How are Staking Rewards determined and when are they paid out?
Staking is a feature commonly included in protocols across the DeFi ecosystem. However, the way in which they distribute rewards differs depending on a number of factors.
Conditions
To be eligible for staking rewards, users must have built debt in Linear.Buildr and have fulfilled the pledge ratio of 500% at the time of claim. All stakers using Linear to build ℓUSD serves as a counterparty to other traders on the Linear.Exchange. As such, each user’s debt position is overcollateralized to ensure the stability of the protocol and currently this collateralization ratio, or the pledge ratio, is set to be at 500%.
Pledge Ratio = (The value of Staked + Locked LINA) / (Value of a user’s Debt Balance)
Users with a p-ratio below 500% will be unable to claim their weekly rewards or build ℓUSD even if they have debt that is eligible for rewards. To fix this, you can either burn ℓUSD to repay your debt or stake additional LINA to bring the p-ratio back to 500%.
How does it all work?
All users with a “Debt Balance” greater than zero will accrue LINA staking rewards and pro-rata transaction fees in ℓUSD. Your rewards are based on the amount of debt you build, acting as your compensation for being a counterparty to traders on Linear.Exchange. In short, more debt, more rewards!
Each week, users’ share of rewards is based on their share of the debt pool. This percentage is calculated using snapshots of each user’s debt value taken during the rewards period divided by the average of the total debt value of all users.
% of Rewards Pool = Average of Debt Value / Average of Total Debt Value of all users
All earned rewards can then be claimed weekly on Linear.Buildr. Users have a 14 day claim window for each reward distribution event. If rewards are unclaimed during this period, the rewards are forfeited and put into the subsequent week’s rewards pool.
LINA rewards claimed are locked for one year in order to mitigate the negative impact on circulating supply. The locked rewards are however counted in the user’s P-Ratio and can be further used to build ℓUSD and/or Liquids. Once unlocked at the end of the year, these rewards will be automatically staked to reap more rewards for you!
Types of Rewards
Provided you have fulfilled the conditions outlined above, you will be entitled to both staking rewards in LINA and pro-rata transaction fees in ℓUSD. Transaction fees are generated whenever a user exchanges one type of Liquid to another using our Linear.Exchange platform. Traders on Linear.Exchange have to pay a 0.25% transaction fee for each transaction. Claim these weekly rewards every Wednesday!
Hopefully, the Linear Educational Series has been helpful and you’ve been able to familiarize yourself with our platform a bit more each time. Have a great year ahead!
About Linear Finance
Linear Finance is a cross-chain compatible, decentralized delta-one asset protocol that allows users to get synthetic exposure to various assets, including cryptocurrency, commodities, and market indices. Users can utilize our cross-chain swap functionality to instantly swap assets across leading blockchain environments and DeFi protocols with unlimited liquidity and zero slippage.
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