# FAQ
## Is MAGIC a stablecoin?
**No, MAGIC** is not a stable coin. Rather, **MAGIC** is a decentralised algorithmic reserve currency backed by additional decentralised assets. Similar to the gold standard, **MAGIC** offers escalating value that its users can always rely on, owing to the fractional treasury reserves from which **MAGIC** derives its intrinsic value.
## How does it work?
**MAGIC** is comprised of a protocol-managed treasury, protocol-owned liquidity, bond mechanism, and high staking rewards that are designed to control supply expansion.
Bonding provides revenue for the protocol, which is used by the treasury to mint and distribute **MAGIC** to stakers. The protocol is able to accrue liquidity using LP bonds in order to maintain system stability.
## What is the deal with (3,3) and (1,1)?
**(3,3)** is a game theory-inspired notion that **'If everyone in Fantom DAO works together, everyone will profit the most.'**
Three actions a user can take:
* Staking = +2
* Bonding = +1
* Selling = -2
Given 2 actors in all scenarios, the total scores of the protocols are:
* both actors bond & stake = (3, 3) = 6
* one bond & one stake = (3, 1) = 4
* if one sells = (1, -1) = 0
* if both sell = (-3, -3) = -6
## What is a rebase?
**Rebase** is a mechanism by which your staked **MAGIC** balance increases automatically. When new **MAGIC** tokens are created by the protocol, the majority portion of it goes to the stakers. Because stakers only see staked **DREAM** (staked **MAGIC)** balance instead of **MAGIC,** the protocol utilizes the rebase mechanism to increase the staked **DREAM** balance so that 1 staked **DREAM** is always redeemable for 1 **MAGIC**.
## What is reward yield?
The **reward yield** indicates the percentage of increases in your **DREAM** (staked **MAGIC)** balance on the next epoch. It is sometimes referred to as the rebase rate. This number will be found on the **Fantom DAO** staking page at all times.
## What is APY?
APY stands for annual percentage yield. It measures the real rate of return on your principal by taking into account the effect of compounding interest. In the case of **Fantom DAO**, your **DREAM** represents your principal, and the compound interest is added periodically on every epoch (around 8 hours) thanks to the rebase mechanism.
One interesting fact about APY is that your balance will grow not linearly but exponentially over time! Assuming a daily compound interest of 2%, if you start with a balance of 1 **MAGIC** on day 1, after a year, your balance will grow to about 1377. That is a lot!
## How is the APY calculated?
The APY is calculated from the reward yield (a.k.a rebase rate) using the following equation:
$$
APY = ( 1 + rewardYield )^{1095}
$$
It increases to the power of 1095 due to the fact that a rebase occurs 3 times daily. A year has 365 days; this results in a rebase frequency of 365 \* 3 = 1095.
Reward yield is determined by the following equation:
$$
rewardYield = MAGIC\_{distributed}/MAGIC\_{totalStaked}
$$
The number of **MAGIC** delivered to the staking contract is derived using the following calculation from the entire supply of **MAGIC**:
$$
MAGIC\_{distributed} = MAGIC\_
{totalSupply} \times rewardRate
$$
Note that the reward rate is subject to change by the protocol.
## How are you able to benefit regardless of the market price of MAGIC?
As illustrated above, your **MAGIC** balance will grow exponentially over time thanks to the power of compounding. Let's say you buy a **MAGIC** for $400 now and the market decides that in 1 year time, the intrinsic value of **MAGIC** will be $2. Assuming a daily compound interest rate of 2%, your balance would grow to about 1377 **MAGIC** by the end of the year, which is worth around $2754. That is a cool $2354 profit! By now, you should understand that you are paying a premium for **MAGIC** now in exchange for a long-term benefit. Thus, you should have a long time horizon to allow your **MAGIC** balance to grow exponentially and make this a worthwhile investment.
## How does the protocol manage to maintain the high staking APY?
Let’s say the protocol targets an APY of 100,000%. This would translate to a rebase rate of about 0.6328%, or a daily growth of about 2% (The APY is high due to compounding interest). Please refer to the [**equation**](#how-is-the-apy-calculated) above to learn how APY is calculated from the rebase rate.
If 10,000 **MAGIC** tokens are staked, 200 **MAGIC** tokens need to be minted daily in order to achieve the APY (Roughly 2% growth a day). The APY is easily achievable If there are at least 200 **MAGIC** tokens brought into the protocol from bond sales.
## Do I have to unstake and stake **$FTM** on every epoch to get my rebase rewards?
No. Once you've staked **MAGIC** with **Fantom DAO**, your **DREAM** (staked **MAGIC**) balance will compound automatically at the end of each epoch. Your rebase benefits are represented by this rise in balance.
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