Since the inception of our Mainnet staking pool, the enthusiasm from our community has been commendable. Over 4.6 million Mainnet NUM tokens have been staked in the previous pool, underscoring its wide acceptance and popularity among our users. It's evident that our community appreciates the potential advantages of engaging with our Mainnet ecosystem, and we are deeply thankful for their trust and active participation.
However, we have noted that a single wallet, holding a significant amount of staked NUM, has garnered a considerable portion of the rewards. Consequently, the Annual Percentage Yield (APY) of the Mainnet staking pool is currently lower than APYs on some other networks. This might be less enticing for potential and smaller stakers. To ensure a more balanced staking pool that appeals to a diverse range of stakers, we will soon introduce quadratic staking alongside our traditional pool.
This topic has also gone through our Community Review phase back in June 2023, and we were glad to see our community’s enthusiasm toward this new staking pool. You can check out the full discussion of our Community Review here :
https://github.com/numbersprotocol/community-support/issues/313
How does Quadratic Staking work?
For any amount of NUM that a user stakes in the pool, it will undergo a square root function before being added. For instance, if you stake 10,000 NUM, the quadratic pool will determine your staking power by applying the square root function to the amount of NUM you've staked, which is 10,000 in this example.
√10,000 = 100,
This 100 multiplied by the time you stake in the pool is your power to share the final rewards.This implies that you will participate and earn rewards in the pool as though you've staked 100 NUM. Once the staking period concludes, you will retrieve the 10,000 NUM you originally staked, in addition to your staking rewards.
Wouldn’t this mean I will stake less NUM and get a lesser reward?
Not necessarily, no. Everyone who participated in the pool will also have their token go through a square root function. So instead of having a measly 7% APR reward when the pool gets congested by 4 Million staked NUM, you’ll instead have more APR (estimated 150% - 1000%+) even with a smaller stake amount.
This seems confusing, what if I want to stake but not with a Quadratic rule?
We understand that this may seem complex. If you'd like to stake without the quadratic rule, we will be offering both a Traditional pool and a Quadratic pool for users to select from. You can continue staking in the traditional pool if you prefer. Although the quadratic approach might appear daunting initially, we encourage you to give it a shot. It might yield better rewards in the end compared to exclusively using the traditional pool.
Here's a hypothetical scenario to illustrate how the quadratic staking might be more beneficial:
Two new pools are introduced, the reward for each pool is 40,000 NUM. Currently there’s two users who are interested in staking their NUM. Staker A with 20,000 NUM, and Staker B with 2,000,000 NUM.
Staking in Traditional Pool :
- Staker A stakes 20,000 NUM for 100 days and will receive 396 NUM in reward after the pool ends. Making their total amount to 20,396 NUM.
- Staker B stakes 2,000,000 NUM for 100 days and will receive 39,604 NUM in reward after the pool ends. Making their total amount to 2,039,604 NUM.
In this Traditional Pool, the rewards are directly proportional to the amount staked. As a result, Staker B, who has staked a significantly larger amount, receives a correspondingly larger portion of the rewards.
Staking in Quadratic Pool :
- Staker A stakes 20,000 NUM for 100 days and will receive 3,636 NUM in reward after the pool ends. Making their total amount to 23,636 NUM.
- Staker B stakes 2,000,000 NUM for 100 days and will receive 36,364 NUM in reward after the pool ends. Making their total amount to 2,036,364 NUM.
In the Quadratic Pool, the distribution of rewards is designed to benefit smaller stakers like Staker A more than it would in a traditional pool. Although Staker B still receives more rewards due to their larger stake, the difference in rewards is less dramatic.
From the example provided above, it's evident that upon the conclusion of staking, Traditional staking pool will benefit users with higher amounts of NUM staked than users with smaller amounts of NUM. While Quadratic staking pool also share rewards to users proportional to their amounts of staked NUM, will still benefit smaller stakers more than Traditional pool.
We plan to launch the Quadratic staking pool in November 2023. If you have any questions about this new staking mechanism, we invite you to join the discussion in our official Telegram group here : https://t.me/numbersprotocol
