Dr. Kelly Snook, a well-respected DeFi "rocket scientist", shares her secrets for thriving in Ark.
by Kelly Snook
The most sustainable approach to any Daily ROI project is with long-term financial security in mind. Such a mindset requires understanding behaviors that will benefit the user individually without harming the collective, and, where possible, contribute to the long term sustainability of the protocol. “Financial Freedom" is a buzzword that can lead to selfish behaviors, encouraging greed and actions that have negative consequences on the entire community. Successful DeFi protocols are designed so that the “rising tide lifts all boats.”
Some ways of thinking are true generally for most Daily ROI Dapps, but ARK also has some unique innovations that call for further shifts in thinking. Generally, these things are true of most Daily ROI protocols:
- They provide paths to overcoming inflation and bear markets by harnessing the power of compound interest
- Compound interest almost always outpaces price action, which rewards patience as an investor and allows investors to remain calm during volatile times in the market
- They establish cash flow leveraging crypto contracts that passively pay a daily return
- They drastically reduce risk without limiting the profit that crypto can offer
- They allow investors to quickly change their financial situation while protecting things that matter most
ARK should not be thought of as a "get rich quick" scheme and there are mechanisms in place to discourage impulsive, destabilizing behaviors. These mechanisms, such as the ability to split daily allocation of available dividends across multiple actions; upper and lower bounds on the ratio of compounding vs withdrawing; and daily sell limits, call for investor behaviors that can be summed up in one word:
The ARK protocol has been designed to encourage very steady and responsible behavior, for which investors are rewarded with predictable and highly lucrative results. The introduction of the Compound to Withdraw (CWR) ratio, coupled with the ability to allocate specific amounts to compound, withdraw, and airdrop in a single action, changes the game and the strategy significantly. This is especially true because of the dire consequences of extreme or greedy behaviors. The complexity of the 14-day rolling CWR calculations means that it is extremely risky to over-withdraw or over-compound. The generous 2% daily rewards that investors see in the beginning can quickly drop forever to 0.5% if one withdraws too much. And one can get stuck in a situation where no action is possible for a long time if a wallet is over-compounded.
These sustainability features call for new practices that refine previous ways of thinking about daily actions, departing from previous best practices of, say, alternating days of withdrawing and compounding or compounding only for days in a row, then storing up some rewards for a few days to withdraw in a chunk. Not only are these behaviors more difficult in Ark because rewards stop after 24 hours, but they also introduce unnecessary risk in violating CWR limits.
Here are a few important elements of the new mindset specific to Ark:
- Don’t push it. Choose a desired CWR based on defined financial goals using the calculator. buy an NFT, if desired, to support a higher CWR. Strive to stay safely away from lower and upper CWR limits.
- Don’t change it. Once a target CWR is chosen, adjust the allocation bars precisely the same way each time an action is taken to reflect that exact CWR. No wild oscillations between all-compound or all-withdraw! If you need to shift strategies, do it VERY SLOWLY AND GRADUALLY over several days, slightly moving the CWR allocations each day until you reach your new desired CWR.
- Set it and forget it. Ark has an extremely advanced auto-allocation feature that works beautifully as long as there is a two-week history of the above steady and responsible CWR allocations. This is a massive time and stress saver.
- Relax on selling. Ark’s innovative custom Liquidity Management Service keeps the ARKFI price nice and steady. This means sells can be evenly paced to stay within sell limits without worry of timing the market.
With all of this said, compared to traditional financial investment tools, initial return on investment (ROI) and a movement into high rates of earnings happen in months, rather than years. Team building can accelerate your return on investment even further, but it is not required for success in the ecosystem.
It can be overwhelming to weigh the different options available when thinking about investing in a protocol like ARK. You might be asking yourself:
- How much money should I deposit, and when?
- What is my optimum Compound to Withdraw (CWR) ratio?
- By when can I earn back my initial deposit?
- How can I maximize the total return on my initial investment?
- When will my investment stop producing earnings (by reaching its max payout)?
- How many wallets should I use?
- What happens to my investment when the price of ARKFI rises/falls?
- How will team building or NFTs improve my earnings? Is it worth it?
For help answering these questions, a calculator is provided. Investors can enter a candidate total ARK deposit amount and experiment with different CWR, team building, and price scenarios. Experience has shown that most people don’t have reliable initial instincts for the power of compound interest. Often, people who are accustomed to crypto trading, or even to other ROI dApps, must do some work to shift their thinking. The calculator can help develop better instincts for long-term decision making.
Before engaging with the calculator, there are three important questions to answer for yourself. Come to the calculator with the answers to these questions already clear in your mind (or, better yet, on paper):
- 1.How much money do I need to make?
- Total over time (example: I need $100K to pay off all debts)
- Per day, week or month (example: I need $5K/month to pay monthly bills)
- 2.By when do I need to reach this goal?
- Total amount (example: I want to have all debts paid by 1 year from now)
- Daily/weekly/monthly income threshold (example: I need to be paying half my rent 2 months from now)
- 3.For how long do I need to make these amounts?
