First and foremost, I would like to express my gratitude to @gpestana for his invaluable support during the calculation process. He utilized code that closely mirrored real-world implementation and made significant contributions to this analysis. Additionally, I would like to thank the Parity data team for providing additional data support.
Overview
In a previous article (see details here: https://forum.polkadot.network/t/adjusting-polkadots-ideal-staking-rate-calculation/3897), I proposed a change to the calculation method for the ideal staking rate. The goal was to drive the ideal staking rate upwards as tokens flowed into the staking system following a large-scale unbonding event from the initial batch of parallel chain auctions. Our aim was to keep the staking rate below the ideal staking rate rather than exceeding it (for more details, see the previous article). The community quickly rallied together and the change was approved through OpenGov. In this article, I aim to reflect on this change and compare the rewards for stakers in the actual scenario with the simulated scenario without the implementation of this change. It is important to note that Polkadot’s inflation is fixed, so every token not allocated to stakers flows into the treasury.
Data
The graph below illustrates the changes in the staking rate and the two ideal staking rates (actual and simulated) following the implementation of the change over a period of time. As we can see, the change did indeed significantly increase the ideal staking rate. However, it took quite some time for the staking rate to catch up.
Personally, I had expected the staking rate to increase faster than it did in reality. However, the network experienced a period where the staking rate grew slowly, even decreasing slightly by the end of February 2024. Since April 2024, the staking rate has shown a steep and stable growth trend, gradually approaching the ideal rate. The graph below shows the net rewards for stakers (nominators + validators) between the actual and simulated scenarios. Values below 0 indicate that stakers received fewer tokens compared to the simulated configuration (resulting in more tokens being transferred to the treasury).
As shown in the graph, despite taking some time, the effects of the change have fully materialized, protecting stakers from excessive reward losses. The total difference in rewards between the actual and simulated scenarios (as of June 8th) is approximately 27,000 DOT. Stakers’ net rewards continue to increase and have just turned positive at the time of writing this article. As indicated in the graph, stakers are now earning approximately 150,000 DOT more in rewards per era (each day) compared to before the change. Over time, the positive impact of this change on stakers will continue to grow.
Conclusion
In conclusion, while the increase in the staking rate was slower than expected, the net rewards from implementing the change have turned positive and are expected to significantly accumulate with each passing day. This change has proven to be beneficial for stakers in the long run, safeguarding their rewards and ensuring that the staking system can adapt as parallel chain slot auctions gradually phase out in favor of supporting Agile Coretime.
If you would like to participate in the discussion of this article, feel free to share your thoughts on the forum: https://forum.polkadot.network/t/reflecting-on-changing-the-ideal-staking-rate-calculation/8576
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