How to use it
- Enter your position size in CAD and the reward APR as a percentage.
- Enter the CAD cost of one claim-and-redeposit, including every transaction it needs.
- Set the number of days to model.
- Compare the end values for each claim frequency.
- Note the suggested frequency, then rerun with a higher fee to see how sensitive it is.
Why more compounding can leave you with less
Compounding helps because rewards start earning rewards of their own. In DeFi, though, rewards often sit in a separate balance until you claim them, and claiming and redepositing are on-chain transactions with a fee. That fee is a fixed CAD amount, while the benefit of compounding grows with the size of the position. On a small position, frequent compounding can cost more than it earns.
This calculator answers a narrow question: with a fixed cost per claim, how many times a year should rewards be claimed and redeposited to end with the most value? It checks every whole number of claims from 1 to 365 a year and compares each with not compounding at all.
How the model works
The year is divided into n equal intervals. During each interval the position earns simple interest at APR ÷ n; at the end of the interval the reward is added to the principal and the claim cost is subtracted. The number of claims over your period is the number of completed intervals, floor(n × days ÷ 365). Any leftover days earn simple interest with no final claim.
The no-compounding baseline earns simple interest on the original amount for the whole period and is not charged a claim fee. In practice you would still pay at least one fee to collect rewards at the end, so the baseline is slightly flattering. If fees ever exceed the balance, the model stops at zero.
Worked example
Illustrative inputs: a $5,000 position, 12% APR, a $5 fee per claim and 365 days. With no fee at all, daily compounding would end the year at $5,637.37. Once each claim costs $5, the picture changes completely.
Three claims a year come out highest, beating no compounding by only $8.71. Daily claiming spends $1,825 on fees and finishes $1,901.30 behind. With the same rate and fee, a $50,000 position ends highest with nine claims a year ($56,282.68), while a $1,000 position ends highest without compounding at all ($1,120.00). Because the fee is fixed, position size drives the answer.
| Claims a year | Value after 365 days | Versus no compounding |
|---|---|---|
| 0 (no compounding) | $5,600.00 | — |
| 1 | $5,595.00 | −$5.00 |
| 3 (highest) | $5,608.71 | +$8.71 |
| 4 | $5,606.63 | +$6.63 |
| 12 | $5,570.71 | −$29.29 |
| 52 | $5,360.80 | −$239.20 |
| 365 | $3,698.70 | −$1,901.30 |
What the optimal frequency depends on
The optimum depends on the ratio between the fee and the reward earned in each interval. At the same $5,000 and 12%, a $1 fee moves the optimum to six claims a year ($5,624.50), and a $20 fee makes not compounding the optimal choice ($5,600.00). Network fees can change many times over within a day, so a schedule chosen in a quiet period can be wrong during a busy one.
The model holds the APR constant. Reward rates in DeFi are usually variable and often decline, which shrinks the benefit of compounding while leaving the fee unchanged. It also assumes rewards are paid in the same asset as the principal. If they are paid in another token, each claim may also need a swap with its own fee and slippage; the gas breakeven calculator handles those costs.
Record-keeping in Canada
Each claim is a transaction you may need to record. CRA's records guidance asks crypto-asset users to keep the date and time, the number of units, the CAD value at the time, the nature of the transaction and the wallet addresses involved, and to keep records for at least six years from the end of the last tax year they relate to. More frequent compounding means more entries.
How rewards are taxed depends on your circumstances. See staking income for how reward income and its cost base interact, and use the ACB calculator to track the cost of tokens you redeposit.