dApps staking economics

I was digging deep into dApps staking and want to get some thoughts from others on dApps staking.

Based on the current model and infographics, currently the following economics model applies:

  1. Reward ratio of 50:40:10 going to validators:dev team:nominators
  2. If inflation is at 10% and let’s say 100% staked (not realistic by the way), that means nominators will only get 1% staking reward while inflation is at 10%. This would mean stakers would have a real return of -9%
  3. If 50% staked (more realistic) and inflation is still at 10%, the distribution at 50:40:10 ratio will give stakers 2%, still a real return of -8%

I believe that in order to incentivize nominators to stake, we’ll need to get the basic return for stakers to be on par with inflation or slightly better.

That means at 50% staked and inflation of 10%, nominators will need to have 50% of the reward pool to generate reward at the same as inflation at 10%. That’s a rather high number.

In a different scenario where it’s 40% staked, the economics can allow stakers to have 40% of reward pool to generate equal staking reward of 10% to be on par with inflation of 10%. This leaves 60% of staking rewards pool to be allocated to validators and dApps devs.

There’s an ideal balance somewhere. I think this economic model needs further discussion and fine tuning. Any thoughts?

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In my opinion, there should be 2 pools for each project running on Network.

The first pool, nominators won’t get any SDN reward.
Instead, they contribute all of their reward to dApps devs. This option will incentivize nominators to stake SDN based on their project interest. And, It will be up to dApp dev’s offer how they give reward to nominators.

The second, nominator will get SDN and low percentage of dApp dev token.

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Adjusting the distribution % can always be done. It is flexible.

The % that goes to treasury can also be decided by governance. It can be burnt or airdropped to holders, so the impact is not necessarily -9% return.

But if what you want to achieve is on par with inflation, that is not possible. Because part of it will always go to dapp operators. Making it zero inflation means no rewards for dapp operators.

The whole idea is about incentivizing dapp operators, thus creating a network effect that will bring more projects, turning Shiden into a huge ecosystem. When the ecosystem is huge, the valuation is higher.

A dapps hub with only 5 dapps might be worth only $50 million. But a dapps hub with 5000 dapps might be worth $50billion, which is a positive impact to SDN holders, regardless the inflation.

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Does anyone know how we arrived at the calculation of 1% for stakers?

Edit for clarity:
How did we reach the calculation of 1% rather than say 2% or 3% for stakers. Like what is the reasoning for it being 1%?

Topic is interesting, let’s put this straight on the actual block reward:

  • 40% go to dApp operators
  • 10% go to dApp nominators
  • 40% go to treasury
  • 10% (will) go to collator nominators, minus the collator commission (so let’s say 9% to nominator and 1% to collator)

I agree on the fact that 40% to dApp devs seems too much actually, imo we should increase the nominator reward but for both nominators: we have to keep a balance between dApp nominators and collator nominators or it doesn’t make much sense to have both nominations.

An idea could be: instead of sending rewards directly to the dApp operator, have the same reward system than with collators where the dApp operator would take a commission on the nominator reward.

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We want to encourage people to stake, but with 1% APY, people may not be bothered to even stake or hodl SDN.

But since we have 40% of the block rewards going to treasury, we can actually use this to incentivize stakers.

The more SDN being staked, the less allocation will go to the treasury, but more allocation will go to stakers.

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I absolutely disagree with the above economy, but I will say this Pos of staking, which is in many blockchains, dap staking gives you the opportunity to earn extra money. One example: imagine if Uniswap comes, do you imagine the scale? + increase in the price of SDN !!!

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Hello @ben As @bLd759 mentioned, the following numbers are the correct distribution. Would it be possible to update your first post so that people can discuss it more easily?

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Hi @sota,
How did we arrive at the reward of 10% go to dApp nominators?
This will make it easier to explain, thanks.

Thanks. I couldn’t find the update option on my original post so for now, I’ll just add a reply here. The info on rewards posted by @bLd759 makes sense. I’ll create a Google sheet for calculating rewards and post here shortly.

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We didn’t have a specific reason for this if I remember correctly.

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“1. Reward ratio of 50:40:10 going to validators:dev team:nominators”

:point_up_2:This information is wrong as @bLd759 suggested. Please update it. The correct information is

  • 40% go to dApp operators
  • 10% go to dApp nominators
  • 40% go to treasury
  • 10% (will) go to collator nominators, minus the collator commission (so let’s say 9% to nominator and 1% to collator)
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This scheme should help everyone understand better the actual block rewards

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Hi, sota, actually it should be considered that if we only implement token standard, The algorithm is OK, but a friend mentioned two kinds of distribution, which I think makes a little more sense because we’re thinking about the token standard and the gold standard. Because we need to lock up the liquidity, we have to guarantee the return of the nominees, I think we can allocate a smaller percentage to the dapp nominees. Instead, we can negotiate with dapp operators to allocate tokens to nominees. So they can let users participate in their projects, but also can pledge more sdn to them, our purpose should be dapp operators to do to promote their own projects and astar.

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Hello @Graves Thanks for your comment. Actually, it is possible for dApp operators to distribute their SDN to their nominators. And I think it is interesting if the dApp operators distribute their tokens to nominators when they issue tokens.

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This is possible. Some of them are already planning to share the rewards with nominators. You can check the forum post from My Crypto Heroes & EmiDao. The other day, Open Emoji Battler is also planning to share the rewards.

This sort of incentive can be done not only by sharing the SDN rewards. They can also distribute their dapp tokens or nfts. Integrating farming contract to earn dapp tokens while dapp staking is also possible, I think.

The way I see it, this will become a norm. Since the operators want to get rewards, they must compete for it and find ways to attract nominators. Giving incentives is one way to do this. In a way, this will be a new form of token distribution, without having the nominators risking their capital.

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Currently we have equal rewards of 10 % for Collator nominators and dApp nominators. But if dApp operator planning to share the reward with nominator, what purpose to become a collator nominator? If dApp staking is more profitable (in case sharing reward from operator) it could be that no one wanted to stake to collator. I think here should be some balance.

The inflation formula is complex, but it seems that it is designed to balance the block rewards between collator nominator and dapp nominator.

If everybody only nominates dapps, the block rewards that go to collators will be higher than that going to dapps. Something like that. Need to get confirmation from the person who invented the formula.

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sorry, but this for work should be the opposite… no? :thinking:

Love this…we have to name it ISO: Initial Staking Offering :heart_eyes:

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