1/ We’re happy to share that the @componentfi team has launched the first iteration of a Yield Token Compounding (YTC) tool built on top of Element finance that you can try today.
Follow the 🧵and find out how a user got 9% variable exposure to $134K by spending $3.4K.
2/ Before we dive into the thread, remember that YTC is the action of a user recursively Minting and Selling their Principal Tokens(PTs) into the AMM to increase the overall quantity of their Yield Tokens (YTs), in result, increasing their yield exposure.
3/ In the current case, the user started off with an initial amount of crv3Crypto: 8.8414.
At a market value of $1,855 per crv3Crypto this accounted for $16,400 ($1,855 x 8.8414).
The Starting Fixed Rate observed on Element’s markets was 3.51% and the Variable Rate was 13.83%.
4/ By using the current YTC simulation tool (new version coming soon!), the user analyzed diff. scenarios.
See how many crv3Crypto tokens the user would spend for each compounding cycle, how many Yield Tokens he would get, and what the expected gain would be in APR and $ value.
5/ The user decided to do a total of 9 Compounding cycles with an estimated variable APY of 9% (earning interest for the next 5 months), the results were:
6/ The entire action was batched and the 9 recursive compoundings were done in one transaction.
7/Below you can see total gains if the average of the variable interest rate of crv3Crypto is 9% at maturity. The upside here is that if the price of crv3Crypto goes up, the gains increase, likewise, if the average variable interest rate of crv3Crypto is above 9%, gain is higher.
8/Here you can see how the final transaction would look prior to execution (including estimated gas costs).
9/ It’s interesting to see how, as users increase the amount of compounding, the fixed rate in Element increases due to the selling pressure from recursive Mint & Sell PT’s.
10/ In the image below you can see the final state Results of the crv3Crypto market after the user’s YTC operation took place.
The Fixed Rates increased from 3.51% to 5.23% and the Principal LP APY increased from ~0% to 3.69%.
11/ If you want to try Component’s YTC tool today you can find more details in their guest blog post on Element Finance’s Medium Publication in the link below!
medium.com/element-financ…
12/ If you need any help, please get in touch! Join our Discord community and ping us in the
# YTC-Tool channel!
discord.gg/XRhQwfrwY8
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