This article was first published on The AdEx Blog - Medium
In this post we explain how AdEx Network is able to keep up a steady 50%+ APY on the incentivised staking program
This thought piece by AdEx Network’s CEO Ivo Georgiev first appeared on our Reddit page. An AdEx follower started a post in which he asked:
Hi fellow AdEx believers,
I’ve been holding a good sum of AdEx for a few weeks now, happily enjoying the benefits of staking and believing in the product that the AdEx network offers. Of course I’ve been been researching AdEx before I threw my buck in, but these things I haven’t been able to find an answer to:
How is the AdEx network paying so much annual yield to stakers? For example: ~58% APY in Tom’s validator, ~10–50% APY in the loyalty pool, ~46% APY on Binance staking. Where are all these coins coming from? Minting more? Gas fees?
Here’s what Ivo answered:
Staking APY comes from new issuance and validator fees. It has little to do with ETH fees, in fact ETH fees have negative effect on it, because validators have to charge less fees to compensate.
Issuance APY works by creating new ADX, which you might think causes inflation, but since it’s concentrated on staked ADX, what it does is transfer value from non-stakers to stakers. Furthermore, since it’s quite high, it incentivizes more ADX to get locked up, and so far every month since staking exists, the new ADX locked far exceeds the ADX minted. This is sustainable until the ADX max supply is reached.
Validator fee APY works by distributing validator fees to stakers, and this is sustainable forever. Currently, this is a small percentage of the total APY (~3–5%), but it will increase as the network grows, as this means higher volume of payments and therefore a higher ...
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The AdEx Blog - Medium