Proof of stake rewards question


#1

Something I’m trying to figure out is what reasonable range can one expect to earn from pos rewards?
I understand there will be a difference between solo staking, joining a pool, and randomness.
I guess my point is if I have 10,000 ada and it lands on my pool, what percentage of that can I expect to earn? Or maybe it’s too early to know.


#2

Check out these threads.


#3

I have this same question. I will try the link posted and try to calculate the percent from there.

Edit: The web site uses 9.13% for the first year and is an ESTIMATE of what might be used.


#4

Interest Rate = 9.13% (1st & 2nd year), 6.28% (3rd year), 4.57% (4th year)

Not sure where these figures originated but they’ve appeared in more than one place, always labelled when I’ve seen them as a possible scenario.


#5

I was thinking on this subject again and now I am leaning toward the idea that the staking rewards need to be pretty high the first couple years. This is because digital currency is such a high risk investment as shown since January of 2018 (or since the beginning of alt-coins really).

Rewards around 9% the first year and 8% the second year would help generate more wide spread adoption. Many retirement funds are at 5-6% with stock market growth approaching 25% in 2017. Inflation was at 2.1 to 2.6 % recently.

If Ada staking rewards start off at 2.5% the first year then it will be a big disappointment for most investors. The only 100x and 10x gainers got lucky between September and November of 2017. That was a short lived party for a small number of very lucky people. We need to put some fire in Cardano and get it to break out. The gains/loss chart on Cardano is nearly identical relative to bitcoin for the last 3 months.


#6

Remember that 9% reward does not come from the skies :slightly_smiling_face: 9% in rewards could be reached only with something around 5% - 8% inflation on the total supply, which would:

  1. Make anyone not participating in the staking pretty mad
  2. Create too steep inflation curve for the first years

Staking profit size is a complex equilibrium between a reward, a punishment, and a monetary policy. Rewards will be bigger than inflation, when platform gets popular and attracts a lot of transactions. And IOHK does a lot of interesting stuff, to attract programming transactions on the platform, and that is, imo, the best solution. Attracting lots of people with over-profitable staking on a programming platform would be like trying to to encourage people to open car-repairing shops, while also paying people for keeping their cars at home and never riding them :slightly_smiling_face:

Staking is targeted toward all the wails that HODL the coin anyways. And let’s not forget that these 2-3 percent profits will be in a deflationary currency.

P.S. Staking reward size does not really matter, btw. Only the boolean fact - whether you are staking or not will matter, since people who are staking for the first years will basically stay with the same amount of value (if coin price does not change), and people who aren’t staking will get inflated, and will end up with lower value, even with the same amount of coins.

P.P.S. Btw, there’s a new calculator :slightly_smiling_face:


#7

@vantuz-subhuman

Yeah the whole inflating the supply is just a smoke and mirrors game, Charles implemented this so there would be enough funds in the treasury by 2020 (because there wont be much from fees) it will “look” like we are not paying for it, while we actually are.

The only ones who will be rewarded when staking is implemented (for the first many many years) are the mining pools (cause no inflation, they dont own any ADA) and IOHK, because they will get paid with treasury. They are funding the treasury by inflation - those who stake will mitigate their losses, while does who dont will get wiped hard - Charles has learned a few tricks from the US gov.

Of course the money that goes to the treasure should be zero-sum or positive, because that money is put to use improving the Cardano network providing ROI. That is at least the goal, but a chunk of it might be maintenance cost.

and that is how it is supposed to be, mining pools being paid, when staking is implemented, it is basically us that will pay for hosting, while right now we get it for free by IOHK. That is all implementing of Staking basically is… I do know that this is hard for most people to understand… for 99% of people they see staking as a positive magic event where we print wealth out of thing air, while in actuality, it is a cost event…

Its just changing the hosting (right now provided free by IOHK) to mining pools (that needs to be paid) that is all this POS going live is about, and we get the benefit of decentralized hosting, but that has to be paid for, that is more expensive that centralized.


#8

It’s not smoke and mirrors for people who understand things. Let’s not forget that they’ve never advertised staking as something magical.

You make it sound like the whole Cardano is developed by Charles alone somewhere in a basement :slightly_smiling_face: You’ve managed to make inflation sound sinister af. :smiley:

You are right in all your statements, but it is worth to note that: there’s no other possible way to implement an incentives system on a young platform with no much transactional use.


#9

Trust me Charles know what he is doing… of course he hasn’t marketed it this way, but he knows people dont understand it… This sounds a lot better, than having us all being charged 3-10% taken out of our accounts in 2020… (the same thing will happen, just by inflation instead, those who stake might even benefit with surplus, but then the non-stakers pay) It is the right choice he made business wise…

There is no sound reason to use inflation, other than to fool people… Its a smoke and mirrors game, and the whole staking thing, 99% of people just think it is a return on investment.


#10

I hope so.

We can say absolutely the same for the bitcoin. People could have been paying miners directly from their wallets. But they don’t since it would be retarded.

The main point to know - is that there won’t be more than 45 billion of ADA ever.

This is completely ignorant statement.


#11

Why do you think he didn’t just cap it at current cap… There was no reason to do this through inflation. No reason to print 20B more… We could just pay directly. Then we actually see the cost. No smoke and mirrors. The reason is simple… Overinflated return numbers in Staking is hype, and it was a neat way to fund the treasury early on when fees were low, nobody sees anything missing from their account… It is a sound decision for ADA, but it isn’t honest. There is no way to argue it is.

Though I do understand from a logistics perspective the inflation route is also easier, and this way we nag a lot of people to participate in staking, which is good for the soundness of the network.

