Validator & Delegator Rewards

peaq tokenomics is designed in a way to incentivize different network participants. Validators play an important role in the network as they not only maintain the state by running a full node but also propose blocks, which are later validated by the Relay Chain validators.

Validators together with delegators receive 40% of the total rewards, consisting of new blocks being minted and transaction fees paid by the network users.

The active validator set consists of 32 validators, who are proposing new blocks in a round-robin manner. Any new block is being proposed by a single validator. The active validator set renews every round (1200 blocks or approximately every 4hrs). The mechanism of selecting validators in the active set is based on the total stake of the validator itself plus the stake of all of its delegations. If the active set is full and the new candidate has the exact same stake as the last member of the set (by total stake), the system favors the validator that has been in the pool the longest. This way we can ensure that only the validators with the highest total stake are periodically selected to be eligible block authors.

Delegators stake tokens on the validator of their choice, trying to select honest and well-performing validators. One validator can be supported by 32 delegators only. If there is a 26th delegator who would like to delegate to the same validator, then 32 delegators are selected based on the highest stake, and the delegator with the lowest stake is removed from the delegator list.

Total rewards are being split between validators and delegators using the following formulas:

Validator reward

(TotalRewards*ValidatorStake*ValidatorCoefficient)/(ValidatorStake*ValidatorCoefficient + DelegatorStake)

Delegator reward

(TotalRewards*DelegatorStake)/(ValidatorStake*ValidatorCoefficient + DelegatorStake)

ValidatorCoefficient is a parameter, which allows us to fairly compensate validators for their work of running and maintaining hardware nodes, while also compensating delegators based on the staked amount. Currently, ValidatorCoefficient is 8

Validator/Delegator reward calculation example

If validator Bob staked 1000 PEAQ and received delegations from Alice (100 PEAQ) and Ross (200 PEAQ) and total block rewards are 20 PEAQ. Then rewards will be distributed in the following way:

Bob: 20*1000*8/(1000*8+100+200) = 20*8000/8300 = 19.28 $PEAQ

Alice:20*100/(1000*8+100+200) = 2000/8300 = 0.24 $PEAQ

Ross: 20*200/(1000*8+100+200) = 4000/8300 = 0.48 $PEAQ

According to this model, delegators are incentivized to stake on validators with smaller total stake, as blocks are paying similar rewards, meaning that the delegator's portion of rewards will be lower when delegating to a validator with a higher total stake (self-bond plus delegated stake) when compared to a validator with a lower total stake.