- Example: I need this monthly income to continue for 5 years
- 1.How much money do I need to make?
- Since any wallet can produce the same net earnings, regardless of initial investment, your total earnings will depend solely on the number of wallets you have, regardless of the initial investment amount. Investing more (total) up front earns this goal faster and the speed will be the same regardless of the number of wallets you split it across. Keep in mind, you must have at least ten ARKFI tokens to start each wallet with.
- For a high monthly income amount as soon as possible, this depends mainly on how much you can initially deposit. The initial deposit amount affects how far along you are in the investment’s growth profile when you start. IMPORTANT: It doesn’t go more slowly if you split the investment across multiple wallets. The calculator will make this clear.
- 2.By when do I need to make these amounts?
- Again, although the total amount over time depends ONLY on the number of wallets, so to get a higher total amount eventually, split your investment into more wallets. However, this will NOT get the total amount SOONER. To get the total amount sooner, the only way is to start with a bigger initial investment and/or withdraw earlier and more often. Optimum for the fastest/earliest ROI is to alternate withdrawing and compounding.
- The earlier you can invest, the better, so DCAing in (“Dollar Cost Averaging” - putting a little bit in at a time) is not as powerful in this type of an investment as it would be in trading. However, DCAing out is the lowest risk way to reach your “by when” goals.
- In summary: to get quickly to a high monthly withdrawal amount, put as much as you can up front as an initial investment and alternate withdrawing and compounding.
- 3.For how long do I need to make these amounts?
- This is a much neglected, but equally important part of the optimization. The longer you want to stay in ARK, the more wallets you will need to give them the room they need to keep growing. Otherwise the investment will reach its max payout too soon and you will pay more to cascade to new wallets. Knowing how long you theoretically want to keep this going is key to planning the number of wallets you will need to accommodate this.
OPTIMAL - 1:1 compound:withdraw (CWR = 1.0) - Allocation bars on Dapp set to 50% Compound / 50% Withdraw
Note: This provides the quickest Return on Investment (ROI) and steady flow of passive income every other day.
Scenario: This scenario allows the investor to make back their initial investment as quickly as possible while growing their investment as quickly as possible. If you’re interested in a steady income that lasts a long time, extending the life of each wallet but still growing your income every day, this is the optimal approach. Given your initial investment, the income produced every other day is meaningful toward your financial security.
MODERATELY ACCELERATED - compound:withdraw (CWR = 1.38) - Allocation bars on Dapp set to 58% Compound / 42% Withdraw
Note: This is just below the maximum you can compound weekly without a Legacy NFT
Scenario: This will grow your investment faster than 1:1, which is ideal if you have a smaller amount to invest up front and want to speed things up and don’t need money immediately.
AGGRESSIVE - compound:withdraw (CWR = 4.88) - Allocation bars on Dapp set to 83% Compound / 17% Withdraw
Note: This aggressive compounding schedule requires a Gold NFT.
Scenario: You are not planning to build a team but you would like to grow your investment more quickly than you could without a Gold NFT. This will not increase the total earned from your wallet, but it will accelerate the growth and you will reach max payout earlier, which might be desirable if you are starting small and would like to speed up the point where you could reach meaningful weekly income.
MAXIMUM - compound:withdraw (CWR = 11.5) - Allocation bars set to 92% Compound / 8% Withdraw
Note: This extremely aggressive compounding schedule requires a Platinum NFT
Scenario: You are in a big rush to grow your investment. This is the fastest you can grow it, but you must wait 2 weeks between each withdrawal, so the income will be less frequent. Your wallet(s) will reach max payout as quickly as possible using this strategy. This may not be desirable if price is steadily increasing.
Final Note on CWR Schedules: Other compound:withdraw schedules can be followed but these are proven ROI strategies that fit most peoples' goals.
- 1.Withdraw and sell early and often, but don't withdraw more than you need (best to balance). More people spreading their withdrawals over time will help prevent a big supply shock that will drain the price. The ILC does a great job of smoothing things out, but the more investors are selling smoothly, the longer the ILC can remain sustainable. Large numbers of compound-only wallets create a wall of sell pressure when they max out at the same time.
- 2.Plan your investments in advance so you can be in the Ark Vault as long as you want/need to without placing early strain on the system with maxed out wallets.
- 3.Share your success with others to grow the community
- 4.When you have fresh capital, split it between new ARK wallets and investing in other Ark products that support the ecosystem.
- 5.Don’t hoard claimed ARKFI. Sell right away to DCA and reduce volatile jumps in price.
If everyone is withdrawing and selling along the way, it is much better for everyone and also better for the system. The more people who follow a balanced compound:withdraw strategy, the smoother the growth curve will be and the less early and extreme the stress on the system.
Emphasis on "maxing out a wallet" in previous daily ROI protocols is really misunderstood and is a huge distraction. It causes people to operate in ways that aren't healthy for themselves or the system. If all you are doing is compounding, you are providing exit liquidity for those who are withdrawing.