Validator Rewards and Fees

Validators declare a commission percentage , which determines the spread between the base reward rate and the reward rate for their delegators , or equivalently .

Validator rewards are distributed in the first block of each epoch. In epoch , a validator whose delegation pool has size PENb receives a commission of size PEN, issued to the validator’s address.

To see why this is the reward amount, suppose validator has a delegation pool of size PENb. In epoch , the value of the pool is PEN. In epoch , the base reward rate causes the value of the pool to increase to

Splitting as , this becomes

The value in the first term, , corresponds to the portion, and accrues to the delegators. Since , this is exactly , the new PEN-denominated value of the delegation pool.

The value in the second term, , corresponds to the portion, and accrues to the validator as commission. Validators can self-delegate the resulting PEN or use it to fund their operating expenses.

Transaction fees are denominated in PEN and are burned, so that the value of the fees accrues equally to all stake holders.

TODO

  • allow transaction fees in PENb with appropriate discounting, but only in transactions (e.g., undelegations, voting) that otherwise reveal the flavor of PENb.