How often you should re-invest staking rewards to efficiently maximize compound interest - a DOT case study

If you're staking your DOT with Tasliman, you're earning a solid 15.4% APR on your investment. That's a great return, but there's even more you can do to maximize your gains: reinvesting your staking rewards.

When you earn staking rewards, you have a choice to either take them out or reinvest them into your staking pool. By reinvesting your rewards, you can take advantage of the benefits of compound interest, which means you earn interest not only on your original investment, but also on the accumulated interest.

But how often should you reinvest your rewards to optimize your returns? It turns out that the optimal frequency of reinvestment depends on a few factors, such as the amount of DOT invested, the interest rate, the compounding frequency, and any fees associated with reinvestment. For staking DOT with Tasliman, assuming daily compounding and a reinvestment fee of 0.012081523 units, I found that if you have at least 300 DOT, then you should be reinvesting daily.

Here are the optimal days for reinvestment for various staking amounts, assuming daily compounding and a reinvestment fee of 0.012081523 units:

10 DOT: Monthly reinvestment is optimal, which means you should reinvest your staking rewards once per month to maximize your returns.

50 DOT: Weekly reinvestment is optimal, which means you should reinvest your staking rewards once per week to maximize your returns.

100 DOT: Every 3-4 days is optimal, which means you should reinvest your staking rewards every 3-4 days to maximize your returns.

300+ DOT: Daily reinvestment is optimal, which means you should reinvest your staking rewards once per day to maximize your returns.

Of course, these optimal days for reinvestment are based on a number of assumptions, and your individual results may vary depending on the specific details of your staking arrangement. Nevertheless, these guidelines can serve as a useful starting point for determining the optimal frequency of reinvestment for your DOT staking rewards. If you have less than 300 DOT staked, it may be more optimal to reinvest your rewards less frequently, such as weekly or monthly. Ultimately, the best approach will depend on your individual goals and preferences. Happy staking!

Example, showing increased return (although pretty nominal) Here are the estimated returns at the end of each period, assuming an initial investment of 500 units:

----Daily reinvestment: After one year, you would have approximately 659.97 units, which represents a total return of 159.97 units over the course of the year.

----Weekly reinvestment: After one year, you would have approximately 657.91 units, which represents a total return of 157.91 units over the course of the year.

----Monthly reinvestment: After one year, you would have approximately 655.08 units, which represents a total return of 155.08 units over the course of the year.

As you can see, reinvesting your staking rewards on a daily basis results in the highest return, followed by weekly and monthly reinvestment. However, the difference in returns is relatively small, with daily reinvestment providing only a slightly higher return compared to weekly and monthly reinvestment.

TLDR: If you're staking DOT with Tasliman, reinvest your rewards to maximize your returns. Daily reinvestment is optimal for staking amounts of at least 300 DOT, while less frequent reinvestment may be better for smaller amounts.