So been trying to understand the reward mechanism, been in Cardano a while and just never questioned it too deeply but recently I’ve been growing more curious.
So I recall a paper/ama/post somewhere that was with regards to the stake rewards coming from two sources - the block rewards and from the treasury (don’t recall where so can’t cite it, and my memory is fuzzy anyways). Where exactly do the “stake rewards” come from? What are the actual mechanics of the fee and margin deduction? Does the SPO’s pledge also get stake rewards? (I understand the rewards post fee and margin are distributed by stake percentage)
It can’t all be out of tx fees - I’ve seen a pool mint two blocks with only like 20A on fees, so where does it all come from?
Anyone with helpful links would be appreciated!
Thanks in advance!
Hi, so the rewards actually come from the token economic policy. This essentially translates to what the token does to address and account for inflation. There is a current circulating supply and a maximum supply. The difference between those two is what hasn’t been unlocked yet, i.e, minted yet. Similar to Bitcoin’s maximum supply and block rewards, same thing here except with staking instead of mining. So new ADA is added to circulation as pools mint block. The treasury isn’t responsible for it. The treasury actually takes a cut from the block reward before the pools and delegates get their rewards. That’s how the treasury is funded.
A pool’s own pledge also receive rewards just like everyone else. The total pledge can have an impact on rewards (the higher the better) but it’s not very significant. Have a look at my posts under the topic “Cost of Staking” for more details on how these parameters come to play and interact. Happy to answer any additional questions you might have.
CPX Pool