The initial proposal was light on the implementation details and I wanted to follow up with more details on what the implementation could look like.
The essence of the proposed reward model is:
Reward Rate = Daily Global Rewards / TVL
This however is a bit simplified as it does not take into account that one dollar in the junior tranche count differently than one dollar in the senior tranche for example. In the most recent proposal token holders voted for the following different rates:
| Type | Reward |
|---|---|
| TIN Reward | CFG 0.00072 |
| DROP Reward | CFG 0.00048 |
| AO Reward | CFG 0.00004 |
To implement the global rate the reward mechanism takes these as points and multiplies each $ invested/originated in the different categories by this factor. These are example numbers. Rewards in practice will depend on actual TVL and will be different.
| Name | Amount | Factor | Points |
|---|---|---|---|
| Junior Token Value | $1,500,000 | 0.72 | 1,080,000 |
| Senior Token Value | $8,500,000 | 0.48 | 4,080,000 |
| Issuer Origination Total | $8,000,000 | 0.04 | 320,000 |
| Total Points | 5,480,000 |
This means the formula for rewards can be described as follows:
Reward per point = Global Rewards / Total Points
| Example: | ||
|---|---|---|
| Rewards per Day | CFG 30,500 | (set by governance) |
| Reward per Point | CFG 0.0056 | Rewards per Day / Total Points |
Effectively for the above example this would lead to the following reward rate:
| Type | Reward Rate per $ | |
|---|---|---|
| Rewards per $ in Junior | CFG 0.0040 | Reward per Point * Junior Factor |
| Rewards per $ in Senior | CFG 0.0027 | Reward per Point * Senior Factor |
| Rewards per $ in loans | CFG 0.0002 | Reward per Point * Issuer Factor |
Should the on chain poll pass, the reward mechanism will be updated to the above specification.