Retire on ADA in 2024
Episode by Peter Bui on December 28th, 2023
Previous Episode on How to Retire on ADA
Previous How to Retire on ADA Podcast Episode and retirement calculator.
A lot of people that get into Cardano and ADA or some other staking protocols got in with the idea and premise of one day they could probably retire on their staking rewards from that particular protocol. And that was one of the reasons why I wanted to start a stake pool in the Cardano ecosystem. But over the last year or so, those staking rewards have slowly diminished and they’ve gone down from that 4% point to about 3.2% now.
or 3.4 on a really good stake pool out there. And this is just a natural way of decreasing that amount of inflation in the ecosystem and it’s part of the protocol, it’s just how it works. A lot of people just didn’t realize that and now if they were trying to retire on that amount of staking rewards, they’re not getting that back. And with the price of ADA where it is at the moment, it isn’t where it should be. And I did a podcast episode about two years ago about this, links down below for you guys.
I think it was about episode 9 of the podcast. It goes back that far, but you can check that one out and learn a little bit more about staking and how staking on Cardano actually works. But let’s have a look at this brand new feature that’s come out from Fluid Token at the moment. And this is Boosted Stake. And the idea behind this is that they’ll give you an extra amount of boosted ADA rewards to bring it back to that 5% mark.
So when you get back to that 5% there’s more of a chance that you could actually retire on the amount of ADA that you actually have, you can accrue more over the years and add to that to try and reach the amount and threshold that you need. Now there are different amounts and values that people may need to reach in regards to getting those staking rewards to be able to retire off. So this here is a retirement calculator that I put together on our old website, cadarnode.com.au. I’ll put links to it for you in the show notes.
but you can put in the variables here and use them to try and work out how much ADA you need to be able to retire off. So here, if we look in the first input box, let’s say we need 100,000 a year to live comfortably here in Australia. And if the price of ADA at the moment is $1, which is pretty close to, it’s 93 cents AUD at the moment. So it’s pretty close to a dollar. This is how much ADA you need per epoch. So that’s every five days.
you need 1000, let’s round it up, 1400 ADA to be able to sell and use that in fiat currency or buy and trade, whatever it is. Now the amount of ADA that you currently require to be staking is 1.8 million ADA. Now for a lot of people, they just don’t have that amount. It’s quite a lot of ADA. Let me just zoom in for you. It’s quite a lot of ADA here. And this is also based off.
a 5.5% percentage return on the ADA state. And of course, like I said, that is now diminished to about 3.2, 3.4. So it’s actually a lot more ADA than you need. Now if we pull up the staking calculator here, this is a staking calculator I put in to check out those variable numbers. So I’m just going to copy this here, the 1.8 million and copy over to the staking calculator. I will just paste that in.
There we go and I won’t add in any more monthly contribution and then I’ll put in the current staking returns, so 3.2. So your potential return here is only just under 800 ADA per epoch and according to our initial calculator here, we need almost a lot more, almost twice that to actually be able to live off. So those staking rewards diminishing really hamper on our retirement plans here.
and let’s play around with boosted staking. So we want that back up to that 5% so we don’t need so much ADA to be able to retire on. And this is where Fluid Tokens comes into play. So they have announced their new feature here, the boosted staking from their platform where you can provide liquidity in the terms of ADA and get that extra return on your ADA on top of that. It’s relatively risk-free because you’re not loaning out your ADA to be spent.
It’s purely being used for delegation in other SPOs or other state pool operators out there. So if there’s an ISPO initial state pool offering, people can borrow that stake, that delegation and delegate your ADA to that particular pool. They earn those extra tokens or whatever it is, and then you get the extra APR back because they will have to pay for that interest on top for borrowing your ADA delegation. So it’s a nice mechanism that they’ve put together.
And I love what the team have been doing with this. And this will push our return back up to that 5% mark so that you can potentially retire on the amount of AD you have. So if we have a look at the protocol itself, this is it here. You have an option of either borrowing the stake. So if you’re a stake pool operator or someone wanting to delegate to a particular pool, you can borrow the stake. Or you can provide liquidity.
in terms of lending out your ADA. So let’s have a look at the borrow staking parameters here. So you do have a minimum amount of ADA that you need to borrow and that’s 10,000 ADA and then the amount of Epoxy you need to define and then that works out the loan APR. So it’s got a 19% APR at the moment which is fairly high and then we have a loan fee. So this is the amount that you have to pay based on that loan APR. So this is an annualized percentage return. So this is the percentage return per year.
and this is the amount based on the five epochs that this loan is going out for. Of course, there’s a little service fee here as well. You can easily get that earned and delegated to one of the other state pools in the ecosystem. Now you may be thinking, is it worthwhile even getting this ADA and delegate it to an ISPI out there? There’ve been many in the past and some haven’t come to fruition and aren’t really worthwhile, but there are some that.
do give you a good return. Those tokens that do go into the ecosystem you can sell and get a better return on your ADA than staking that ADA to a stake pool for the 3.2 API. So there are benefits from this. I did do a video about the latest ISPO’s out there. You need to go and have a look at all those different projects, see the potential of returns on them, what utility the tokens have, the tokenomics and all the other aspects around it to see if it’s worthwhile.
staking to earn those tokens. Some of them are really good so do look into them that that is the whole idea and premise around ISPO’s. These tokens get distributed to the wider Cardano ecosystem and you can buy sell trade them at that point and some have been quite good so do check out that video. Now on the flip side you can also provide liquidity and there is a minimum amount that you need to put in so is 1000 that you need to put in any smaller amount it won’t let you.
10,000 like in the previous example where I’m borrowing 10,000 I can choose the amount of APR. So most people within this pool here if you look further down here most people gone for this around the 19% so someone’s gone in and provided 17,000 ADA at 19% some provided 5,000 at 20% so there’s a varying amounts here some people are asking for a lot more. So here you can change the amount of the APR.
So let’s be reasonable and go for a 7.5 APR. There’s more chance of someone’s going to fulfill this loan. And then choose the amount of epochs that you want to lock in your ADA for. So I’m going to choose 20 here and then you can continue. We’ll do the calculations based on what you need to provide and the amount of APR on this particular ADA. So here we can see the 10,000 ADA, 7.5 and 1% service fee. So you can confirm that, lock in our ADA in the transaction.
and then someone else can borrow that delegation in the future to delegate to a state pool. Now I have to be really clear here about how it works. So you understand that this ADA doesn’t leave the contract and isn’t spent frivolously in the ecosystem. So every Cardano wallet has what’s called a stake key and that stake key can be pointed to another address or another state pool out there without that ADA actually being spent or used.
And this is the power that the guys at Fluor tokens are taking advantage of to be able to provide this type of loan out there. So now this ADA that you’re putting into this particular pool, its state key is what’s being used to point to another state pool in the Cardano ecosystem. So really cool mechanism, absolutely love it. There’s other protocols out there that do this as well. If you check out Optum Finance, they bring out OADA and SOADA.
and I thought that was a really good way of doing it as well. It’s a little bit more fluid in regards to how that one works. And I love that mechanism. So lots of different options in regards to boosting your state and potentially retiring on your ADA. If you enjoyed this episode, please consider giving me a thumbs up, click subscribe, click on the notification bell, lots more Cardano related content coming for you. I’ll see you in the next video. Yeah, gotta do it like that. You’ve been listening to the Learn Cardano.