Compound interest is debated as the most important component of wealth-building. And Auto-compounding means that rather than having to manually re-stake your MTP every so often in order to get the best APY, our protocol will do that for you.
What is compound interest?
Warren Buffet once famously said that his wealth came from “a combination of living in America, some lucky genes, and compound interest.”
Albert Einstein is widely credited for saying that “compound interest is the most powerful force in the universe. He who understands it, earns it; he who doesn’t, pays it.”
Compounding is the process in which an asset’s earnings, from either capital gains or interest, are reinvested to generate additional earnings over time. This growth, calculated using exponential functions, occurs because the investment will generate earnings from both its initial principal and the accumulated earnings from preceding periods. Compounding, therefore, differs from linear growth, where only the principal earns interest each period.
For example, say you have $100 in a savings account, and it earns interest at a 10% rate, compounded annually. At the end of the first year, you’d have $110 (100 in principal + 10 in interest). At the end of the second year, you’d have $121 (110 in principal + 11 in interest). At the end of the third year, you’d have $133.10 (121 in principal + 12.10 in interest). And so on.
In other words, with compound interest, you earn interest on interest.
How quickly your money grows depends on the interest rate and the frequency of compounding. Interest can be compounded daily, monthly, quarterly, annually, or hourly, in the case of DeFi.
The formula for the future value (FV) of a current asset relies on the concept of compound interest. It takes into account the present value of an asset, the annual interest rate, the frequency of compounding (or the number of compounding periods) per year, and the total number of years. The generalized formula for compound interest is:
FV=PV×(1+i)^n
Where:
FV=Future value
PV=Present value
i=Annual interest rate
n=Number of compounding periods per year
Compounding is crucial in finance, and the gains attributable to its effects are the motivation behind many investing strategies.
Now, you get the basic idea of compound interest but you don’t have time to manually re-stake your assets monthly, daily, or hourly. No worry, MetaPoo had your back.
MetaPoo Auto-compounding DeFi
Auto-compounding strategies help an investor automatically earn optimized yields through a target platform strategy.
How does it work? The users’ funds are first deposited into a target vault or staking pool. The target platform utilizes yield-optimizing strategies to enhance returns which increases the value of deposits. They also reward depositors with native tokens then auto-compounds again for additional returns.
But keep in mind that no investment, whether in DeFi or the physical world, is truly risk-free.
Users benefit from convenience and automation by removing the manual aspect of compounding rewards thanks to target platform auto-compounding.
One more thing, users should note that high APY farming is inherently risky.
With MetaPoo, when you stake LP tokens in our vaults, our smart contract deposits them into the underlying farms for their reward tokens, which then automatically harvests and compounds into more LP tokens for you.
Unlike the other services, we don’t charge their high fees which can negate the benefits of auto-compounding.
This is to provide users with the best staking experiences, maximize the efficiency of users’ investment.
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