What should be the APY of 2-week vs 1-year rewards?

What should be the net yearly reward of staking and compounding every two weeks (over the course of one year), vs just staking once for one year?

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Apy for 2 week: 7%
Apy for 1 year: 11.5% + able to farm locked coins in avaxwap ( foundation staked coins to be distributed to all liquidity provider)

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if my calc is wrong, someone correct me, but thats what i got, quite close number aproximations

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Another idea related with aggregation like Yearn Ecosystem Token Index (YETI) which includes
YFI %35
SUSHI %17
others %8
etc…
You may mint that kind of token in Avaxwap as a LP token and provide higher APY for both 1 year validator and dex liquidity provider
Also you may consider ATH distribution to 1 year validator.

Another one: ) Orion protocol partners with Elrond . Orion is one of dao maker project. Dao maker is going to tokenize their business model and havent done TGE yet. Have you talked with them to run their tokenized model on Avalanche? that will be perfect for avalanche ecosystem. Many decent upcoming projects use dao maker platform to tokenize their business.
what ı would like to say that ıf you partner with Dao maker, you can get airdrop of their upcoming project tokens and distribute the 1 year validator.

I think 7% or 7.5% net yearly reward if staking every 2 weeks and 11.5% or 12% for the full year would be good.

Security of the network is the most important thing, so don’t want to discourage users from staking if they don’t want to lock up for a whole year but at the same time encourage longer term staking. It needs to be competitive against other potential yields that maybe available. (not sure whether staking tokens could also be used for additional use cases as I believe this was something that was possibly mentioned previously)

Additional rewards could also be from another token. As an example, (and I really haven’t put a lot of thought into it lol), but maybe there could be a lottery where the staking rewards from the foundations tokens are the initial reward. New tokens for the lottery are minted and sold at $1 or w/e for a chance of winning the prize. There could be a basic DAPP where you select numbers and ticket is written to the blockchain as metadata for proof. The winning results numbers are from an actual large televised lottery through oracles and only need to get say 3 or 4 numbers to make it more likely to win. When someone uses the ticket with their numbers, the token is burned. If nobody wins, then the prize rolls over and 100% of the funds from people buying tickets goes into the reward pool.

You could then either have a scenario where if nobody wins the lottery each week for a quarter then either a large % of the funds gets distributed to the validators that stake for 6 months or over (with higher reward ratio the longer you stake, and the more AVAX you stake). Or instead you reward lottery tokens to the validators and they get free chances of winning the reward.

To create awareness for Avalanche and the lottery you could also airdrop a small amount of lottery tokens each to various other token holders each week, so one week to ETH holders, the next week to another ERC 20 token holders etc. They would need to claim their reward, maybe get them to use the bridge and ultimately show the speed and low finality of Avalanche. More a case of raising awareness and usage of the platform / lottery and bit of fun.

A percentage of the rewards could also be put into a DAO and used for other projects / use cases. Any rewards could also be distributed slowly each week over a year or something to prevent mass sale of tokens (would actually mean more tokens are locked up overall).

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IMO, the range should be kept between 9.5%-12%, keep it relatively close. The reason is to incentivize dynamic participation within the ecosystem. The heterogeneity of the architecture means that as the chain’s activity grows/branches out, so too does the dynamic nature of decisions being made on it expand. One should help along as much short term activity as there is medium and long term activity.

It is harder to induce dynamism in a community than to create conformity, thus the better way is to reduce conformity by not punishing dynamism. Who is to know what all the benefits are best in staking for shorter periods of time and remaining agile is, for validators/services/use cases? (Common sense goes: lock longer for more rewards, but what happens when new uses and projects(Recent Pangolin project etc) require token participation some time in the middle of the 1 year staking period? Oops, can’t participate at that point in time because one’s holdings have been staked for max returns already. Would have to wait it out. Could lead to less participation in future organic community outputs.)

Like the posters above have also mentioned, rather use another type of token/incentivization program/idea to induce more 1 year staking nodes. Keep the primary rewards as friendly as possible to all entrants and types of services/projects by having a smaller APY range difference. There will be pros and cons of short and long term staking that can’t be predicted
particularly with regards to project use cases. When some users see that staking, even in the short term, is relatively as profitable, they could be more inclined to try different things on the chain too, and within the ecosystem of projects that are yet to be imagined still, with parts of their holdings for different periods of time.

In conclusion, if the staking rewards system is geared too much towards a 1 year period, conformity occurs, and one may find in the long run the staking environment can become stale(locked holdings means one can’t use them within the ecosystem for that period of time), since to get more of the overly geared unbalanced rewards structure, the logical outcome for people will be the longer the better, and thus you lose some dynamism of different actions by the coin validators, services and organic projects in the community within that locked 1 year period of time.

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Where can I find more info on this farming?

Dear Kevin.

I’ve calculated it to just over 19%, compounding 10% every 2 weeks for the entire year.

You would have to keep doing it again and again though. If you miss the deadline or a day it knocks things off a bit.

I can’t wait for a better UI. I know this will be a huge winner in the end.

Interesting take. Why, then, have any difference in APY at all?

I’m leaning towards the opposite. Skewing APY in favor of long staking periods isn’t meant to disincentivize dynamic participation, it’s about paying fairly for the opportunity cost & risk associated with locking assets for extended periods. The current implementation forces people to cycle in and out of their staking positions every other week. It’s exciting for short term speculators, but not great for aligning incentives between investors and the long term success of the platform.

