4. Staking rewards (APR)
- 1.The staking rewards structure is a new parameter that is governed by the GoodDAO
- 2.Rewards vary depending on the third-party protocol (e.g. Compound, DAI etc.) and currency pair involved.
- 3.Staking rewards are calculated in G$ values, as set out in the smart contract (e.g. 1M G$ in rewards per month).
- 4.Rewards are prorated based on the amount of capital staked per block.
Rewards are calculated based on the formula set out here. Simply put, users are rewarded in each block, according to the following calculation: (User’s total stake/Total staked in contract) * (Reward per block).
Initial staking rewards
- Compound DAI Total reward per block = 138.88 G$s | Yearly Reward = 291M G$s
- AAVE USDC Total reward per block = 69.44 G$s | Yearly Reward = 145.5M G$s
The minting of G$ rewards affects the reserve ratio in the same way as the minting of G$ for UBI. The minting of new tokens both to pay rewards and to supply UBI to members increases the total supply of G$, and thus reduces the reserve ratio.
The decline in the reserve ratio following the minting of tokens for staking rewards can be determined as follows:
- 1.Current state (before the minting of staking rewards):
- 2.Newly minted tokens as Staking Rewards:
- 3.New Reserve ratio: Rr1
- 5.Rr1 = R/((S+SR)*P)
Because stakers have the option not to withdraw the rewards to which they are entitled, tokens are minted only at the point a user makes a claim, not at the point of entitlement.
Multiplier rewards are designed to encourage users to leave their principal and rewards locked, rather than withdrawing and converting all or part of this amount the moment they are entitled to claim their rewards.
In the first month of staking, for instance, the user will earn only 50% of the reward to which he/she is entitled: i.e. a multiplier of 0.5. From the second month onward, the user will earn the full allocation of rewards: i.e. a multiplier of 1.
When a user takes any of the below steps, his/her multiplier resets to 0.5:
- 1.Withdraws part or all of the capital staked.
- 2.Withdraws all or part of the accrued rewards.
- 3.Transfers LP staking tokens.
Staking is critical to GoodDollar’s ability to generate and distribute crypto UBI. To show users the power of their contribution, we use a calculation called the Social APY (annual percentage yield). This sets out for each user how much G$ will be distributed to GoodDollar claimers each year as a result of his/her stake.
Social APY calculation:
Social APY is calculated according to the following equation:
Social APY = CAPR / Rr
- CAPR (contract annual percentage return) = The annual percentage return offered by the third-party protocol a user has staked to
- Rr (reserve ratio) = The ratio between capital in the GoodDollar Reserve and the total market capitalization of G$
For example, a stake of $100 to the GoodDollar Trust would enable the protocol to mint and distribute $10 worth of G$. If that stake is made to the Aave protocol (with an APR of 10%) and the reserve ratio stands at 85%, the Social APY calculation would be as follows:
Social APY = 10% / 85%
Social APY = 11.7%