How is USDN staking able to pay more interest than banks?

I don’t understand how USDN staking is able to pay more interest than banks.

Banks take our investment and lend it to people and companies, who later pay banks back with interest, and part of that banks pay back to investors.

But staking keeps the money on hold, it’s not lent or used in anyway. So where does its interest come from?

That’s actually pretty easy to answer. Main USDN income comes from staking waves locked in smart contract which issues USDN. All the waves which are closed in contract participate in block generation, so there is a node which uses the waves to generate more waves.

Basically that means that every block generated by the node which is holding locked waves assets as collateral gives 6waves + transaction fees to contract and this waves are being converted to USDN and distributed to stakers. Not all USDN participate in staking which is way staking reward is increased proportionally.

If waves price is considerably higher than 1 usd meaning that more than 1:1 new USDN are issues which gives even more new USDN meaning that reward % is higher than even 6%. If waves price is lower than 1 USD then less new USDN generated and reward is smaller also as it requires more waves to create less USDN. Stacked USDN % difference makes it still profitable while price is lower than 1 USD.

Low price (waves less than 1 USD) for the contract is good way to accumulate reserves. Meaning that at the time of downfall (Waves less than 1 USD) of the price more waves are sent to contract when new USDN are generated and when waves price recovers contract will have more waves as collateral to cover USDN and be able to withstand future downfalls. Basically USDN as its called is algorithmic coin.

Please read more at it’s source or ask for more information in their telegram channel.

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