Rewards calculations
Rewards are calculated and distributed automatically by the protocol at every epoch. Stake pools have no control of the process. See Delegation Cycle to learn when rewards are distributed.
Rewards come from two sources:
- Transaction fees: All transaction fees from all transactions from all blocks created during the epoch will be added to the rewards pot of that epoch.
Monetary expansion: Every epoch, the total amount of ada in circulation is increased by adding ada to the rewards pot. These funds come from the Ada Reserve.
Calculations follow this steps:
- A fraction (20%) of the rewards pot for each epoch goes to the treasury.
The protocol calculates pool rewards, taking the rewards pot collected for an epoch and splitting them among pools that created blocks in that epoch. This calculation considers the pool's stake as proportion of the total stake, the pool's apparent performance and pool's owner pledge. - Pool Rewards are then split in pool operator rewards and pool member rewards as follows:
- The protocol first pays the fixed costs of the stake pool. A minimum of 340 ADA provided that the pool rewards are sufficient to cover that amount. If pool rewards are less than 340 ADA, the resulting amount is paid to the stake pool to cover part of the costs and no rewards are distributed among pool members.
- After paying the fixed costs, the protocol pays the margin to the stake pool as per the pool parameters set at registration (from 0 to 100%).
- Finally, the remaining rewards are distributed among pool members (including the pool owner) in proportion to their contribution to the pool's stake.
- The protocol first pays the fixed costs of the stake pool. A minimum of 340 ADA provided that the pool rewards are sufficient to cover that amount. If pool rewards are less than 340 ADA, the resulting amount is paid to the stake pool to cover part of the costs and no rewards are distributed among pool members.
Definitions:
Rewards pot: Total rewards collected for a given epoch
Treasury: Funds in the treasury are made available for decentralized development of the system (See Project Catalyst).
Total stake: Circulating stake including stake that is not delegate.
Apparent Performance: The slot leader schedule is not public, therefore it is impossible to know the real performance of a stake pool. As a proxy for the performance, the protocol uses:
Fraction of blocks produced by the stake pool in a given epoch
β = Blocks by stake pool / Total number of blocks for an epoch
Fraction of the Active stake controlled by the stake pool
σ = Pool stake / Active Stake
Apparent Performance
P = β / σ
Pledge: Pool owner's stake delegated to its own pool
Pool Operator Rewards: Rewards paid to the stake pool for producing blocks
Pool Members Rewards: Rewards distributed among pool members