 SLP tokens for your pooling.  Your gas fees will be higher than the ILV pool, though again, your ideal claiming frequency is the hybrid 2 model.  Over the course of three years, you’ll spend almost $2000 in claiming rewards.  Your value at the end though will turn you initial 7 ILV and a little less than 1 ETH into about 16.5 ILV, worth a little over $40,000.  At $50 per month per ILV, you also expect to earn almost $10,000 per year in revenue distribution.  Your ROI in this scenario jumps to almost 700%.  Due to the higher gas fees of the Sushi LP - your ROI actually decreases, but your absolute return is higher.  

Example 3: $5000 in the Sushi Liquidity Pool

The only difference between example 2 and example 3 are the pool you decided to join.  Remember, there is a much higher risk associated with the Sushi liquidity pool, including impermanent loss and you should strongly consider your financial situation before taking on any of these risks, though at the current APY, investments are highly rewarded.

For fun, let’s take one more baller example.  You decide to switch to only eating ramen and pour $40,000 into the SLP.  In pooling ETH/ILV on Sushi, you receive 15.2 SLP tokens, which you pool on Illuvium for 52 weeks.  You decide to follow the hybrid 1 claim model, initially claiming weekly, switching in about six months to claiming every two weeks for six months, then every four weeks in August 2022, and finally reducing claiming to every 3 months in July 2023 until the end of yield farming.  At that point, your initial $40k turned into a holding of 130 ILV worth $325,000.  Again, revenue distribution becomes a huge factor, netting you an additional $78k per year at $50 per month per ILV in distribution.  Similar to the absolute ROI of the earlier SLP example, your return is about 700%.

Example 4: Staking $40k in the SLP

To briefly put revenue distribution on scale, recall first that the intent of the Illuvium DAO is to distribute 100% of all revenue generated to staked ILV holders.  This revenue includes all in-game travel fees, shard curing (the means of collecting Illuvial NFTs), a portion of NFT sales and even a percentage of the Ethereum wagered on in-game PVP matches.  Axie Infinity pulled in around $84 million in the month of July.  For the potential 10 million ILV, that would be around $8 per month/token.  One year into staking in the previous example, we anticipate having around 130 ILV, so with $10 per month in revenue distribution, we would be earning an additional $15k per year.  At the end of yield farming in three years, we anticipate potentially having around 646 ILV.  At that point, multiple Illuvium games are expected to be launched, so we'll estimate a monthly revenue distribution of $50 per token, which would be about $500 million per month for the DAO, or $6 billion per year.  For scale, Activision Blizzard reported $8 billion in revenue in 2020 with no NFT or Play-to-earn element.  At $50/ILV, this investor could anticipate a potential annual income of $78k, while continuing to hold the underlying ILV.  Not too shabby.

Each of these are entirely fictional examples, with a number of estimates on my part predicting the change in APY over time with increasing pool participation while also including the 3% fortnightly decrease in rewards from the protocol.  See my future articles for further updates, including a major revision on 8/28/2021 that applied the current pool increase rates.  Download the calculator here and try your own assumptions to see what staking in Illuvium could be worth.

Hopefully this was entertaining and enlightening to see the potential value of early investment in ILV and participation in the staking protocols.  Please do your own research and never invest more than you can afford to lose.  Happy staking and see you in Illuvium!

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Deraji
Deraji

Crypto curious thinker, amateur economist, geriatric millennial gamer passionate about Illuvium. Happy to share my economic and financial assessment of this unique blockchain NFT Play-to-Earn project. patreon.com/ilvfi


ILVFi
ILVFi

ILVFI focuses on the upcoming P2E game, Illuvium, the first proposed AAA-quality video game based on blockchain technology and NFT ownership. We'll focus on both the game play, as well as the in-game and ILV governance token economics.

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