The same goes for Bitcoin yes, people pay for mining through inflation and constant selling pressure, and its very very expensive… and sure no one notices in a bull market, but in a bear market, not only is the rug pulled out under you, its continues pressure down.

If the BTC network cost 20M USD a day to run, that means that 20M net inflow of new funds has to enter the market for it to stay at the same price, each day. Miners are sucking out tons of value from BTC, for doing very little. Which is why the whole proof of work system just wont do it… If people saw all of this money coming directly out of their wallet, people would wake up to it… Instead they will just pay for it back-end.

If all the money that went into mining hardware and electricity bills went into BTC instead, bitcoin would prob be at least 50k today, at this time.


#12

vantuz-subhuman, you bring up some really great points as always. But you are presenting the crypto currency expert perspective. I am trying to present the perspective of the average everyday person and look at adoption and investment outside of the current paradigm of the cypto currency world.

The rates you used in the staking calculator, which is really very cool by the way, are far below the return rates on something like the stock exchanges where the majority of investors currently put their money.

So my key word here is IF the Ada staking rewards start off at 2.5%. The IF part. For a high risk investment the 2.5 to 3.5 % is still low and my point is still valid, and not mutually exclusive to the points you made. I am perfectly OK with 2.5% but not likely is the average person not involved in crypto.

I could also say the opposite, that IF the Cardano community wants to keep the price of Ada relatively stable and low, then keep the staking rewards low so as not to incentivize high risk investors from outside the crypto world. That will reduce the number of new adopters from purchasing Ada.

Most people who do not understand crypto, which is most people on earth, will not invest in something that has a 2.5% annual return on its self because they just don’t understand it as well as you. Many people will just say “Oh well, I will play the stock market instead and shoot for 6% -12% annual returns” and not worry about that pump and dump thing or whales thing. Once in a while I have to take a step back and ask my self how does the average everyday person look at it?

Out of 8 people I have talked to about crypto personally in the past 6 months, only 2 people were interested and only 1 person actually started investing. Most people cannot wrap their heads around how this stuff works. That is just the way it is and that is the perspective I was trying to convey. Not the average crypto trader/HODL perspective.

Edit: I also meant the high 8 or 9 % would only be the first couple of years as an incentive. Then it would rapidly drop to 2% over the next couple years. But I left that part off my post.


#13

But you do understand that this 8% is paid for, by ourselves, nobody will actually get the 8% return. They will just get more ADA in their wallet with less value… and if we get a “real” return it was transferred from those who didn’t participate in staking.

So it is a question about honesty, if we set the return at 8%, right yeah we will fool a lot of people and get a lot of people to buy into ADA… It is just something I personally cant partake in… though I understand the pragmatic approach in doing this… I just couldnt` spread the gospel.

Most people on earth wont be investors, they will be users, users of the end product of the technology. We all use google, but very few is actually investing in google.


#14

I am not talking about users. I am talking about investors. Users will not be staking so they do not care about staking rewards.

Edit: For example, I have 2 wallets. 1 for staking and 1 for using.


#15

If you are talking about anyone who uses the network, buys the ADA as they go, and just spend it immediately you are probably right.

But I do believe most users will hold ada for future usage, or even users who use it as a store of value, will be staking their ADA, since it would be stupid not to.

If you can stake activate/deactivate immediately, then most of the flowing ADA will be expected to be staked at all times. It will prob be a default setting in most wallets, so when you are not using them, they are automatically staked.

But yeh that will be interesting to see, if it will turn into pay by go usage.


#16

I totally disagree. I think it is very difficult to say ‘it would be stupid not to’. There are far too many people who can make 2.5% ROI in a matter of 1 week just by trading. I see them on Cardano Trading all the time. The day traders drive the price up and down and 2.5% is nothing to those folks.


#17

But someone is holding the ADA at all times. Even if someone makes ADA trading, they are just being transferred from one user to another. If they are not holding them, the exchanges are.

You can stake for 1 minute, if the technology allows it, and you will, if you can, it will eventually be default setting in any wallet, that it is staked.


#18

Yes some one is holding the Ada at all times, and the users and the traders will not be staking because staked coins are not tradeable or spendable (as far as I know). So I am still trying to present the investor perspective.

Also, I still don’t quite understand what dynamic proof of stake means, I don’t think it will affect the investors who are staking and trying to gain stake rewards.


#19

No but if the technology allows it to be unstaked immediately, that means that when you sent it to someone, it will be unstaked only for the period it takes to get into the other person wallet (who will immediately restake it)

The only reward there is to be given out is the one generated from fees

the last time there was a fee count from Cardano, I believe it was 20K ADA since origination… Cant remember what post it was in, but I believe @Haskell-plus wrote it… If you could link to it, that would be great.

Most of the rewards has to go to the mining pools, since they are the ones using electricity and hardware, another chunk of it will go to the treasury, the rest will go to the stakers.

to get 2.5% you will have to have crazy fees, that is 120 Million USD a year right now… if 50% is consonantly staked, that has to be paid by the other 50%… also that 2.5% is without mining pools and treasury tax.

Assuming their cut, it would prob be 300M USD a year, of revenue the Cardano network has to generate. In fees.


#20

Now that makes sense that some of the transaction fees would go back to the stakers, and not just a piece of the remaining 45 Billion tokens the way the calculators are set up.

And FYI I just ran the math on the fees of 20K Ada and it kinda makes sense. The current fee is 0.17 so 20,000 / 0.17 = 117,647 transactions to get that amount of revenue. 20K Ada is not that much relative to the daily volume of trading alone which is a good thing, that means it is cheap to transfer Ada. The daily volume of Ada transfers today alone is over $86 million.