How are Interest Rates Calculated at Hodlnaut
Presenting one of the most common questions that our customer support team faces - “How are interest rates calculated at Hodlnaut?” To help users understand how interest is calculated, we have put together this guide to answer top questions regarding interest rates. In this article, we will address some of the Frequently Asked Questions related to crypto interest rates at Hodlnaut.
How does Hodlnaut Make a Profit While Paying High Interest?
We lend out the deposited assets received to established and vetted financial institutions that pay an interest rate. Hodlnaut provides attractive interest rates after analyzing the supply and demand of our available crypto assets. The interest offered is subject to market conditions and considers our earnings from previous months.
Hodlnaut takes a small portion of the interest earned from lending and passes the rest to our users. Additionally, we lend out the assets to decentralized protocols and earn interest on it. Partners borrow funds from us to hedge against Bitcoin prices or market-making on their respective platforms/exchanges. They might also approach us for liquidity.
Our current supported assets are BTC, ETH, USDC, USDT, DAI, and WBTC.
To understand interest calculations, it would be helpful to know about APY, APR, and the difference between the two terminologies.
What is APR?
Annual Percentage Rate (APR) is the annual rate that is charged to borrowers and the income earned from investments. It is expressed in percentage and does not consider the compounding of interest within that year.
What is APY?
Annual Percentage Yield (APY) is the real rate of interest earned on a savings deposit or investment, with the inclusion of compounding interest. The more often a deposit is compounded, the faster the growth of investment.
How Does Hodlnaut Calculate the Interest?
The introduction of tiered interest rate structure is to ensure our users receive the best experience on our platform while maintaining sizeable yields. Tiers are calculated on a per asset basis.
Here are some examples of how the tiered interest structure would be calculated in different scenarios:
- If you deposit 0.1 BTC with Hodlnaut: 0.1 BTC will earn 4.08% APY.
- If you deposit 2 BTC with Hodlnaut: 0.1 BTC will earn 4.08% APY, 0.9 BTC will earn 3.25% APY, and the remaining 1 BTC will earn 1.61% APY.
- If you deposit 200,000 USDC with Hodlnaut: 100,000 USDC will earn 7.25% APY, and the remaining 100,000 USDC will earn 5.23% APY.
In the following hypothetical scenario, you deposited 2 BTC on 5 July 2022 (Tues), and the funds are kept on Hodlnaut till 11 July 2022 (Monday) when interest is paid out at 5pm (GMT+8).
*The following calculations are done using APR Interest Rate
Total Daily Interest earned at the end of 5 July 2022 5pm (GMT+8)
= Interest earned from first tier + Interest earned from second tier + Interest earned from third tier
= (4.00%/365 * 0.1 BTC) + (3.20%/365 * 0.9 BTC) + (1.60%/365* 1 BTC)
= 0.0001336986 BTC
Since this is accrued daily, we will have to repeat the same steps everyday till 11 July 2022.
Total interest earned from 5 - 11 July 2022: 0.0001336986 BTC * 7 days = 0.0009358902 BTC
Total assets as of 11 July 2022 5pm (GMT+8) = 2.0009358902 BTC
As shown above, interest earned is calculated daily and compounded weekly. You can utilize our Interest Calculator at our homepage to determine how much interest you will receive.
How Does Hodlnaut Pay the Interest?
The interest is accrued at the end of each day and paid out every week. You can also choose to earn interest in the cryptocurrency you desire with our preferred interest payout feature. The interest is directly credited into your Hodlnaut account every Monday, 5 PM (GMT +8). You will start earning interest immediately after depositing crypto into your Hodlnaut Interest Account. Our interest rates are updated monthly and depend on the market conditions.
Sign-up for Hodlnaut Interest Account
Signing up for a Hodlnaut Interest Account is incredibly easy and takes just a couple of minutes. Visit https://app.hodlnaut.com/signup to create an account with us. You will have to first verify your email and enable Two-Factor Authentication (2FA). As required by the Monetary Authority of Singapore (MAS), you will need to undergo the Know Your Customer (KYC) verification process. After successfully creating your account, you can deposit and start earning crypto interest seamlessly.