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# IV.2 The rewards decay

We implemented a rewards decay system that causes a decrease of ROI over 1 year.
Why? Because with the daily decay, we encourage holders to recreate new nodes rather than only sell their profits.
It is also an efficient anti-whale system:
If whales do not play the long game, they are penalized by earning less and less.
Here’s the percentage of decay for each node:
-> Zeus Node: -0,33%/day
-> Ares Node: -0,43%/day
-> Kratos Node: -0,54%/day
-> Apollo Node: -0,65%/day
Before explaining the interest of the Daily Decay System, here is its mathematical formula:
RNE = Rewards Next Epoch (8 hours)
Decay = Decay coefficient per epoch
RPE = Rewards Previous Epoch
$RNE = RPE - ( (RPE/100 )*Decay)$
Example:
With a Zeus node at 100 $PHI you receive 0.33$PHI at the first epoch.
At the second epoch you receive:
RNE = 0.33 - ( (0.33/100)*0.11)
RNE = 0.3296
At the third epoch you receive:
RNE = 0.3296 - ((0.3296/100)*0.11)
RNE = 0.3293
In total after 3 epochs (one day) you receive:
Rewards epoch 1 + Rewards epoch 2 + Rewards epoch 3
= 0.33 + 0.3296 + 0.3293
= 0.9889
At the end of one day you will receive 0.9889 $PHI. This mathematical decay formula is valid for 1095 epochs or one calendar year. After the 1095 epochs, the ROI per epoch will remain 0.099$PHI, or 0.297 $PHI per day. This makes a monthly return in the second year of$8.91PHI per month.
Here is a graph allowing you to visualize the decay curve for the Zeus Node:
A clear view of the mathematical function of the decay.
Here is a simple sheet for the Prometheus Rewards Decay Calculator made by one of the member of our community.
What is the point of such a decay system?
When we analyzed most node projects, a common trend emerged: the inexorable decline in the price of the native token.
The reason for this is that users are converting the protocol's native token into stablecoin. This is totally normal because in the real world it is not (yet) possible to pay your rent, bills or gasoline in $CAKE,$STRONG or \$PHI.
This price drop is also multiplied by the inflation of the supply available on the market.
Traditional DAO tokens like Olympus DAO / Wonderland / Jade / ATLAS show that this business model has not yet proven itself in terms of price stability despite the incentives of the (3.3) rule and other variants.
This is how the rewards decay was born.
Instead of encouraging inflation of the supply of the token in circulation, we think it is better to reduce it.
This decay mechanism allows us to:
=> Limit the supply available on the market;
=> Reduce the bearish pressure when users take profits;
=> Offer sustainability to the protocol in order to offer returns in the long term.
The decay system is only one of the stability guarantee mechanisms implemented in the Prometheus Protocol.
See the other Prometheus price stability mechanisms: