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Welcome to part 3 of my series on staking with Illuvium. In part 1, we looked at how to stake, in part 2 we looked at the different rewards of staking, including earning more ILV, revenue distribution, and sILV for in-game use. Today, let’s look at the future and estimate how much your ILV stake may be worth over time.
Disclosure & Disclaimer - I am long ILV, and this is for entertainment and educational purposes only, not financial advice. The examples presented below include a number of assumptions of growth of the ILV staking pools and value of the ILV token, and are subject to change.
How much will my rewards be worth over time?
If you are staked in the pools, I’ve put together a calculator here that you can use to estimate your total returns over time. Just enter the pool you are joining (tabs at the bottom - ILV or SLP), the current APY, and your staked amount. If you’d like, you can also add your price predictions for the token and possible monthly revenue distribution to see a potential vision of the staking value. Note, this is just an estimate, as the exact reward amount will be based on the popularity of the pools over time.
Using this calculator will enable you to avoid the mistake I see a lot of people making of just multiplying their initial APY by their staked amount, neglecting the 3% decrease every two weeks and the impact of increasing pool population. While certainly not perfect, it’s better than just guessing what your ILV investment could be worth over time.
My current estimates are that the SLP will have a 2% volume increase over time as Illuvium gains popularity, and the ILV pool will have a 3% volume increase over time. These are total shots in the dark, and I’ll continue to track over time and adjust the calculators as more data emerges. The ILV pool population will also increase over time, as all rewards claimed from the SLP pool are automatically added to the ILV pool. during their vesting period I plan to share updated versions here and in the calculator, so check back if you have any questions or want to see an updated estimate.
Some Scenarios for Fun
Let’s suppose you’re interested in investing $500 in Illuvium. Likely, your best option is to stake in the ILV pool due to lower fees to both Sushi and Illuvium. You can expect to pay around $15-25 for your swap to get ILV, and then a bit more to stake that into the ILV core pool. You manage to snag 1 ILV from Sushi.com and stake it on Illuvium. After 1 year, you can expect to have earned about 0.5 ILV in interest if you claim your rewards monthly, however, you’ll be paying over $300 in gas fees to do so. You actually get a better return with less wasted money on gas by claiming every three months, or potentially just claiming a reward at the end when you want to withdraw. You’re bullish on the project, estimating a ILV price of $2500 in three years, and thanks to staking, you will be able to claim about an extra 0.5 ILV, making your initial investment of $500 worth over $2600 in three years, net of gas fees. Beyond just the token value, since you are staked, you are eligible for revenue distribution. You estimate a $50 per ILV revenue in 2024, meaning you’ll be earning an extra $870 per year in ILV thanks to in-game revenue. Overall, this would mean a return on investment (ROI) of over 500% in three years, with ongoing income. Not too bad!
Moving up a bit, we’ll stay with the ILV pool, and presume you managed to get about 14 ILV tokens at an average price of about $350 each. Staking that in the ILV pool, your best value is actually to claim rewards monthly, incurring about $1400 in gas fees over the three year yield farming period. Across the three years, your initial 14 ILV will turn into around 24 ILV. Presuming the same price predictions as above, at $2500 value in 2024, your initial $5000 investment will turn into $52,780 (after gas fees), and you’ll be receiving an extra $14,000 per year in revenue distribution. Your overall ROI (not including rev dis) would be over 1000%!
What if you took that same $5000, and decided to be riskier and put it into the Sushi Liquidity Pool, currently rewarding over 600% return? You get your $2500 in ILV and ETH, pool them on Sushi, and then take them to the SLP core pool on Illuvium. You receive 1.9 SLP tokens for your pooling. Your gas fees will be higher than the ILV pool, though again, your ideal claiming frequency is monthly. Over the course of three years, you’ll spend over $2000 in claiming rewards. Your value at the end though will turn you initial 7 ILV and a little less than 1 ETH into about 80 ILV, worth just under $200,000. At $50 per month per ILV, you also expect to earn about $47,000 per year in revenue distribution. Your ROI in this scenario jumps to almost 4000%.
The only difference between example 2 and example 3 are the pool you decided to join. Remember, there is a much higher risk associated with the Sushi liquidity pool, including impermanent loss and you should strongly consider your financial situation before taking on any of these risks, though at the current APY, investments are highly rewarded.
For fun, let’s take one more baller example. You decide to switch to only eating ramen and pour $40,000 into the SLP. In pooling ETH/ILV on Sushi, you receive 15.2 SLP tokens, which you pool on Illuvium for 52 weeks. You claim rewards weekly, and at the end of the yield farming period, your initial $40k turned into a holding of 646 ILV worth $1.6 million. Again, revenue distribution becomes a huge factor, netting you an additional $387k per year at $50 per month per ILV in distribution. Similar to the absolute ROI of the earlier SLP example, your return is about 4000%.
To briefly put revenue distribution on scale, recall first that the intent of the Illuvium DAO is to distribute 100% of all revenue generated to staked ILV holders. This revenue includes all in-game travel fees, shard curing (the means of collecting Illuvial NFTs), a portion of NFT sales and even a percentage of the Ethereum wagered on in-game PVP matches. Axie Infinity pulled in around $84 million in the month of July. For the potential 10 million ILV, that would be around $8 per month/token. One year into staking in the previous example, we anticipate having around 550 ILV, so with $10 per month in revenue distribution, we would be earning an additional $66k per year. At the end of yield farming in three years, we anticipate potentially having around 646 ILV. At that point, multiple Illuvium games are expected to be launched, so we'll estimate a monthly revenue distribution of $50 per token, which would be about $500 million per month for the DAO, or $6 billion per year. For scale, Activision Blizzard reported $8 billion in revenue in 2020 with no NFT or Play-to-earn element. At $50/ILV, this investor could anticipate a potential annual income of $387k, while continuing to hold the underlying ILV. Not too shabby.
Each of these are entirely fictional examples, with a number of estimates on my part predicting the change in APY over time with increasing pool participation while also including the 3% fortnightly decrease in rewards from the protocol.
Hopefully this was entertaining and enlightening to see the potential value of early investment in ILV and participation in the staking protocols. Please do your own research and never invest more than you can afford to lose. Happy staking and see you in Illuvium!
