Staking Rewards

What are staking rewards?

Staking rewards refer to the rewards received by wallets which are locking or staking their CHZ in the staking pool contract. Locking or staking CHZ is an essential component of the governance of the chain.

Staking rewards come from the CHZ used in gas fees paid for each transaction on the chain. So if a block includes 100CHZ worth of transaction fees, those CHZ are used to reward stakers (Validators and Delegators) for participating in the governance of the chain.

How are the fees in each block distributed as rewards?

The distribution of the fees collected in each block are distributed as follows:

  • 20% of the total fees in a block are taken by the network, to be reinvested into the chain

  • 80% of the total fees in a block are kept by the validator, and subsequently distributed to the delegators staking on that particular validator node.

Each Validator takes it in turns to create a block, so if we have 11 active validators, then each validator will create 1 out of 11 blocks, and keep the fees of that 1 block.

Validator Commission Fee

The validator commission fee is a fee taken from the cut of all delegator rewards. This is a fee that the validator keeps since they provide the service (i.e. running the validator node) so the delegators don't have to.

Therefore, if delegators keep 20CHZ and the commission rate is 10%, then 2CHZ stay with the validator and the rest is distributed among the delegators.

Example scenario

Let's say that a block has 100 CHZ rewards, and the validator has 10,000,000 CHZ self-staked and 10,000,000 CHZ delegated from many delegators. The delegator has also set the commission rate to 10%. The rewards will be distributed as follows:

  • 20% will remain with the network (20% * 100 CHZ = 20 CHZ)

  • 80% will go to the validator (80% * 100 CHZ = 80 CHZ). Those 80 CHZ will then be split 50% to validator and 50% to delegators since both are staking the same amount. We then need to reduce the commission rate from the delegators cut. This means:

    • Delegators' cut will be: 50% * 80 CHZ = 40 CHZ - 10% = 36 CHZ

    • Validator's cut will be: 50% * 80 CHZ = 40 CHZ + 10% = 44 CHZ

    The Delegators' cut is then distributed fairly among all the delegators of the specific validator, based on how much they originally staked.

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