Rejigging APR/APY Calculations 📈
👋 Hey #CrystalCrew! We’ve got some news for you guys! To better align ourselves with the industry standard for APR/APY calculations, going forward we will now be using a block time of 2 seconds per block. This will lead to a noticeable increase in the displayed interest rates and APRs on Crystl.Finance, and is being done to ensure that we stay competitive with what other platforms are doing.💪
These changes will be entirely optical, and will not have any direct effect on returns.
We wanted to bring you a brief article explaining the reasoning behind these changes, in an effort to be as transparent as humanly possible.👍
In this article, we’ll also explain a little bit about the Polygon blockchain, and how APRs are affected by the network’s real-world performance! Let’s begin by understanding some important background information first, and then get into the explanations for the changes being made!😉
Polygon Block Speed
The advertised block speed of Polygon during regular network operation and the industry standard across most decentralized applications for calculating APR/APY is 2 seconds per block. What exactly does this mean?
It means that according to this information, the Polygon blockchain confirms and posts 1 block every 2 seconds. What’s extremely important to note is that blockchains are Peer-to-Peer networks, consisting of multiple computers all working together to confirm transactions and make sure all of the information placed in a block is accurate. In practice, it is completely impossible to achieve a consistent block speed! There are simply too many factors that can delay a confirmation.
The actual speed varies, and you can see for yourself the real time blockspeeds on Polygonscan! The chart available here most definitely shows that there are minute fluctuations in blockspeeds, normally varying between 2.1–2.5 seconds per block. This might not sound like much, but let’s look at the difference in block confirmations over a single year:
- At 2 seconds per block, the Polygon blockchain is estimated to confirm 15,768,000 blocks.
- At 2.3 seconds per block (so a fraction of a second slower) is about 13,700,000 blocks.
This is a substantial difference, with the second example being about 2 million confirmations short. Differences such as this directly impact the returns on Crystl.Finance, as well as all other dApps running on the Polygon blockchain.
First and foremost, it is important to remember that APY/APR calculations on ANY dApp are offered as a courtesy. They are directly reflective of a number of constantly changing factors. In other words, APRs and APYs are not to be taken as exact measures, nor hard and fast rules for calculating returns on investments, but rather — as estimations.
Recently we noticed some discrepancies in the APY calculations on our vaults when compared to the underlying farms that are being vaulted. In some cases, the APY was lower than the APR on the underlying farm. Concerning at first, but later we realised most of these farms are calculating their returns with a block time value of 2.
Thus far, we have been using a conservative value of 2.4 seconds per block for our calculations (the higher end of the average confirmation times). However, now — we have elected to emulate calculations for APRs using a value of 2 seconds per block. This is the same value an overwhelming majority of farms, yield aggregators, and decentralized exchanges use today.
This change will take place in the following couple of days, and is designed to improve the optics of our site. In other words, the interest rates will look more attractive ❤️! It is always best to align ourselves with industry standards, and ensure that we are able to promote our auto-compounding vaults as being able to aggregate yields and offer higher returns in comparison to their underlying farms.
Due to the discrepancies between the way we’ve currently been calculating APRs (which is a far more conservative estimate) versus everyone else (a more liberal estimate), it looks like our vaults pay out less rewards — when in fact, they pay out more (due to compound interest). This is due to the underlying farms using a faster/different block speed to calculate returns than what we currently use.
In order to ensure that we incentivize our vaults as being a better and more convenient way to passively earn income, and attract users to the platform, we’ll be making this change to benefit Crystl.Finance!
We will continue to research features that will give our users clear optics on their realized returns. However, at this point in time, we have to align ourselves with what other platforms are using in order to be competitive.
With technology as innovative and with as wide a scope as distributed computing, there are many challenges to come by when it comes to precise calculations. Until there is a more reliable way to make these calculations, we’ve opted to follow what other successful platforms have done, and as always we are working fastidiously to make sure our platform is able to provide accurate estimates. We intend our efforts to be as transparent about these changes as possible. It’s extremely important to be honest and upfront, as well as to set realistic expectations through educating our beloved community about these subjects.
If you have any questions about these changes, please reach out to us on Telegram!