Reward Distribution

The administrator of a staking platform selects a reward distribution mechanism that will be applied across all staking campaigns running on the platform. To implement the required functionality for these campaigns, the administrator chooses a set of specific facets that will dictate how the campaigns operate.

The Staking Protocol provides four reward algorithms that can be grouped into two categories:

Collective Algorithms - The reward pool is shared by all users, meaning that those with higher staking amounts, longer staking periods and total staking periods will receive higher rewards. In this scenario, users compete for a larger share of the limited pool.
Independent Algorithms - Rewards are distributed independently to each user, based solely on their staking amount and duration. User activities do not affect one another.

Collective Algorithms

Collective algorithms distribute rewards to users based on their staked amounts relative to the total amount staked by all participants. In this system, the total staked amount, staking period, and overall staking duration all influence the rewards, making it the most complex type.

Pre-Stake Reward Distribution

This is the most straightforward algorithm within the collective category, where rewards are allocated solely based on the amount staked by each user.

All users must stake their assets before the staking period begins.
Once the staking period commences, no additional staking is permitted, and users' staked amounts remain fixed for the entire duration.
The staking pool has a predetermined start and end date, for example: from August 1st to August 30th.
Rewards are distributed according to each user's stake, relative to the total amount staked in the pool.

In the example below, the total reward is allocated according to each user's stake relative to the total amount staked, ensuring a fair distribution based on individual contributions:

Condition: User A stakes 5,000 tokens, User B stakes 3,000 tokens, with a total reward pool of 16,000 tokens.
Result: User A receives 10,000 tokens(5000/8000 * 16000), and User B receives 6,000 tokens(3000/8000 * 16000), based on their proportion of the total stake.

Complex Reward Distribution

This algorithm is applied in situations where the timing and amount of rewards are unpredictable. An example of this type is the Synthetix Reward Algorithm, where rewards are announced by a designated entity and distributed based on the staked amounts and staking durations. Rewards are allocated according to both the stake size and the length of time the assets are staked.

In the example below, User A receives twice as many rewards for staking over a longer duration, demonstrating the fair distribution of rewards based on both the amount and length of the stakes.

Condition: User A stakes 1,000 tokens at the start of the week, and User B stakes 1,000 tokens later in the week. The reward pool is 3000 tokens
Result: User A receives 2,000 tokens, and User B receives 1,000 tokens, as User A staked for the entire week.

Independent Algorithms

Independent algorithms calculate rewards independently, meaning that user's rewards are only calculated based on their stake amount and duration. Stakes of other users do not affect the rewards.

Rate-Based Reward Distribution

Rewards are distributed at a fixed rate per second, not relying on the total amount staked by other users. Depending on the configuration set by the staking platform creator, rewards may be paid out instantly when a user stakes, allowing them to use the rewards immediately.

In the example below, you can see that the reward rate is based on the user's staked amount, with no impact on the stakes of other users:

Condition: User A stakes 5,000 tokens and gets 0.1 tokens per second, while User B stakes 2,500 tokens and earns 0.05 tokens per second.
Result: User A earns rewards based on their stake, unaffected by User B’s stake, and vice versa.

In a rate-based algorithm, you can configure a virtual balance that receives multipliers based on the staking lock period.

This system ensures that both the duration and amount of your stake directly influence your rewards, with longer and larger stakes yielding higher effective returns.

There are two types of these multipliers:

Continuous Multipliers: These increase gradually as your stake grows, with no fixed categories.
Interval Multipliers: Fixed categories (bronze, silver, gold) with multipliers that change as the stake increases over time.

The example below highlights how time-based multipliers affect the rewards received after some period of time:

Stake for 0-1 year: multiplier 1.0; 1-2 years: multiplier 1.2; 2-4 years: higher multiplier.