Guys, I am confused — what is the deal with Auto-farms, Auto-staking and damn Reinvest button?

First of all, we’d like to apologise for not covering these specific options at Canary platform in a comprehensive manner as yet since the volume of questions has been sustainably high and the need was quite obvious. We are fixing the omission by this short article explaining how simple staking and farming is different from auto-staking and auto-farming and how the hell to use this Reinvest button.

If you are new to DeFi we strongly recommend first to onboard yourself on the fundamentals via few easy reads by Canary Academy. Those will help you build the right basis so then any new knowledge (like this article) will be processed much easier as you will know where to fit it in the growing DeFi expertise in your head. Should we rather use ‘connect the dots’? Anyway.

We assume that you are familiar with simple staking and farming. Staking is locking your tokens in the platform to earn more tokens (very similar to depositing cash in the bank to earn an interest… that interest… ok, let’s not go into that). That helps the platform:

• influence demand-supply thing as higher rewards lead to more people wishing to lock their tokens in the staking contracts thus a certain volume of tokens is removed from the market leading to a higher demand and vice versa
• enable governance and loyalty programs where people who lock their tokens in the staking contract receive rights with the corresponding weights to influence rules and parameters that platform operates according to (yes, enter DAO — we’ll talk about that in the next release) and receive privileged access to certain benefits

Ah, well done, quick-witted! Yes those two bullet points are connected… I suppose we cannot get away from ‘connecting the dots’ thing today. By the way, some platforms use staking to provide assets lending and borrowing services but usually this comes along with additional staking conditions, e.g. bonding periods.

Farming is staking LP tokens that you get for providing liquidity. Staking LP tokens usually yields much higher rewards. This helps the platform to attract liquidity into swap pools or vaults so then others can use this platform as a decentralised exchange.

At Canary staking and farming rewards are accumulated every few seconds so you can see them growing in your pool just staring at the screen for a few minutes (‘Your unclaimed CNR’).

Rewards are measured in Annual Percentage Rate (APR) or Annual Percentage Yield (APY).

APR is a simple interest rate (your reward is accumulated separately). APY is a compound interest rate (when your earned reward is added to the initially staked amount so then your next reward is calculated based on the slightly increased staked base). You can read more about the magic of the compound interest or APY here.

So when you see a simple staking pool or farming pool with APY rate shown then do not think this is the rate you are going to receive by default. You can achieve this rate of return only if you withdraw your accumulated rewards and add them to the initially deposited amount manually at least once per every 24 hours. In case of farming you have to follow few additional steps to convert your rewards to the liquidity pair tokens and then add them to the liquidity pool to mint LP tokens which only then you can add to the initial farm deposit. Thus simple staking and farming pools rather should show you APR rates.

Ok, it seems like you have already got it that auto-staking and auto-farming pools are those where the rewards are added to the initially staked deposit automatically so you avoid the manual hustle.

Ah, do not forget that each manual step, i.e. rewards withdrawal and adding them back to the deposit is considered as a separate transaction thus you will be asked to pay transaction fee for each step. Thank whatever saint person or spirit you believe in that we are on Avalanche!

Therefore auto-mode also saves you transaction fees. Alright, seems like we are all clear now about the difference. Note that in case of auto-staking or auto-farming you will not be able to claim the accumulated rewards separately. You will need to withdraw everything and then leave whatever you need in the wallet and deposit the rest back to the pool. Thus if you need to claim rewards everyday to pay your bills probably auto-mode is not quite handy for this.

Now let’s sort out this reinvest button puzzle. First thing you need to know is that you can ignore that button altogether and you will be totally fine with your auto-staking or auto-farming. This button is really just to add a pinch of fun into the process.

As mentioned above, the smart contract will add your rewards back to the initial deposit, i.e. reinvest automatically once per 24 hours. You can see the accumulated rewards up to the given moment in the ‘Next Reinvest’ section. Note that this is the amount of reward for the whole pool, i.e. not only for you. When reinvestment happens the accumulated amount is distributed among all stakers based on the amount they deposited (i.e. their share in the pool).

Reinvestment can happen more frequently — once someone who deposited the assets into the same pool decides to click that reinvest button. The accumulated amount is then distributed to all stakers and gets reset to zero. Then the cycle starts again until someone clicks the button. If no one clicks it during 24 hours the smart contract will do it.

That someone who clicks it initiates the off-cycle transaction thus that someone will need to pay the transaction fee. For all other stakers that distribution will not cost anything, i.e. only that someone will pay the fee and others will benefit from that (because the intensity of compounding rewards will increase with no additional cost for them).

Then why someone would click it at all? Because of the bonus.

You can hover the pointer over the ‘Reinvest’ button to see how much additional reward you and only you will get on top of staking rewards for pressing that button. Other stakers will not get that additional 66.54 CNR. Then you can compare that with the transaction fee and see if it is profitable. For that you just click ‘Reinvest’ and you will be prompted to confirm the transaction.

So if 66.54 CNR is worth more than 0.0086 AVAX fee than you earn something and help others. If not, you just click ‘Reject’.

Hope we managed to explain this in sufficient details and now you are comfortable with the auto-thing. Please do not hesitate to share this article in any forums you see someone asking the similar questions to earn some karma and gratitude, this is royalty-free.

Stay tuned and safe!