An In-Depth Look into the Bluzelle Staking Economics

Reference: Copied from Bluzelle Medium

Participants from our Soft Mainnet may have already experienced that staking rewards are distributed on a daily basis. And instead of receiving a fixed amount of rewards, the rate fluctuated.

This is because Bluzelle’s staking economics are designed differently than other systems. It is designed in such a way that it will:

• Encourage loyalty
• Encourage tenure
• Encourage larger stakes

In this guide, we go more in-depth of how the daily rates are calculated by showcasing a series of scenarios.

Types of Rewards in the Bluzelle Network

There are two types of rewards that validators & delegators can get.

1. Network fees that are generated from all network transactions and will be shared among all participants in proportion to their stakes. Validators are allowed to get commissions from delegators. It shows up under the “reward” section in the staking dashboard. Participants are required to “claim reward” manually from the staking dashboard.
2. Staking rewards that the Bluzelle team has purposely allocated to incentivise the community to participate in the network at early stage. It is distributed on a daily basis and will show up directly on your available balance (not under the “reward” section on the dashboard).

⚠️ Disclaimer: this article will only refer to the second type.

Daily Yield

The targeted APY for Bluzelle staking is 25% APY. This is equivalent to 0.06115% daily yield. We also assume that all staking rewards are re-invested diligently, which means as soon as you receive your staking rewards, you stake all of them back into the pool.

Every day, our mechanism guarantees that the total rewards for the whole community pool is 0.06115%. That means if the whole pool has 10 million tokens staked, the total reward pool for the day will be 6115 BLZ.

However, how much of each individual will share from the total reward pool will vary from each other, depending on the staked amount as well as length of stake.

Maximum Rewards Pool

Bluzelle has allocated an annual BLZ rewards pools that will decrease over time. These allotted rewards represent 10% (50M) of the total supply over four years. Unallocated rewards from the previous year will be rolled to the next year.

Reward Calculation Mechanism

It takes a few steps to determine how much each individual should receive every day. Here, we assume Alice & Bob are the only two participants.

Step 1. Look at the proportion of an individual’s stake against the total stake in the pool on the current day.

Here, S represents the staked amount that Alice & Bob is holding on the current day. This value only represents the current state and does not matter when you put in the stake.

Step 2. Look at the proportion of an individual’s staking history against the full staking history over the past 90 days.

The historical stake is the running totals of the daily stakes for the past 90 days.

Step 3. Divide daily rewards pool for individuals

Total Daily Rewards (TDR) that the whole pool will receive is 0.06115% based on the TCS today.

Among the TDR, 25% of it is shared proportionally based on Current Stake %, while 75% of it is shared proportionally based on Historical Weighted Stake %. Therefore, the rewards for Alice will be computed as:

Now let’s take an example to understand how these formula work. Below is the staking status of Alice & Bob each day.

Now, based on the data, let’s calculate how much Alice & Bob will receive on Day 3:

From the above, we can see that Alice actually yields 0.06682% (equivalent to 27.6% APY) on day 3, which is higher than the community target of 0.06115%. This is how the stake amount & tenure come into play.

Below, we will go through 3 different scenarios to understand how your daily earnings can be impacted by the staked amount, tenure, and also activities of other participants.

Examples

Ex 1. Stake on same day, different amounts

Alice & Bob staked 1,000,000 & 2,000,000 BLZ respectively on Day 1.

The above table showed that both yielded the same rate at 0.06115% on a daily basis. However, since Bob has a larger stake, he also receives higher rewards proportionally.

Ex 2. Stake on different days, same amount

Alice staked 1,000,000 BLZ on Day 1 while Bob only stake 1,000,000 BLZ on Day 6.

From the above table, it shows that when Bob contributes to the pool on Day 6, Alice’s daily yield also jumps up. This is because the total staking pool increases. Even though Alice & Bob put in the same stake, Alice has a higher historical stake % because she started staking earlier, leading to a higher daily yield than Bob. As Alice & Bob hold their stakes longer, their actual day rate will gradually regress to 0.06115% and becomes stable afterward.

Ex 3. Unstaking from the pool

Alice staked 1,000,000 on Day 1. Bob staked 1,000,000 on Day 5. Alice then unstaked everything on Day 9.

From the above table, it shows that even though Alice unstaked everything on Day 9, she still receives daily reward because she still shares a historical stake % from the previous 9 days. Her rewards will gradually decrease to 0%. Bob’s yield also decreases due to Alice leaving the pool.

Conclusion

Now, you all understand that your reward is determined by the current state as well as the past 90 days activities of the whole pool. It’s difficult to project the yield for tomorrow, next month, or the whole year because it is highly impacted by any future activities. The formula and above examples imply that:

• The higher stake you have, the higher daily rewards you get compared to other participants in the pool
• The longer you hold your stake, the higher daily rewards you get compared to other participants in the pool
• If more stakes are contributed to the pool, you get higher daily rewards as well
• If you unstake, you still earn some rewards because your past 90-day staking history still takes effect. Your daily rates will slowly regress to 0% till 90 days after you unstake.

There are several advantages of Bluzelle’s complex staking model:

• Rewards are distributed on a daily basis and become immediately available upon receipt. Participants have the freedom to withdraw or re-invest your daily rewards
• By staking earlier and longer, you get the opportunity to earn more than 25 APY
• There is a network effect. The more people join the staking pool, the higher yields people can get. This will incentivise more participants to stake or invite others to do so.

Check out for more detailed info: https://blog.bluzelle.com/an-in-depth-look-into-the-bluzelle-staking-economics-2f7a9201ad8d