This is not financial advice and is for educational purposes only. Please do your own research prior to participating in any investment product.
A few days ago on September 29, 2021, the latest Illuvium Flash Pool opened, enabling participants to stake Chainlink’s token (LINK) to earn Illuvium rewards. You can learn more about the flash pool in my article , and my video below. However, I strongly encourage you to read the rest of this update, prepared on October 1, 2021.
As of today, there are well over 500 people, including myself, who have staked LINK in hopes of earning either ILV or sILV. However, due to the limited time duration (through about October 29), the fixed rewards (about 3500 ILV), and the high pool participation, my current estimate is that nearly everyone who staked less than about $3000 in LINK will lose money. When I say lose money, I mean the transaction fees paid to participate will exceed the expected value of ILV rewards, meaning it would cost less to buy ILV directly rather than attempt to earn via the flash pool. Please strongly consider the best thing for you, and note that it is unlikely that a significant amount of LINK is unstaked to improve the reward situation. My spreadsheet tracking and estimating rewards is available
To participate in the flash pool, you will have at least three ETH transactions requiring gas. First, you will need to enable the smart contract to access your LINK, then pay to stake, and eventually you will need to pay to unstake and claim rewards. My personal experience was the first two fees cost around $60 at 50-65 Gwei. If you are already staked, remember that you do not need to unstake immediately at the end of the yield farming rewards, so consider waiting for quite low gas prices to minimize your costs. Of all the participants so far, the average fee for the first two transactions is a little over $60.
The participants
There is quite a diversity of LINK investments from the participants. The largest investor so far staked over 140,000 LINK (a little under $4 million), while there have been two people who have staked under 1 LINK. Divided by groups, I looked at the number of participants over $1 million, between $100k-$1 million, $50k-$100k, $10k-$50k, $1k-$10k, and under $1k.
The largest block by number was the $1k-$10k at 187. There have been 14 participants staking more than $1 million in LINK. This block represents over 45% of the total LINK staked, with the next 82 participants between $100k-$1 million representing another 40%. As rewards are issued on a per-LINK staked basis, this means 85% of the 3500 ILV are going to these participants. For the smallest participants, those each staking fewer than 38 LINK ($1000), they collectively staked about 0.05% of the pool, and for their efforts, I predict they will split 1.8 ILV across 65 wallets, or a little under $1000 in value, despite already spending over $3000 in transaction fees.
How Many ILV To Expect
As these participants joined to earn ILV rewards, it’s worth taking a quick look at the ILV token itself. Recently listed on BINANCE and Kucoin, there are now more opportunities to purchase the Illuvium governance token on the open market. The primary DeFi exchange pool remains on Sushi. With the token rising with the broader market to over $550 today, I asked myself how much ILV could one purchase with the likely average $120 in fees that it takes to stake and unstake in the LINK Flash pool?
Overall, $120 would be a little over 0.2 ILV at this point, meaning for the LINK pool to be a positive gain over just purchasing ILV on the open market, one will need to earn this amount in rewards. Earning less than 0.2 ILV means the person would have been better off taking their LINK pool transaction fees and just buying ILV. As of tonight, I predict a minimum of 120 LINK must be staked to hit this threshold. There is a possibility this breakeven point will rise in the coming days if participation increases.
Transaction fees matter…A Lot
Examining the transaction data, there were several people at stakes well above 120 LINK that may lose money due to high Gwei when they staked. The highest stake that I current predict may lose money staked over $5500 LINK at a fee of $92. Depending on their unstaking cost, it will be quite close based on current estimates of rewards. As I shared in the introduction, my math points to everyone who staked under 100 LINK may very likely lose money relative to just buying ILV directly.
Please take this as a precautionary tale and really consider any investment and associated fees before jumping in. Always consider an alternative investment that may yield a similar outcome with lower fees. I’m highly passionate about Illuvium and my heart goes out to those who participated in this pool with the intent to increase or gain their first exposure to Illuvium, and strongly hope that you consider involvement in this amazing community and potential future of play-to-earn gaming. However, the flash pools have not been a positive experience for smaller investors. If you’d like to model your expected results, I continue to update my calculator here. Please check out the LINK tab of this sheet.
Thanks as always for reading, and feel free to support my work if you are so inclined. Be safe out there!
