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Reward Calculations
At the end of every epoch, stakers and market makers receive rewards in PSP. Let's look into the glossary before we dive into the reward calculation formulae
• Volume traded on each Market Maker during the epoch:
$v_i$
• Total PSP staked on each Market Maker at the end of the epoch:
$s_i$
• Total staking rewards distributed per epoch:
$R$
• Total market-making rewards distributed per epoch:
$M$
• Stakes of an individual user o​n a market maker:
$u_i$
• Total number of market makers:
$n$
The total rewards distributed to MarketMakers and StakingPools are fixed for every epoch. These rewards are distributed to individual MarketMaker or StakingPool based on weights. The weights for both Staking Pool rewards and Market Maker rewards are calculated using the same formula:
$\sqrt{v_is_i}$
The above weights are normalized and scaled by
$R$
and
$M$
to get exact Staking Pool rewards and Market Maker rewards
Therefore the Staking Pool reward for a particular epoch is given by
$r_i = R \frac{\sqrt{v_is_i}}{\sum_{j=1}^{n}{\sqrt{v_js_j}}}$
Similarly, the Market Maker reward for a particular epoch is given by
$r_i = M \frac{\sqrt{v_is_i}}{\sum_{j=1}^{n}{\sqrt{v_js_j}}}$
​As the rewards are distributed uniformly between all the stakers of the pool. The total rewards received by a user would be the sum of proportional rewards received by individual pools
$TotalUserReward = \sum_{i = 1}^{n}{\frac{u_i}{s_i} r_i} = \frac{R}{\sum_{j=1}^{n}{\sqrt{v_js_j}}} \sum_{i = 1}^{n}{u_i\sqrt{\frac{v_i}{s_i}}}$
ProTip: The most profitable Market Maker to stake is the one that has the highest Traded Volume
$v_i$
to Staked
$s_i$
​ ratio.
The current
$R$
and
$M$
are both set to 0.125% of the supply (2.5M PSP) and the epoch length is 2 weeks. All the market maker rewards received at the end of the epoch are vested on chain: 50% after 6 months and the rest 50% after 1 year. Everything above is subject to change by the governance.