Massive update on RND taxes. A new 50% claim tax (Playmates)
Massive update on RND taxes. A new 50% claim tax has been added on top of the last one, helping price stabilize, and pushing back above $6 again.
Red light Nodes are a passive income protocol built on the avalanche network. RND or also known as Playmate for their native token $Playmates has decided to do a massive update on their taxes, so I decided to write about it and bring up some clarity.
How RND works is by creating a node (they call them mansions). A node needs 20 $playmates tokens to be minted (created), and by that, you will be receiving 1 $playmates per day as a reward.
These node projects count heavily on their taxes to help the project be more sustainable, before the update the taxes where:
15% claim tax — When you claim your rewards 15% gets deducted.
10% sales tax — After claiming, the normal thing to do is to sell. So, there is another 10% tax on that amount.
That means, if you had 10 $playmates in rewards and you claim, you will then receive 8.5. If you choose to sell that 8.5 tokens you will end up selling 7.65 $playmates due to selling taxes.
The taxes go back to the reward pool to help replenish it.
The issue is that now they added another 50% claiming tax! Yes, 50%. Now instead of the usual 15% claiming tax, you should be calculating 15% + 50%, after that if you choose to sell another 10%.
50% Claim tax
After doing some research I come to the conclusion that what they are trying to do is to decrease the selling pressure on the token. Also on their discord, they said this is to combat micro wallets taking advantage of the tax.
If we take a look at the chart below you can how fast and how low we’ve been dropping. I know that’s normal for most node projects because holders are selling their tokens to take profits, but this kind of daily 10-20% drop was pretty scary.
If you want to get around this 50% claim tax, the only way is by creating a District.
A District needs 10 mansions + 20 $playmates (that’s the price for the next 2 weeks, this might change soon).
That district pays 5 $playmates. So, now we come to the question.
Why create a district to get paid 5$pm instead of having 10 mansions and getting 10pm instead.
Well, it boils down to the taxes.
A mansion pays 50% + 15% claim tax. While a District pays 14% claim tax.
Let's do some math.
You have 10 mansions and get 10pm per day. You decide to claim them, how much do you think you will get?
Mansions
10$pm — 65% claim tax = 3.5 pm | Now you decide to sell that 3.5, so we subtract 10%, which leaves us with 3.15$pm
Total = 3.15 $playmates
District
5$pm — 14% claim tax = 4.3 | You decide to sell it, so we subtract 10%, which leaves us with 3.87
Total = 3.87 $playmates
Conclusion:
Creating a district is much better than having 10 mansions if your goal is to cash out. If your goal is to compound then I would say that having mansions is much better.
There are no fees when you compound into a node, so you can avoid the claim taxes and sell taxes by just clicking on ‘compound’.
My issue with that is I haven’t got back my initial investment, and I hate compounding before reducing my risk of losing money in a project.
I currently have 3 mansions, that is 3$pm per day. My goal was to claim my rewards until I get back my ROI. Well, that has changed, it makes next to no sense to claim instead of going to a district.
With the new tax bracket, if I claim and sell my3$pm I would be left with 0.945 $pm. That’s around 6$.
I used my calculator on my spreadsheet and I choose that option it would take me 70 days to get my ROI back.
Overall I do not like the 50% tax, but I do get it. I know that this project was bleeding and it was going to continue to do so. I hate that I will have to compound now, but sometimes we have to go with the flow.
Even though we did not like the new tax, it has been working because most of us stopped selling our rewards and chose to compound instead.
$Playmates is up +20% in the last 24h.
Youtube video:▶️ Explaining the new 50% claim tax
This is the spreadsheet I have been using to track all my passive income. I created this spreadsheet with DeFi in mind, so it is tailored around passive income.
If you are into passive income protocols you should be tracking your income. You cannot improve what you don’t measure.
Check it out: https://defichronicles.gumroad.com/l/xwwln
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Disclaimer: This is not financial advice, I am just a guy with a laptop sharing his opinions and experience. This is for entertainment purposes only. Always Do your own research before investing.
