Reward with native tokens?

Hello,

we have a native token on the Cardano, we want to allow our users to stake ADA to our stake pool but we want to output the stake rewards in our token instead of ADA.
we’ve been researching all over on how we can do this and i’m not sure if it possible.
Do you have any advice on how we could do this?

Interesting stuff I found:

Hello @tkopic

Rewards are issued by treasury and they are always ADA. That can’t be changed.

What you can do is put fees to 99%. This way you keep all the rewards for your stake pool. Then you can get the list of all delegators and issues them your tokens as rewards for staking to your pool.

This is similar to what some ISPOs are doing.

The article you linked talks about Babel fees which is just a way for stake pools to choose to pay for transactions with their ADA in exchange for other tokens. This way regular users can just use those tokens to pay fees instead of ADA. Rewards are never replaced by that token. Someone else pays ADA fees and gets those tokens for providing “exchange” service…

Can you please say how a pool can get those tokens? Sorry, for a newbie question))

As Neo_spank said, you can increase your pool fees to 99%. Then you can monitor the Ada rewards issued from treasury to each wallet staked to your pool representing the 1% remainder. This would then make it easy to know proportionally how much of your token you should give to each delegator. Since it would save you having to monitor timing about when people stake and unstake in relation to when the stake snapshot occurs for calculating rewards.

Then you would have to send your tokens to each of your delegators wallets. This will cost you in transaction fees. Otherwise you could use DripDropz but then it would cost your delegators even more in transaction fees, but it wouldn’t cost you.

Also, as I understand DripDropz currently, if you use their service, it would require your delegators to keep generating DripDropz transactions to collect their tokens every epoch, which is obviously more profitable for DripDropz.

On the other hand, if you deliver the tokens yourself you could just deliver all the tokens at the end of a defined period to minimise the number of transactions. You can also craft transactions that deliver tokens to many delegators in one transaction.

Thank you for your reply. I understand how the tokens can be distributed among the delegators. Neo_Spank has explained. My question was how to get them. I mean where do you take them for distrubution? What is the process? Do I need to register on Cardano DEX and make them or buy them?

You can invent a new kind of native tokens and mint them yourself or you can buy tokens invented by someone else at some market place (e.g., a DEX) or you can get them from someone else in some kind of promotion to distribute them to your delegators.

Buying them probably does not make much economic sense for you. Why not give the ADA directly to your delegators? Or better still, let the protocol give them the ADA like it’s designed?

Minting yourself is cheap for you, but begs the question if the tokens will have any value at all. What is their purpose? Why should people trade them? Why should delegators prefer to get this thing you just invented instead of ADA?

Distributing promotion tokens of other people seems to be hot right now, cf. SundaeSwap. Even if the long-term value of the tokens is still questionable, you are at least part of a bigger hype. In the case of Sundae, they are distributed in addition to the normal rewards and they will, as it seems, be distributed by the DEX to delegators to their chosen pools, not by the pools themselves.

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When sending the tokens to the delegators as one transaction, besides the transaction fee, I assume you still need to include the ~1.5ADA token deposit for each recipient? …or does it not work that way?

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Yup, exactly that. Outputs with less than 1 ADA are still completely impossible and with tokens or NFTs it is still a little more.

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Thanks @HeptaSean So to summarize it for those who want to distribute native token rewards, the cost would be the transaction fee + ~1.5ADA * NativeTokenRewardRecipientCount + NativeTokenTotalRewards… which can quickly become very expensive.

I’m not sure how other pools distribute native tokens unless asking the delegator to send the ~1.5ADA deposit first?

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I have read that for the SundaeSwap ISO some sort of claim procedure is planned. There you can easily integrate that enough ADA to accompany the tokens do a round-trip.

There already was a topic a few weeks ago complaining that the minimal accompanying ADA make airdrops far too expensive, if I remember correctly.

For me, the first problem still is if the tokens are even worth something. If they are, then it will also be worthwhile to do some process, where the delegators send the minimal ADA beforehand. If they are not, then why should delegators do this “The pool gets all the ADA and gives us Monopoly money instead.” deal in the first place?

I agree regarding that matter.

The question was more towards those scenarios where pools additionally distribute native tokens to attract more delegators, as is the case with the PIGY tokens. My pool has the Pigy tokens but as it’s small and not producing blocks I haven’t yet extensively thought about the best way to distribute those besides asking the delegators to send ADA once they want to redeem the tokens.

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Thank you for the explanation. That’s my major concern too, why to make tokens that worth nothing.