Reflecting on Changing the Ideal Staking Rate Calculation

I would like to thank @gpestana for his invaluable support in calculating numbers using code very close to the actual implementation and contributing significantly to this analysis. I would also like to thank the Parity Data team for providing additional data.


In this post, I advocated for changing the ideal staking rate calculation to effectively push the ideal staking rate higher in anticipation of an influx of tokens to the staking system after large unbonding events from the first batches of parachain auctions. The goal was to have a staking rate that remains below the ideal staking rate rather than overshooting it (for more details, read the post above). The community quickly came together and passed the change through OpenGov.

In this post, I want to reflect on the change and compare the actual situation in terms of staker rewards to a simulated scenario in which the network hadn’t implemented that change. Note that Polkadot has fixed inflation, so every token that is not allocated to stakers would go to the treasury.


The graph below plots the staking rate and the two ideal staking rates (as it is now and simulated) for the period after the change was enacted. As we can see, the change, as expected, significantly increased the ideal staking rate. It took quite some time for the staking rate to catch up.

Personally, I had expected a much quicker increase in the staking rate than we actually observed. However, this was not the case, and the network experienced a prolonged period where the staking rate did only increase slowly, dipping down towards the end of February 2024. But then, since April 2024, the network has seen a steep and steady increase in the staking rate, closing the gap towards the ideal rate.

The following graph plots the net benefit for stakers between the actual and simulated situations. A value below 0 means that fewer tokens were minted to stakers (nominators + validators) compared to the simulated configuration (and, as a result, more tokens were diverted to treasury).

As we can see, it took some time, but especially recently, the benefits of the change have taken full effect and protected stakers from overly losing rewards. The total difference between actual and simulated rewards (until 8th of June) is approximately 27’000 DOT. The net benefit for stakers is increasing continuously and, as of writing, has just turned positive. As shown in the graph, a single era (i.e., each day) currently increases the benefit for stakers by around 150’000 DOT compared to the situation before the change. With every passing day, the positive impact of this change for stakers increases.


In conclusion, while the increase in the staking rate was slower than anticipated, the net benefit of the implemented change has just turned positive and is expected to accumulate significantly with each passing day. This change has proven to be beneficial for stakers in the long run, protecting their rewards and ensuring a staking system that is adjusted to the new circumstances of a deprecation of parachain slot auctions in favour of agile core time.


Okay now do the net benefit to the Treasury :wink:

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It’s simply the inverse of the second graph :slight_smile: This change was initiated to protect stakers. There is another initiative to find a more sustainable model for the treasury, which could become reality soon. The code is already deployed and tested on Westend. I’ll give more updates on that in my next updates.


@jonas FTW!

Great suggestion and makes economic sense!

btw, thanks for the PBA lessons!