How is the APR calculated

Questions
1

Hello,

I’m new to Fx and I’d like to start getting involved. May I ask how is the Validator’s APR calculated on the Mainnet?

Thanks!

2

Hi Lobster, welcome to Function X!

First off, Function X has a dynamic inflation rate mechanism that fluctuates based on the total bonded tokens.

Example: (it doesn’t fluctuate that wildly, for illustration purposes only)

image
image1162×651 68 KB

There are a few factors that affect the APR - it changes every block depending on the bonded tokens.

DYNAMIC INFLATION RATE

  • If the staking ratio falls, the block emission will increase accordingly
  • If the staking ratio rises, the block emission will decrease accordingly

There is a maximum ceiling and a minimum floor parameter to ensure the inflation rate will not either drop to zero or sky rocket.

image
image728×289 37.8 KB

The reason why block emissions increase when the bonded ratio drops is to incentivize the community to delegate to reach the target of over 51% staked to better secure the network and avoid network manipulation.

VALIDATOR’S COMMISSION

  • The APR varies since each validator has a different commission

Rough Delegation Reward Formula:
( Total Delegated Tokens / APR ) / 365

This will give you roughly the same calculation as what is shown on the Estimated Daily Rewards

Validator’s Reward Formula:

[(Total current token supply * inflation rate * current staked ratio * block) * (1- community & ecosystem tax rate)] * [(total self delegated token / total staked token of the node * (1-commission rate) * participation period + commission earning]

Note: Inflation rate is not reward rate.

  • Inflation is the total emission per block (fluctuates)
  • Reward rate is after you deduct the community and ecosystem tax and other calculations

If anyone spots any inaccurate information, feel free to correct me! I’m always learning.

5 Likes
3

Wow, thanks for the detailed breakdown, I’ll definitely take some time to digest this :smiley:

I just have a few questions to ask:

  1. Is the current staked ratio: (total bonded fx tokens overall / total supply) or is it (total bonded fx tokens for the Validator / total supply)?

  2. In a very hypothetical scenario, if I delegated 5 FX to a Validator 16 days ago, and this Validator has a commission of 1%, and say my rewards from this Validator is now 0.38FX, would my APR be: about ~200%?

I’m new to this APR thing too :sweat_smile:

4

Yup current staked ratio = total bonded fx tokens overall / total supply

image
image228×199 10.9 KB

Yup, if you delegate 5 FX and you get 0.38FX in 16 days without compounding - the APR is around 173% ish.

2 Likes