The cryptocurrency space is filled with so many opportunities to make profits. One of the easiest ways to do this is to stake your crypto asset over a set time in expectation of getting returns. Together with this opportunity that the market provides, it is also important to understand how to use the staking calculator to make qualitative market investment decisions.
What is a Crypto Staking Calculator?
A crypto staking calculator is a calculator specifically designed to estimate staking returns before investment to make informed and calculated investment decisions.
There are many constituents of a crypto staking calculator that you must understand. The calculator takes into account,
- The number of crypto assets to be staked
- The real-time market price of the crypto to be staked
- The projected period of the stake
- The estimated annual percentage yield (APR)
When all of this information has been supplied to the calculator, it then estimates the expected return on investment.
Crypto Staking Calculator Formula
The formula for calculating the expected profit return after staking a crypto asset involves three major components
- Initial Investment (I): This involves the quantity of crypto assets the user wants to stake
- Annual Percentage Yield (APY): this indicates the projected return on investment that the user will likely get over a timespan of one year.
- Timespan (T): This indicates the projected period the user intends to stake his crypto asset.
Considering the components expounded above, we arrive at a mathematical formula to make staking calculations which is Q = I * (1+APY/365) ^ (365T) where we have Q as the overall earning, I as the initial investment, APR as annual percentage yield, and T as the timespan.
For example, If you stake $200 worth of Ethereum (ETH) at 5% APY for 2 years, to calculate your total earnings at the end of two years, you can slot in your initial investment, APY and time values into the mathematical equation.
We’d have Q= 200 * (1+0.05/365) ^ (365*2) = $221
So, your overall earnings after two years on an investment of $200 at an APY of 5% will be $221.
It is important to note that only coins that are built on the proof of stake mechanism can be staked.
Read more: Best staking wallets to stake crypto in 2023
In this comprehensive guide, we have considered staking and how to use the staking calculator. You must keep in mind that the interest rate offered by different cryptocurrencies has a direct impact on the return you generate.
It is also important to keep in mind the security of your asset and prioritize it above the need to stake.