Auto compounding vs manual compounding: Stage 1 — Kogefarm
After my first experiment, where I compared the two auto compounding vaults from Beefy.Finance and Kogefarm, there was the request to compare the vaults vs manual compounding. It wasn’t specified how many manual compounding a day I should check. Therefore I decided for the one that surely doesn’t make you insane: Once a day.
The Experiment begins
For this experiment I staked exactly 0.0000063380128256 BONE-USDC LP on Kogefarm and Polypups Bone Farm for 24h. After that, I withdrew the LP and reward token from the vault and farm. Then I swapped the earned BONE token from the farm into LP and add it to the original staked amount on the farm. After that I compared the outcome.
On the side of the experiment I won’t take note of the staked amount. As the first experiment revealed, the staked amount has no effect on the outcome. Also, I didn’t create any screenshots. In the end, there is everything I’ve done public visible on polygonscan.com. Just sad I can’t provide an APR/APRD/APY comparison now.
Time: Jul-04–2021 16:15:47 UTC
Time: Jul-04–2021 16:15:53 UTC
As already mentioned in the beginning, I just make one compound after 24h. Sure it is bit sensless that way, but it’s for research purposes. Before I dive into the numbers, I will share the transaction logs with you. To not become a big difference, I withdrew from Kogefarm first as they compound every minute at the moment.
Time: Jul-05–2021 16:16:39 UTC
Total LP Token compounded: 0.000006885967485285
Total LP Token received: 0.000006885967485285
Time: Jul-05–2021 16:17:01 UTC
Total LP Token received: 0.0000063380128256 (no surprise here)
Total BONE Token received: 0.087974914636316528
Swap 50% of the received BONE Token:
Time: Jul-05–2021 16:18:01 UTC
BONE spent: 0.043987457445624284 BONE
USDC received: 7.921789
Adding liquidity to BONE-USDC LP:
Time: Jul-05–2021 16:18:25 UTC
BONE-USDC LP Token received: 0.00000052937135785
Summing up the new LP Token from here plus the orignal staked one gives us a total of 0.00000686738418345 BONE-USCD LP Token after 24h with just one manual compounding.
Doing the math
Like in my first article, I will provide you a little oversight for the most important numbers.
LP Token invested per Vault/Farm: 0.0000063380128256 => 100%
LP Token after 24h 1min: 0.000006885967485285
LP Token gain absolute: 0.000000547954659685
LP Token gain APRD: 8.64552778233178840729166984%
LP Token gain after 24h 2min: 0.00000686738418345
LP Token gain absolute: 0.00000052937135785
LP Token gain APRD: 8.35232386579915222568526574%
Formula for APRD calculation: <LP Token gain absolute>*100/<LP Token invested per Vault>
Kogefarm outperformed a single daily compounding by~0.3%. This is in line with my spreadsheet. Btw: Go on and create a copy of it and play with the numbers.
Kogefarm provided 0.2932039165326361816064041% more gains for you in 24h compared to a single manual compound per day. What is missing here are cleary the Gas fee for the matic network itself. Taking them into calculation, the gains would probably slightly be over 0.3%. As long as you can’t compound frequently per hand, stick with Kogefarm. They have very competitive fees. To outperform Kogefarm, you probably need at least 2, better 3 manual compoundings a day. Sure, volatility can be in bad mood for you and force you, to always compound in the deepest dips or highest high you’ve ever seen. Unlikely, but possible. In that case, the result may already flip over or get worse. Luckily, I hadn’t to deal with that.
Kogefarm gives you around 0.3% better APRD than a single manual compound per day. This gap grows per day due to the compounding effect.