Since there is a growing number of PoS coins/tokens, with indicated interest APY, I would like to clarify for beginners what Interest / Compound Interest is, and how one can use it in their own best interest, to improve their earnings through PoS coins/tokens, but not to overwhelm with two much work around what should be passive earnings
first thing first - let us take for example a 100% APY, which is not realistic at the moment, but should be useful to show what is the best frequency to compound interest
what is compound interest - it is when you take your interest in some time intervals (weekly, monthly, yearly) and add it to your initial stake for interest
for example you have 1000 USD in your stake, on a yearly level, with 10% interest APY, and than after a year you earn 100 USD add it to your initial stake and put 1100 USD for another year, instead of spend this 100 USD, and leave just 1000 USD as initial stake
what could be seen on a image is when you invest and compound interest in ten years, it is good enough option to compound even on a yearly level, have good enough interest above just putting initial stake, with more frequency adding lower amount to initial stake
when speaking on a yearly level, if you put your stake with 100% interest, having following gains:
- just putting with 1000 USD - will give you 2000 USD at the end of the year
- having monthly compound (12 times a year) - will give you 161% interest in the end - having roughly 2610 USD at the end
- having weekly compound (52 times a year) - will give you 169% interest in the end - having roughly 2690 USD at the end
- having it daily/constantly in the end - will give you 171% in the end - or roughly 2710 USD at the end
it could be seen that compound more than on a monthly level is getting more work with not so good difference to monthly level, and if you introduce some transaction fees, it could actually be lower than, due to transaction fees on the network
EXAMPLE
one example for Zilliqa project, with current annual yield at roughly 20% for Zilliqa, then you have following for 1000 USD:
- without compound 1200 USD at the end
- with semi-annually (two compounds ) - 1210 USD
- with monthly (12 compounds) - 1219 USD
- with daily compound (365 compounds) - 1221 USD
it could be seen that even monthly is too be considered as high effort for small difference, and daily will even put you in minus with all transaction fees
edit:
as @BrewMaster pointed out, this analysis did not consider price changes for underlying asset (coin/token), because primary goal was to provide optimal number of compounds in a given period
Disclaimer: this is not a financial advise, do not take this as advice for buying Zilliqa at any point