🤑What APY can you expect?

"APY" is a term often used in crypto for staking, yield farms, and all kinds of other activities that pay you a passive income.

The actual definition of APY involves compounding, but for the purposes of our discussion we'll keep it simple: if you put in 10 SOL today, what % on top of that 10 SOL are you getting back in a year? +1 SOL = 10%, +3SOL = 30%, +10SOL = 100% (aka double your money).

We'll say this upfront: it's kinda difficult to calculate the APY for your market-making order upfront because of the plethora of factors involved. ¯\_(ツ)_/¯

But it's possible to do in retrospect.

A real-world example ✏️

Let's take this order as an example (real order by a real TensorSwap user):

The numbers we care about:

  • They had ~11.5 round-trip trades on their order

  • They charge a 5% market-making fee

  • Their starting price was between 17 and 19

Multiply the 3 and you get 11.5 * 5% * (17+19)/2 = 10.35 SOL. This roughly matches the approx MM profit on that screenshot.

So they:

  • invested ~78 SOL + 5 NFTs worth ~18 each = 168 SOL

  • received ~10.35 SOL,

And thus earned a return on invested capital of 6.1% (10.35 / (78 + 5*18))

Now the question is over what period of time?

  • It seems from the screenshot that the order has been live for ~2d

  • So if the order continued to buy and sell at the same rate for an entire year their APY would be ~1,100% (6.1% * 365 / 2).

Now, importantly there are A LOT OF ASSUMPTIONS baked into that calculation. The main one is that the order will continue to buy and sell at the same rate. What if the market runs away in either direction and the order is depleted? What if traders lose interest in the collection and there are no trades happening?

To ensure your order is set up correctly & that you're getting consistent trades follow the advice in Setting up your Market-Making Order

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