Gero Token : Calculations about Gero’s future APY -> !! 91% APY !! ??
Idea about how to calculate the former rewards you get from owning and staking Gero token
This article is about my idea how to calculate the former rewards you get from owning and staking Gero token https://gerowallet.io/. The Gero wallet will be the one-stop-wallet to use when smartcontracts on Cardano go live and Cardano unfolds it’s whole power and gets it’s real use. An event where hundreds of thousands of people are waiting for right now.
The Gero token will among others be used to pay different services connected to the Gero wallet, DeFi for example, or premium features. On the other hand, owners of Gero token will be able to stake their token to participate from the fees other users pay to use premium features of the wallet.
Before we digg in deeper, just a short disclaimer: Nothing in this article is a financial advise. Everything is for educational purposes only. Please do your own research.
Calculation of the APY:
Goal & Data
What I try is to form an idea of a calculation to estimate how much APY you get on your Gero token if you buy Gero at a certain price. I will use some assumptions, as we simply somehow have to estimate some datavalues. That leads to the fact that the calculation is everything else than precise, but please form your own opinion on my assumptions and if you think these assumptions are clever or not.
What data do we need?
[A] The Gero price
[B] How much Gero is or will be in circulation
[C] An estimation on how many Gero will be staked to participate in fees
[D] An estimation on how much fees will be generated per day by wallet users using payed features
Lets fill in the data
[A] = 0.306539 $
Source : www.coingecko.com , 28.05.2021 18:06 UTC
[B] = 83,448,337 Gero currently in circulation
Source : www.coingecko.com , 28.05.2021 18:06 UTC
[C] = 50%
Our goal is to get a realisitc estimation for the APY. We are not here to make a calculation which says everything will moon. From the mathematical view a higher percentage means that the APY will be lower. That is easy to understand, because lets say there are 100$ fees collected one day, it is easy to calculate that you get 1$ per Gero if 100 Gero are staked in total and only 0.5$ if 200 Gero are staked.
So lets be pessimistic and take a high value for this percentage in the beginning: 50%!
Remark: 50% is totally unrealistic in my opinion. Never ever I would think it is realisitc that 50% of all tokens will be staked! In my opinion this will be a much much lower percentage, because many many token will be on wallets of users who buy and sell them for price specualtions, many many token will be in Gero wallets waiting to be used to pay premium features, many Gero tokens lie inside Uniswap V2 and Uniswap V3 liquidity pools (6.5 million at the time of writing, which is about 8% of the circulation supply!), and one day many many Gero token will be inside some centralized exchanges when Gero gets a listing and last but not least, Gero will be listed in Cardano’s very own decentralized exchange called CSWAP.
[D] = 637,444 * 0.05$ per day = 31872.2 $ per day
Where do these numbers come from? [D] is very difficult to estimate. What I have done is that I checked how many followers Cardano has on Twitter. That is 637,444 followers at the time of writing.
The “0.05$ per day” is just an idea, nearly out of nowhere. But we need a value, so I tell you about my thinkingprocess: For my last transaction on Uniswap I payed about 36$ transaction fees. I think the most of the users in the cryptospace already did one transaction on uniswap already, what means for everyone it was ok to spend 36$(what is low price actually) for a single transaction. So if you only spend on average 0.05$ per day to use some special features in the Gero wallet you end up with about 36$ if you use it for 2 years. => If for everyone it was okay to pay 36$ for a single transaction on uniswap, it will be okay for everyone to pay 36$ to use Gerowallet for 2 years. That is what is behind the 0.05$
Remark: You do NOT have to pay a daily fee to use Gero wallet. 0.05 $ per day is only the average per day you get if you spend about 36$ over 2 years.
Ending up, I assume that every follower of Cardano on Twitter will use Gero wallet and spend 0.05$ per day on average as fees for special features in Gero.
That means you multiply the number of users with the average fees per day one user will spend.
I think you can rate the resulting number as pessimistic again, as I think that Gero will be the one and only wallet on Cardano users will use in the long term. And to underline the pessimistic rating even further: I guess it is clear for everyone that there will be a lot more users on Cardano when the smart contracts are ready than there a followers on Cardano’s Twitter just right now.
Lets do the final calculation!
To get the APY you do the following calculation :
[B] * [C] = 50 % * 83,448,337 = 41724168.5 Gero = [F]
That is how many Gero will be staked for participating from fees.
[F] * [A] =41724168.5 Gero * 0.306539 $ = 12790084.88 $ = [G]
That is the total worth of these Gero tokens if bought for 0.306539$ per token
[D] * 365 = 11633353.0 $ [H]
That are the fees collected in one year.
And the final step:
[H] / [G] = 0.9095.. ~= 91%
Wow! 91% APY even with pessimistic values!!
That would be to good to be true. But if all the above numbers and assumptions are correct, this is the truth.
The calculation is correct. I wrote everything down in very very small steps so that you can confirm that it is correct.
Remark: In the following I share some of my thought as well as I play around with some of the values. It is written not as structured.
Lets bring that 91% down!
What is the biggest problem in the calculation? It may be the 0.05$ per day. That is the one piece of data which is the most unclear one for me.
If it would be only 0.01$ collected fee per user per day we would end up with about 91% APY / (0.05$ / 0.01$)= 18.2 % APY, if you would have bought for 0.306539 $ per Gero.
But to be honest, 0.01$ as collected fees per user per day feels like a joke! Much to low in my opinion. But nevertheless. Lets play on with this 0.01$ and turn our other very pessimistic into somthing more optimistic. Lets turn the 50% for the staked tokens into 25%, and lets (only) double our 637444 users to 1274888 users. Now we have doubled two times, meaning we get to 18.2% APY * 2 * 2 = 72.8% APY. That’s very great again :-)
But now lets get serious
What really brings us down long term will be the “tokens in circulation” QQ
These will be 500,000,000 million Gero one day, meaning that we get a factor of 500,000,000 / 83,448,337 = about 6.
That would tear down our 91% to 91% APY / 6 = 15.16% APY.
That is still a good good value!!
And dont be sad, because:
# In short term the tokens in calculation will only be about 283,000,000 when the token from the private sales get released within TGE + 3 to 12 month at a daily rate
=> the factor from above will be <6 => calculated APY goes up!
# Tokens will get lost: Users die, keys get lost, maybe token burn occurs some day
=> lower ammount in circulation => calculated APY goes up!
# The values for our calculation were pessimistic and unrealistic
=> more optimistic values turn out to be true => calculated APY goes up!
My conclusion :
15.16% APY was our lowest estimation, which is still very good for literally doing nothing than buy, wait and stake (when finally possible in the future) to generate a monthly income.
Another thing regarding the Gero price itself:
Probably the APY will be much higher than 15.16%. Let us just assume the APY turns out to be 91%. Or 51%. Or only 30%.
What will happen to the Gero price? It will go up and up because people want these high APYs! Then at a certain point the price will stop going up, because if you buy for a higher price, the APY is not as good anymore. But if you bought early your APY should be great and you have the option to sell your token for much much higher price than you bought :-)
Summarizing all these thoughts, Gero is heavily heavily undervalued in my opinion. Even IF we should encounter another multi-year bearmarket (what I do not think will happen!), Cardano will survive, 100% sure, and so will Gero. If not this year already anyway, then when the world has massadopted crypto, everything will pay off.
Wise word at the end:
There was a point of time when INTERNET was only used by 1% of all humans, today its is 60%. Crypto is now used by 1% of all humans. What do you think will happen next?
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