RomeDAO Staking / Bonding strategy guide

Introduction

The staking and bonding mechanisms in RomeDAO are both giving different Return on Investments (ROI). Because of the different moving variables and actions, without doing calculations it is hard to see what you should do to get the best yield for your investment. In the following paragraphs I try to give you an overview and some guidance on how to properly navigate and manage your $ROME tokens.

Staking

The staking process is pretty straight forward in RomeDAO. You stake your $ROME and you get $sROME. This sRome compounds via the dynamic compounding rate and in this way the amount of tokens will grow your investment.

Bonding

Bonding is an entirely different process than staking. When people trade their non-$ROME tokens for RomeDAO bonds, RomeDAO takes the non-$ROME tokens and issues new $ROME tokens as a reward at a discounted market price. With bonding you bring external capital into the closed system of the DAO. This means the protocol creates its own Protocol Owned Liquidity (POL). This is a layer of safety for the token holders in case of a bank run. With POL, a protocol can start generating its own revenue via providing liquidity on the dedicated exchanges. Nearly 100% of the ROME/FRAX pair is owned by the RomeDAO itself. This means every time someone buys or sells $ROME the protocol earns fees.

The best-case scenario for the protocol is external money which enters for the first time into the DAO via bonds. In this case no selling pressure is exerted on the price and the market cap grows via dilution. But that is not always the case. At a specific threshold the ROI for bonding is greater than the ROI for staking your tokens. This means when the bonding discount is high, users will sell their tokens to get favorable bonds, which in turn exerts a selling pressure onto the market and the price goes down. Balancing the advantages and disadvantages of bonding is a delicate thing on which developers keep a close eye. A protocol needs to grow its treasury and does achieve that with bonding, but at the same time, it doesn’t want the bonding rates to be too favorable so that people will sell in masses.

If you want to read more about the basics of bonding and staking you can do this here.

Bond / Stake

Besides the “stake it and forget” strategy there are more strategies. Bond/Stake is a pretty common one. With Bond/Stake you enter a favorable bond and try to claim and autostake before every rebase. But even if you miss the third rebase of the day because you are sleeping or can’t be arsed and you are only able to claim/autostake twice a day this is still a very valuable strategy as I will show you later.

Bond / Stake / Bond

Another more advanced strategy is the Bond/Stake/Bond strategy. This adds another bond onto the Bond/Stake strategy. In this case after 50% of the initial bond is done you unstake your already staked $sROME and enter another favorable different bond. This will maximize bond uptime, which should be the ultimate goal. In theory you could keep doing that strategy infinite times, but bonds—especially good bonds—are limited.

Calculations

To figure out which strategy we should use considering the given parameters, we need to do some calculations. The basic staking ROI percentage right now is at 9.87% for 5 days. This means that 10 staked $ROME would become 25.63 $ROME after 10 Cycles / 50 days. This percentage will most certainly not hold long term, but it gives us a good metric to gauge what strategy we should use at the given moment. This simple strategy has the best “effort to reward” ratio. You just need to stake your tokens and can forget them. In my perspective, people with little time to micromanage their investment this should be their most preferable strategy.

To improve the rewards you get from simple staking, you can and should do the bond/stake strategy if you have the time to manage it. This combines a ~50% uptime of staking with a 100% uptime of bonding. To calculate it we take a bonding rate at 6%, because 6% is a fairly doable bonding rate which is seen quite often. This bonding rate will give you a favorable outlook compared to just staking. You can get away with smaller bonding discounts, but you’ll need to do everything perfectly and look at it isolated (more on that later) it should not be worth the hassle.

This strategy, with perfect execution, will give you an ROI of 12.16% on your ROME. This equals 31.50 $ROME after 10 cycles / 50 days and a Meme APY of 434,308%. The rewards generated with this strategy are 22.90% greater than simply staking your $ROME tokens.

The most rewarding and time-consuming strategy is the Bond / Stake / Bond strategy. You need to hunt at least twice for a good bond in the span of 5 days. This can be quite challenging, especially in the last weeks. I haven’t seen a bonding rate for FRAX or ROME/FRAX LP of 6% since releasing the bonding quests.

With the Bond / Stake / Bond you can score an ROI of 12.89% in 5 days. This an increase of 31.13% compared to simply staking your $ROME tokens. The Meme APY sits at a whopping 697,127%. 10 $ROME become 33.61 after 10 Cycles / 50 days.

The difference between Bond / Stake and Bond / Stake / Bond is only 6.7% at a bonding rate of 6%, but it will become way bigger with higher bonding rates. If you somehow catch a 9% Bond you can achieve a Meme APY of 17,680,613%. Yes 17 million percent. Quite the return on your investment.

Bonding Quest

The announcement of the bonding quest has had quite the interesting effect on the bonding rates. People are bonding massively at unfavorable rates. This means instead of staking their $ROME they are bonding at sub 4.5% discounts to achieve the progress in the NFT quests. This hurts the growth of the amount of their $ROME and they will get outpaced by the protocol. Their motivation seems to be gambling on getting expensive NFTS out of the bonding chests you can get via bonding a set amount. The difference of your $ROME if you bond at 12% ROI versus 4% ROI is nearly 50%. I can’t imagine that the NFTs will make up for this large gap. If you are in it for the NFTs, then consider waiting for good bonds and buying the NFTs on the secondary market.

What you need to consider if you decide on progressing through the bonding quests is how much staking rewards you are willing to sacrifice for the shot at a good NFT and how much that NFT will be worth. If you see bonds at a 5% — 6% this could be worth it and give you a solid ROI. Another thing to consider is the progress you did in the quest line already. If you haven’t got the first bonding quest done with 1,000 Notional bonded, then I think it’s safe to say that you can and should bond at a bit unfavorable rate to get the Juno’s Treasure. The minimal rewards you sacrifice with a suboptimal bond, for example 4%, will most certainly get compensated with the NFT you acquire. The further you progress the harder the decision gets and you should decide for yourself about how big of a gambler you are.

Staking Quest

I can’t tell a lot about the effects of the staking quest yet. Locking 10 $sRome will give you a safe allocation to a war chest. The more $sROME you lock, the better your chances are at rarer items. I can imagine that this could have a positive effect on the discount bonds will give, because a lot of people are locking their $Rome for a long time, but there are so many variables in play it’s hard to make a proper guess.

Summary

From my perspective you should be on the outlook for some good bonds. If you don’t necessarily need them, then try to wait a bit more and don’t jump on bonds >5% immediately. Under no circumstances I would suggest bonding under 4%. This will give you way lower return in the long term. If your Rome stack isn’t the biggest, I would suggest going for the Japhy’s chest or the Pile of Junk; afterwards, you can then lock your (hopefully) 10 $ROME for a guaranteed war chest.

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