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description: Dynamik APY is the new meta.
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# Dynamik APY

**What is APY?**\
APY stands for Annual Percentage Yield. This measures the real rate of return on your principal tokens amount by taking into account the effect of compounding interest. In the case of Cosmik Protocol, your tokens represent your principal, and the compound interest is added periodically on every Rebase event.

**Traditional Practice**\
The traditional practice of having a Fixed APY is not sustainable as the protocol would need more buyers than sellers just to maintain the price. When immense sell pressure is created, late investors may be left with tokens which are steadily decreasing in value. It's fragile fundamentals would not be able to weather any market conditions.\
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**Cosmik's Solution**\
Cosmik's solution to the existing flaw in the current auto-staking protocol ecosystem is to introduce our own Dynamik APY where the APY is not fixed and is fluid. Thus, it fluctuates based on the buy/sell volume. This is better suited to a complex trading environment where the APY is engineered to benefit the holders. The Dynamik APY ultimately reduces unnecesary inflation.\
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Additionally, our Dynamik APY is hard coded in the contract. Thus, it eliminates any human manipulation that could joepardize the protocol.\
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**Stats**\
**Base APY:** 19,166.27%\
**Max APY:** 265,290.02%\
**APY Reset Timer:** 10 Minutes\
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**How it works?**\
Between the Base APY, 19,166.27%, and the Max APY which is 265,290.02%, there are 500 incremental divisions for annual compounding. The APY value increases based on the amount of tokens traded every 10 minutes. The APY value increases at double rate when there is a sell and would reset to its Base APY of 19,166.27% every 10 minutes.\
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**Formula**\
Dynamic Rebase Rate = (Buy total + 2\* Sell Total)\*100/Number of tokens in Liquidity\


According to the above formula, the rebase increases by 1 division for every trade of 0.2% of Liquidity volume.\
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**Example 1:**&#x20;

If in a given 10 minutes timeframe, there are a total buy of 100 tokens and sell of 100 tokens and suppose the liquidity has 1000 tokens. Then the dynamic rebase rate will be:

_Dynamic Rebase Rate = (100+ 2\*100)\*5\*100/1000 = 150_\
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The rebase would increase by 150 divisions and thus, the final APY would be 42,159.80%. This rebase rate will reset when the 10-minute timer hits zero. This way there is no unnecessary inflation and inflation is controlled by the buy and sell of the tokens.\


R**ange of Daily Returns:**

The dynamik APY is fluid and would depend on the trading volume on any particular day. But as we have upper and lower limits to the APY, we can therefore estimate the range of the rewards distributed in one day. Cosmik Finance's daily ROI varies from 1.4% (min) to 2.1% (max)\
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