The math behind Updraft might look complex, but understanding how to maximize your earnings by supporting Ideas and funding Solutions is actually quite straightforward.

Want the quick answer? Jump to the "Key Takeaways" section for direct recommendations on how much to contribute to maximize your profit. Otherwise, read on to see the reasoning behind these strategies.

How Funder Rewards Work

Updraft offers a unique system where participants contribute to Ideas and can earn from subsequent contributions. Here's a breakdown:

• Funder Reward Fee: A small percentage of each new contribution (we'll call it the "fee") is distributed among previous supporters. While the actual fee for an Idea is typically 10%, we'll assume 100% for our calculations to simplify the math and highlight the core mechanics. In practice, this means 10% of a contribution is used for earning, and the remaining 90% is always refunded upon withdrawal.

• Shares: This fee is split among previous supporters proportionally to their shares in the Idea. Your shares are calculated by multiplying your contribution by the number of cycles since your contribution.

• Earning Distribution: When a new contribution comes in, the fee from that contribution is distributed among all previous supporters based on the shares they held in the previous cycle. To simplify our profit maximization formula, we'll focus on the ratio of your contribution to the total existing contributions, as share growth rates eventually converge.

Updraft uses UPD as its currency for Idea contributions. You can get UPD for free from our Discord or through exchanges like Jumper Exchange (which often has the lowest fees and allows swaps from any token on any chain) or Uniswap.

Understanding Your Earnings

Let's define a few terms to make the formulas clear:

• E: Existing total support for an Idea.

• F: Predicted follow-on support (future contributions).

• C: Your personal contribution.

Your potential Earnings are calculated as:

Earnings = (C / (E + C)) * F

Breaking Down the Formula:

• The term (C / (E + C)) represents your fraction of the total shares in the Idea after your contribution.

• F represents the total fees collected from all subsequent follow-on support.

• Multiplying these together gives you your portion of those fees.

Maximizing Your Profit

Your Profit is simply your Earnings minus your Contribution:

Profit(C) = Earnings(C) - C

To find the contribution amount (C) that maximizes your profit, we use calculus. We take the derivative of the profit function with respect to C, set it to zero, and solve for C.

dProfit/dC = d/dC[(C / (E + C)) × F - C]
           = F × d/dC[C / (E + C)] - 1
           = F × [E / (E + C)²] - 1

Setting the derivative to zero:

F × [E / (E + C)²] - 1 = 0
F × E / (E + C)² = 1
F × E = (E + C)²
√(F × E) = E + C
C = √(F × E) - E

This gives us the optimal contribution formula for subsequent cycles:

C* = √(F × E) - E

Special Case: First Cycle Supporters

The first cycle of an Idea is unique. The Idea creator and all supporters in the first cycle do not pay a funder reward fee. They receive all of the funder reward fees from the next cycle's contributions, and then their proportional share from all subsequent cycles.

For first-cycle supporters, the goal is to contribute an amount that maximizes their earnings without deterring future contributions from others who also want to maximize their profits.

Optimal First Cycle Contribution Formula:

C₁ = F / 4

This formula represents the total sum of all first-cycle contributions. By using this, first-cycle supporters can maximize their earnings while maintaining an incentive for follow-on supporters to participate.

Is It Profitable to Contribute?

Before you contribute, here's a simple rule of thumb:

It's profitable to support an Idea only if you predict future support (F) will exceed the existing support (E).

F > E

This straightforward check comes directly from our optimal contribution formula: if F is not greater than E, then C* would be non-positive, meaning it's not financially beneficial to contribute.

Risk and Expected Returns

When you contribute to an Updraft Idea, you're primarily risking the funder reward portion of your contribution.

• For contributions in later cycles, you risk the 10% funder reward fee. This 10% is also the portion that earns profit. The remaining 90% of your contribution is always refunded when you withdraw your position.

• For first-cycle contributions, there is no risk from the funder reward fee itself, as first-cycle supporters don't pay this fee. Their potential profit is derived from the future contributions.

By accurately predicting future support and applying the formulas above, you can potentially achieve a maximum profit of up to 4x on the funder reward portion for first-cycle contributions, or 2x for contributions in later cycles.

Practical Examples

These examples assume a typical funder reward fee of 10%. Remember, this means only 10% of your contribution (except for first-cycle contributions) is "at risk" and eligible for profit.

Example 1: Mid-Stage Contribution

• Existing contributions (E): 1 Million UPD

• Predicted follow-on (F): 4 Million UPD

• Optimal contribution (C*):

  √(4M × 1M) - 1M = 2M - 1M = 1M UPD
  

• Expected Earnings:

  (1M / 2M) * 4M = 2M UPD
  

• Risk (10% of C*): 10% * 1M = 100K UPD

• Profit (10% of (Earnings - C*)): 10% * (2M - 1M) = 100K UPD

Example 2: Unfavorable Conditions

• Existing contributions (E): 2 Million UPD

• Predicted follow-on (F): 1 Million UPD

• Optimal contribution: Since F < E, do not contribute. (C* would be negative).

• Risk: 0 UPD

• Profit: 0 UPD

Example 3: Marginally Profitable Contribution

• Existing contributions (E): 2.5 Million UPD

• Predicted follow-on (F): 2.6 Million UPD

• Optimal contribution (C*):

  √(2.6M × 2.5M) - 2.5M = √6.5B - 2.5M ≈ 2.549M - 2.5M = 49K UPD
  

• Expected Earnings:

  (49K / 2.549M) * 2.6M ≈ 50K UPD
  

• Risk (10% of C*): 10% * 49K = 4.9K UPD

• Profit (10% of (Earnings - C*)): 10% * (50K - 49K) = 100 UPD (a minimal profit)

Example 4: First Cycle Supporter

• Predicted total follow-on (F): 8 Million UPD

• Optimal first contribution (C₁):

  8M / 4 = 2M UPD
  

• Risk: 0 (as first-cycle supporters don't pay the fee)

• Profit (10% of F): 10% * 8M = 800K UPD

Key Takeaways

To maximize your profits when supporting Ideas on Updraft, remember these formulas:

Variables

• E = existing support

• F = predicted follow-on support

• C₁ or C* = the amount you should contribute

Formulas

• For first-cycle contributions:

  C₁ = F / 4
  

  Where C₁ is the total of all first-cycle contributions.

• For contributions in later cycles:

  C* = √(F × E) - E
  

• Before contributing, always check for profitability:

  F > E
  

By understanding and applying these guidelines, you can strategically support Ideas and optimize your earnings on Updraft!