How are the rewards accrued in Mina Protocol?
Mina Protocol is a next-generation Proof-of-Stake blockchain that stores transactions in succinct form. The Mina blockchain is only 22KB in size. It operates on Succinct proofs of state or SNARK-based compressed proofs of state. If you want to know more about Mina Protocol, please read the article.
This article aims to explain how the Mina Protocol delegation works, how to delegate your funds when your delegated funds start to pretend to win the blocks, how rewards are determined and how Everstake Block Producer will pay the rewards to delegators.
What is Mina Protocol staking and delegation?
Staking MINA tokens allows nodes on the network to increase their chances of being selected as a block producer for a particular time slot to create a new block and get a corresponding reward. The chance of winning the block scales in proportion to the amount of MINA staked.
Mina delegation is an alternative to direct staking, with the advantage that you don’t need to maintain your own node, which must always be online. The block producer (or staking pool operator) may charge a fee for running this service, which will be deducted any time the delegator gets selected to be a block producer. In return for delegations, the block producers share the corresponding amount of rewards with the delegators.
How to delegate MINA tokens?
If you are interested in MINA delegation, please follow one of our guides below:
When do your delegated funds start to pretend to win the blocks?
Blocks in Mina Protocol are produced within distinct time intervals called "slots.” Block producers may win the chance to produce a block during the slot (3 minutes duration). An epoch is a unit of time equal to 7140 slots. Therefore the epoch duration is 14 days and 21 hours. The staking data for the next epoch generates after 290 slots of the current epoch.
For example, let's consider three epochs (epochs 6, 7, and 8). After 290 blocks of epoch 6 are produced, the staking data for epoch 7 is generated. The delegators (that have delegated before that) will start to pretend to win block only from the beginning of the 7th epoch.
For that user who will delegate after 290 blocks of the 6th epoch, the delegation will be formed only after 290 blocks of the 7th epoch. And they will pretend to win some blocks only from the beginning of the 8th epoch. And so on.
How are rewards determined?
Each block producer in the ledger has a chance of winning each slot on the network, which allows them to create a new block and get corresponding rewards. The probability of winning is proportional to the amount of staked/delegated tokens.
Block rewards are determined as
Block reward = coinbase reward + transaction fees - snark work fees
Currently, transaction fees and snarkworkers fees are much smaller than coinbase rewards so to simplify the explanation let's assume that Block rewards = coinbase rewards.
The coinbase reward for producing a block is 720 tokens.
To encourage staking, Mina also offers Supercharged rewards for the first 15 months for accounts with unlocked tokens. For the first 5 months, supercharged rewards are 1440 tokens.
In the case, you are delegating the unlocked funds your account will have the chance to win a block that will be produced by the block producer to whom you have delegated your assets. Whether or not the reward is supercharged is based on the account that won the block, not the account that actually produces the block.
Example Reward Payout
Consider that block producer has 4 delegators with a total stake 200 000 MINA:
- Account A has 100 000 locked MINA (50% of total stake)
- Account B has 10 000 locked MINA (5% of total stake)
- Account C has 10 000 unlocked MINA (5% of total stake)
- Account D has 80 000 unlocked MINA (40% of total stake)
For each slot, one of these 4 accounts may win a block.
In the case, if the block winner is account A or B the coinbase reward for producing a block will be 720 MINA tokens. After that, the block producer will take some percentage as a fee. In the case of Everstake, the fee is 5%.
NOTE! The fee is different for different block producers. The next calculation is done for the Everstake fee (5%).
So the block producer fee will be:
720*0.05 = 36 MINA
The remaining 684 MINA (720 -36) will be distributed between delegators.
Account A will get 684*0.5 = 342 MINA
Account B will get 684*0.05 = 34.2 MINA
Account C will get 684*0.05 = 34.2 MINA
Account D will get 684*0.4 = 273.6 MINA
In this case, if the block winner is account C or D, the coinbase reward for producing a block will be 1440 MINA tokens (Supercharged rewards). In that case, the fee will be
1440*0.05 = 72 MINA
The remaining 1368 MINA will be distributed between delegators.
The delegators A and B will get the same rewards as before:
Account A will get 342 MINA
Account B will get 34.2 MINA
The remaining 991.8 MINA coins (1368–342–34.2) will be distributed between delegators with unlocked funds (C and D), proportionally to their delegation amount.
Account C will get 110.20 MINA
Account D will get 881.60 MINA
Currently, (on average) the annual yield is up to 12% for the locked tokens and 24% (Supercharged rewards) for the unlocked tokens. Please note that this estimated APY is not guaranteed and can change depending on how many blocks a particular block producer won and how many MINA tokens are staked in the network totally.
The Mina protocol does not automatically payout rewards to delegators. It is designed in such a way that block producers receive all block rewards and they need to split and manually pay the rewards to their delegators after deducting some fees. The Everstake fee is 5%, and rewards will be distributed after each epoch (before the 3500 slot of the next epoch).
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