🔁Distribution

An overview of the Distribution Module.

Overview

The distribution module enables a simple collection and distribution mechanism to passively distribute rewards between validators and delegators.

Summary

Key Concepts and Definitions

  • Community Pool: a pool of tokens funded by a portion of staking rewards (community_tax) that the dYdX community could use to fund contributor grants, community initiatives, liquidity mining, and other initiatives.

  • Distribution ModuleAccount Account: an account that collects and distributes trading and transaction fees among validators, delegators, and the community pool.

  • Staking Rewards: the total portion of the Fee Pool that a DYDX staker can claim at a given block.

  • Fee Pool: fee pool from maker trading fees (USDC), taker trading fees (USDC), DYDX-denominated gas fees from transactions, and USDC-denominated gas fees from transactions for a given block.

  • Staking Rewards Withdrawal: a DYDX staker may claim their portion of the Fee Pool for each block. If a DYDX staker does not claim staking rewards, their respective rewards will accrue in the Distribution ModuleAccount Account.

  • Total Bonded Power: the sum of all tokens that are currently staked by validators to themselves and tokens staked to validators by DYDX holders.

  • Block Rewards: fees distributed to validators and delegators for successfully proposing and validating a new block on the blockchain.

Parameters

These parameters may be adjusted by the dYdX Community with an on-chain governance proposal.

Staking Rewards

On the dYdX Chain, all transaction fees (trading fees denominated in USDC, DYDX-denominated gas fees from transactions, and USDC-denominated gas fees from transactions) collected by the protocol will be distributed to validators and DYDX holders that stake to dYdX Chain validators.

The Cosmos x/distribution module is a simple mechanism to allocate rewards earned by Validators and Stakers. For a detailed understanding of the Cosmos rewards mechanism, read here.

How rewards are distributed on dYdX Chain

DYDX holders who stake to (a) validator(s) are entitled to a portion of the following fees:

  • DYDX-denominated gas fees from transactions,

  • USDC-denominated gas fees from transactions,

  • USDC maker trading fees, and

  • USDC taker trading fees.

Fees will accrue in the Distribution ModuleAccount Account each block. Each block a DYDX staker may claim their portion of Staking Rewards. If a DYDX staker does not claim Staking Rewards, their respective rewards will accrue in the Distribution ModuleAccount Account.

Note, Staking Rewards are not automatically staked to a dYdX Chain validator. Any DYDX earned by a staker as Staking Rewards will need to be claimed from the Distribution ModuleAccount Account and staked to a dYdX Chain validator to contribute to the security of the network and qualify to earn staking rewards.

How staking rewards are calculated

  • Fee Pool = fee pool from maker trading fees (USDC), taker trading fees (USDC), DYDX-denominated gas fees from transactions, and USDC-denominated gas fees from transactions for a given block.

  • Number of DYDX staked by DYDX holder = total DYDX tokens that a dYdX Chain address has staked to (a) validator(s) at a given block.

  • Total bonded power = the sum of all DYDX that are currently staked by validators to themselves and DYDX staked to validators by DYDX holders.

  • Staking Rewards = the total portion of the Fee Pool that a DYDX staker can claim at a given block.

  • Community tax = A tax that directs a percentage of the fee pool to the community pool.

  • Validator commission rate = commission set by each validator and applied to the staking rewards of each delegator. Validators are required to follow the min_commission_rate parameter but are otherwise free to set their own commission rates.

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