We Struck Gold!

As we’ve mentioned before, it’s important to reward folks fer their contributions, and of course, there’s a couple of different ways to do this. Why, you can pay ‘em fer the work they do on a per-hour basis, or you can set a fee fer a job and have ‘em work based on that! Whatever you decide, there’s no denyin’ that rewards and incentives play an important role in gettin’ folks to do somethin’, and as long as you reward ‘em fairly, they’ll probably be willin’ to do the work over and over again.

Just how much you reward someone depends on a whole bunch of different things - their experience, education, skills and so on all need to be taken into account. But in certain situations, it’s better to pay everyone more or less the same (unless yer fixin’ fer an insurrection partner!) Naturally, it’s also better to pay certain folks more in other circumstances (like payin’ advisers or foremen fer helpin’ you run a lucrative minin’ operation). And then, in some cases, you might not want to reward anyone - at all…

Say what!? Well yeah, sometimes you might want folks to contribute or help out of the goodness of their hearts, or maybe you have somethin’ non-financial to reward ‘em with. There are plenty of cases where no reward might apply, strange as it might sound. It’s all up to you to decide just how you want to motivate folks, and this will certainly depend on what kind of system you plan to implement!

Reward Offered!

Block rewards are awarded to validators for creating a new block and may or may not include transactions. These rewards can take various forms, and exactly which one you decide to use will depend greatly on what your economic incentives for validators and delegators are in order to keep the network secure.

Validator Strategies

Strategies for rewarding validators are configured via milestones for the whole blockchain. Every validator will receive rewards using the same strategy. Fortunately this strategy can be changed using milestones should you ever need to at a later point in time.

You Ain’t Gettin’ a Penny!

The most basic strategy that you probably won’t be using much is the nil strategy (unless you have off-chain incentives for validators to secure the network). Using this approach will reward nothing to a validator for producing a block with the fees being burnt instead.

Yer Gettin’ Tips, and That’s It!

This strategy rewards the consumed transaction gas to validators for producing blocks. This is a good strategy if you want to create a deflationary environment since no new tokens will be created when a block is produced. In essence, existing tokens simply change hands.

Yer Gettin’ a Set Salary, and No More!

This strategy rewards a fixed amount of tokens to validators for producing blocks. This is a good approach if you want to create an inflationary environment by creating more tokens every time a new block is produced. However, be cautious with how much you reward so that you don’t end up with hyperinflation!

Yer Gettin’ a Set Salary…and Tips!?

This strategy rewards a fixed number of tokens as well as the consumed transaction gas to validators for producing blocks. This is the strategy for those environments that aim to maximize rewards for participating in the network because new tokens will be created and gas will be awarded to validators.

As with the previous strategy, exercise caution here - using this approach, the wealth of validators will grow significantly faster if they decide not to share any rewards with delegators or a whale. For this reason, it’s important that you take your economic goals into account before choosing to use this strategy.

Delegator Strategies

Strategies for rewarding delegators are configured per validator. As such, they have the power to change them whenever they like (provided they possess all key pairs required to do so). It’s their job to decide how they wish to reward their delegators for staking with and putting their trust in them.

You Ain’t Gettin’ Diddly Squat!

The most basic strategy that (again) you probably won’t be using much is the nil strategy (unless you have off-chain incentives for delegators to vote for a validator, of course). In this approach, nothing will be awarded to a delegator after their validator successfully produces a block.

Yer Gettin’ the Same as Everyone Else!

This strategy equally distributes a percentage of a validator's rewards to its delegators. This is the best approach if you want to treat every one of your delegators as an equal, regardless of their economic standing.

Bear in mind that this comes with its own drawbacks - in this case, high-stake holders don’t really have any incentive to stake. As a result, they may instead decide to become validators themselves because their individual wealth won’t have any impact on the staking rewards they earn.

Yer Gettin’ Paid Accordin’ to Yer Contribution!

This strategy distributes a percentage of a validator's rewards to its delegators according to the equity (or stake) of each delegator. This is the most common approach because it rewards delegators based on their economic standing and financial input. It therefore encourages high stake holders to choose validators that take their job seriously because it is these validators who will ensure that their delegators receive adequate compensation on a consistent basis.

So Which One Should I Pick, Pilgrim?

There really isn’t any one approach that’s necessarily better than another - we would love it if some kind of simple formula existed, but that’s just not how it works. For this reason you should take the time to talk to your team and figure out exactly how you’d like to reward validators. And if you’re a validator, consider what it is you’re trying to promote to delegators and what they’ll receive as an incentive in the even that it isn’t a share of the block rewards you receive.

Regardless of what you choose, ol’ Buckley always takes the time to distribute rewards accordin’ to the rules of the system, so you can rest assured there’ll be no problems on that front!