I’d personally go as far as to parametrize it linearly such that max APY ~ 4x min APY with a single governable inflation parameter. So, for instance, an 8% YOY inflation at 80% staked with 20% capital validating for 2 weeks and 80% validating for 1 year would be lead to ~ 2.95% APY for 2 weeks and 11.8% APY for a year. Inflation is a metric most people want to be aware of and it should be leading the discussion here, so it seems sensible to define APY in its terms and not the other way around.

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Yes, what you bring up is what my post was going against the thought process of that you have described.

There doesn’t need to be a difference in APY at all in terms of staking over a time period. The only reason is to “secure the network.” (Which is meaningless when there are so many participants who will naturally setup their staking for different periods of time due to their own choices and circumstances.)

Skewing APY in favor of long staking periods isn’t meant to disincentivize dynamic participation, it’s about paying fairly for the opportunity cost & risk associated with locking assets for extended periods. The current implementation forces people to cycle in and out of their staking positions every other week. It’s exciting for short term speculators, but not great for aligning incentives between investors and the long term success of the platform.

It isn’t meant to as an outcome but it will, which is what I had described. Yes you are right, so if the opportunity cost is too high to not stake for the maximum length of time, most, if not all, would logically be forced to stake for 1 year, because it would be a pitiful return to stake for 2 weeks if is too skewed. Thus, one gets a dead chain since low levels of transactions occur with most coins being locked up. And one would only see transactions volumes go higher on the chain when rewards are released when most put up max period of time to stake. Alignment of incentives and long term success of the platform means usage of the platform in my opinion. As a native token of the platform, it isn’t going to be successful if most of the coins don’t move around for large parts of the year. This is one area of weakness in PoS systems. Locking it up may secure the platform in many minds, but does it really? Incentives therefore should be designed to facilitate more use of the native coin leading to the long term success of the platform. (In my opinion, staking is only one use case.)

Your final point I know well. And it is why I disagree with that route. It has been done before and many PoS become dead chains because of this design. Inflation is a non-factor when usage and growth of the participants expand alongside one another. The type of scenario you have constructed is one where there becomes too many coins minted within the ecosystem, thus over-supply. It is understood, though that is a non-expansionist type of approach. Over-supply to what? To who? A hard-capped coin plays a big role in this difference between what is deemed as an inflationary coin. Tezos and others have to worry about inflation because they don’t have a hard cap, unlimited coins over time. That is inflationary proper.

I’d personally go as far as to parametrize it linearly such that max APY ~ 4x min APY with a single governable inflation parameter. So, for instance, an 8% YOY inflation at 80% staked with 20% capital validating for 2 weeks and 80% validating for 1 year would be lead to ~ 2.95% APY for 2 weeks and 11.8% APY for a year. Inflation is a metric most people want to be aware of and it should be leading the discussion here, so it seems sensible to define APY in its terms and not the other way around.

In a way, we are trying to construct what is the meaning of long term success for all holders of AVAX. The points mentioned for long term success, may actually be short term thinking, because inflation as you pointed out is linked to per year, but if you took the overall full spectrum tokenomic graph up until the hard cap is reached, the real long term success isn’t led with the inflation APY metric as the leading discussion point.

A good way to test what we are talking about, is to create a subnet with your exact parametization. And you may find most times out of ten, the coin holder will take your 11.8% and have their coins locked for the year. It leaves your subnet with hardly any transactions within it, because everybody wants the 11.8% compared to the 2.95% obviously. Effectively forced/engineered a dead chain. And then you may wonder, what is the point of having transaction speeds of 4500/tps with fast finality when the only thing it is used for is to return the annual rewards? Thus why in my opinion, that type of design(heavily skewed rewards APY) does not lead to long term success of the platform. Try it on a subnet please.

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Fair enough Alan, you’ve changed my mind.

I vote for a single rate for 2 weeks and 1 year periods to incentivize on-chain liquidity. Longer period validators will still benefit a bit more from being able to provide more flexibility to delegators. From a network security reason 1 year vs 2 weeks cycles doesn’t make much of a difference as far as I know. Let’s reduce staking friction as much as possible. I’m also all about reducing the numbers of governable parameters.

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Staking should be the primary use of AVAX as it secures the network. You have to be careful when you have other use cases for the native token such as yield farming / lending platforms etc which offer a higher rate than staking as it can have negative consequences of the security of the network. If an attacker decides to offer a much higher rate short term, resulting in stakers deciding to move their AVAX to them for higher rewards then the number of AVAX securing the network decreases and thus an attacker requires less stake to attack the network (maybe the attacker could then use those to stake as well to further increase their proportion to the amount staked?)

A longer lock up period should be encouraged and proportionally rewarded imo. AVAX isn’t the only token on the platform, there will be many other tokens and of course there are still fractions of AVAX which can be spent so it’s not like they are ever going to run out and the network can still flourish without AVAX being used directly for every use case. Having a longer lock up period should also have a more positive effect on the price as well, albeit i understand the more the entire network is worth then maybe less proportion of stake is required to secure it (like ETH 2.0 for example). With ETH 2.0 though there are higher rewards the smaller amount staked, so maybe something similar can be introduced in Avalanche to always ensure there is a certain amount staked by offering a very high percentage under certain thresholds.

If validators also only do 2-week periods, then I don’t believe there can be any delegators as it’s not sufficiently long enough? (not 100%).

I’m not saying there shouldn’t be any additional use cases for AVAX, but staking should always be the most important and should be wary about potential attack vectors using it with other solutions offering higher yields may introduce.

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