Foreword
The opportunity of staking is one of the most attractive business models in the crypto world — the very idea of earning passive income delights everyone interested in investing his money. Fortunately, the new cryptoeconomics allow everybody to do it — hold tokens and get more like bank deposit which gives you daily/monthly/annual return on your holdings.
Let’s start a look at the solution offered by IOST.
Introduction
The reward pool is composed of two sources.
- The first source is locked-up tokens — Ecosystem Fund. All the rewards from Fund are paid quarterly to all the nodes and delegators.
- The second source is minted tokens. They are minted every day and paid daily. One half is paid to all the nodes and delegators, the other is paid only to Servi Nodes — block producers.
The inflation rate is 2% of Total Supply or roughly 7% of Circulating Supply.
IOST Model
There are two options of staking in IOST. First option is to become Node, second option is to delegate your money to Node. In this article, we are going to explain the rewards of delegators and to show how much you can approximately earn. The details of token mechanics can be found here.
In our example, we have the next entries:
- Our delegating voting power = 100'000 IOST
- Producer voting power = 8'080'000 IOST
- Tier 3
Let’s calculate all the points of rewards!
IOST Ecosystem Fund
We get token from IOST Ecosystem Fund. There are two subpoints:
- The share of votes you receive
- Contribution to the ecosystem
Must admit, Node Reward depends on Tier of Node and number of Nodes. Now there are roughly 90 Nodes.
Token Issuance
- The share of votes you receive
- The number of blocks produced
It does not matter for delegator. This reward is earned only by Servi Nodes.
The Result
As you can see, the reward is about 14'137 IOST. According to our voting power — 100'000, the annual return rate is 7.1%. But since we can reinvest our reward, we are able to get more than 18.0%.
Inflation Adjusted
Since our reward is due to inflation, we must take into consideration that real yield would be smaller.
So, we get our inflation-adjusted annual yield — 10.3%.
Comparison
We used only Tier 3 option. There is comparison of return rates for delegator with 100'000 IOST depending on Node Tier and its total voting power.
Complete-Incomplete Projects
We hope you have heard about the separation of contracts/projects complete and incomplete ones which were published by Andreessen Horowitz.
In our vision, it is one of the best approaches to the analyses of the crypto projects. According to the above table, the reward distribution applied in IOST relates to incomplete contracts since the Tier placement is quality assigned to the IOST foundation.
The above information lets us weigh all the pluses and minuses. On the one hand, since the Tier placement depends on a commitment to community development, the Tier placement gives reasons for validators to improve the community of IOST. On the other hand, it is impressionistic and defies forecasting of the future reward.
Conclusion
According to all the calculations, inference should be drawn that it is more profitable to delegate to a Node with a higher tier and has less voting power. Must admit, the delegation to Nodes with high voting power has a negative yield if adjusted with inflation.
