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Problems of achieving stable APR

Unfortunately, to get stable and high profitability in the DeFi market, it is not enough just to invest in one protocol, as its profitability will vary. To determine which strategy will be the most effective, to achieve the highest profitability and, at the same time, maintain it, it is necessary to understand what affects this profitability.
The formula for calculating the APR will vary according to the nature of this yield generation. So, for lending protocols, profitability changes occur when the Utilization ratio changes, for DEX protocols when the trading volume changes, and for farming protocols, it is calculated by the formula:
APR = farm_token_price * pool.rewardRate (per second) * 604800 seconds * 52 weeks / f_token_price / pool.totalSupply (of f-tokens)
From this formula, it follows that APR is influenced by the number of rewards, the price of rewards and the TVL of the pool.

Amount of rewards

Often, the number of awards is constant: The same number of tokens is distributed on a block-by-block basis without any future changes until the end of the rewards. But also, there are protocols in which the number of tokens distributed changes over time. To correctly estimate APR and potential future return, this must be taken into account.

Total value locked

The higher the pool TVL, the lower the APR. It is a very important parameter, and OneStake actively monitors and calculates it. It doesn't matter what amount is added to the pool, with static rewards, the APR of this pool will decrease. In essence, this can be called staking slippage. And the more volume is added to the pool, the sharper its APR falls.

Token prices of rewards

If the number of rewards is a static value, then the price of the coin handed out is usually volatile, and it directly affects the final profitability. The higher the price of the coin being handed out, the higher the APR and vice versa.

Diversification vs Sliding

There are two types of staking strategies. Each of them has its advantages and disadvantages.

Diversification between protocols to achieve stable APR

Diversification means investing in multiple protocols with roughly the same returns. For each of the protocols, APR will change (due to changes in the parameters that have been discussed). But since the capital is distributed among several protocols, the final profitability will not be as volatile as when investing in only one protocol. In fact, diversification performs exactly the same function as diversification of assets within a portfolio - to reduce the total volatility of the portfolio, only instead of the volatility of assets in our country, the volatility of APR decreases.
This strategy makes the APR percentage more stable, but the cost is lower yield. Since it is impossible to diversify between several protocols and get an average APR equal to the highest APR in the current market, it will happen that the resulting APR is significantly lower than the maximum but stable.

Sliding between protocols to achieve high APR

Sliding implies the most timely transition from one protocol to another to maintain the highest rate of return. This strategy has a great advantage over diversification in terms of profitability. This sliding between protocols will almost always yield the highest returns, but this is a limited strategy. In the case of large capital, investing in the pool with the current highest rate will result in a significant decrease in APR. Also, if the protocol charges staking or withdrawal fees, this will entail additional transaction costs that will reduce the final profitability.

Conclusion

The most effective strategy will be both diversification and sliding. Diversification is necessary to effectively distribute capital between protocols, so as not to negatively affect the final APR, and sliding is necessary to change the protocols between which diversification takes place in time.

Different types of stablecoins and wrap tokens

Recently, the number of wrap tokens and stablecoins has noticeably increased. It is very good for the DeFi and staking market. Each stablecoin has its separate pool in the protocol with separate rewards that are allocated directly to it. The emergence of new stablecoins or wrap-tokens ensures the emergence of new pools with low TVL but with very high APR.

Consolidation into one pool

But despite such a positive effect on the entire market, it is becoming increasingly difficult for an ordinary DeFi user to figure out how a particular stablecoin works and which one is safe to use. OneStake solves this problem as well.
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