Explainer: Stader Staking Rewards Mechanism
The purpose of this article is to clarify the staking rewards on Terra and the benefits of Stader’s unique mechanism.
This article has the following sections:
Stader’s key value proposition for Terra users is the following. Most users stake Luna to get Luna rewards vis-a-vis stables. Stader adds value by doing the following.
2. Auto-convert stables to Luna and auto-compound it. Currently, stable coin rewards are at 40% of staking rewards. Long term stakers can take advantage of Stader via:
Gas fees become prohibitively expensive if a user manually compounds daily or at high frequency. With Stader smart compounding, typical user staking 50–100 Luna is saving significant gas fees while enjoying compounding
1. 3 types of gas fees. Claiming rewards, swapping stables and staking Luna. These gas fees are borne by Stader when you stake with us
2. Gas fees depend on frequency of compounding, # validators staked
Staking rewards on Terra have 3 major components:
2. Stablecoin yield
3. Airdrops (ANC, MIR, VKR, MINE currently)
Stader smart compounding benefits users in 4 ways as discussed in several AMAs:
Compounding Luna staking rewards.
Claiming and converting stables to Luna and staking.
Gas fees incurred while swapping, re-staking (Stader bears this)
2. For an average Luna staker (50–200 Luna), these costs are prohibitively expensive vis-a-vis rewards to do frequent compounding.
Staking rewards and air drop strategies (To be launched)
2. For a 50 Luna staker, gas costs 26% of staking rewards (2.5% APR) to compound even 3 times per week at 10% staking APR.
Gas fees (as % of rewards for 50 Luna staked)
*Each compounding event incurs 0.5 UST gas fees for staking, swapping and restaking leading to ~182 UST per year for daily compounding. Luna = 60 UST. Refer to Appendix 1 for further details
Stader charges 3% of staking rewards as plain staking fees. We do the following:
LunaX is a liquid staking token and key utility is the following:
E.g. Additional returns on leveraging LunaX
Under manual compounding, gas fees incurred by users during compounding has 3 components:
*Average fees estimated based on 10 sample transactions. Stader pays for all the gas fees when you stake with Stader as we optimize fees. 1 Luna = 60 UST
For daily compounding,
Table below shows gas fees as a % of staking rewards for daily compounding.
Gas fees become prohibitively expensive even for users staking 100+ Luna if they want to manually compound daily.
2. Swapping stables to Luna (Min 0.3 UST)
Gas fees as a % of staking rewards for a 50 Luna staker are prohibitively expensive to do this frequently.
Assumed 1 Luna = 60 UST.
Stader’s smart compounding avoids all these gas costs generating superior returns vis-a-vis normal staking.
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