Docs cleanup (#16964)

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Justin Starry
2021-04-30 16:20:56 +08:00
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@@ -4,6 +4,6 @@ title: Validation-client Economics
**Subject to change. Follow most recent economic discussions in the Solana forums: https://forums.solana.com**
Validator-clients are eligible to charge commission on inflationary rewards distributed to staked tokens. This compensation is for providing compute \(CPU+GPU\) resources to validate and vote on a given PoH state. These protocol-based rewards are determined through an algorithmic disinflationary schedule as a function of total token supply. The network is expected to launch with an annual inflation rate around 8%, set to decrease by 15% per year until a long-term stable rate of 1.5% is reached, however these parameters are yet to be finalized by the community. These issuances are to be split and distributed to participating validators, with around 95% of the issued tokens allocated for validator rewards initiall (the remaining 5% reserved for Foundation operating expenses). Because the network will be distributing a fixed amount of inflation rewards across the stake-weighted validator set, the yield observed for staked tokens will be primarily a function of the amount of staked tokens in relation to the total token supply.
Validator-clients are eligible to charge commission on inflationary rewards distributed to staked tokens. This compensation is for providing compute \(CPU+GPU\) resources to validate and vote on a given PoH state. These protocol-based rewards are determined through an algorithmic disinflationary schedule as a function of total token supply. The network is expected to launch with an annual inflation rate around 8%, set to decrease by 15% per year until a long-term stable rate of 1.5% is reached, however these parameters are yet to be finalized by the community. These issuances are to be split and distributed to participating validators, with around 95% of the issued tokens allocated for validator rewards initiall (the remaining 5% reserved for Foundation operating expenses). Because the network will be distributing a fixed amount of inflation rewards across the stake-weighted validator set, the yield observed for staked tokens will be primarily a function of the amount of staked tokens in relation to the total token supply.
Additionally, validator clients may earn revenue through fees via state-validation transactions. For clarity, we separately describe the design and motivation of these revenue distributions for validation-clients below: state-validation protocol-based rewards and state-validation transaction fees and rent.

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@@ -20,45 +20,43 @@ The effective protocol-based annual staking yield \(%\) per epoch received by va
The first factor is a function of protocol parameters only \(i.e. independent of validator behavior in a given epoch\) and results in an inflation schedule designed to incentivize early participation, provide clear monetary stability and provide optimal security in the network.
As a first step to understanding the impact of the *Inflation Schedule* on the Solana economy, weve simulated the upper and lower ranges of what token issuance over time might look like given the current ranges of Inflation Schedule parameters under study.
As a first step to understanding the impact of the _Inflation Schedule_ on the Solana economy, weve simulated the upper and lower ranges of what token issuance over time might look like given the current ranges of Inflation Schedule parameters under study.
Specifically:
- *Initial Inflation Rate*: 7-9%
- *Dis-inflation Rate*: -14-16%
- *Long-term Inflation Rate*: 1-2%
- _Initial Inflation Rate_: 7-9%
- _Dis-inflation Rate_: -14-16%
- _Long-term Inflation Rate_: 1-2%
Using these ranges to simulate a number of possible Inflation Schedules, we can explore inflation over time:
![](/img/p_inflation_schedule_ranges_w_comments.png)
In the above graph, the average values of the range are identified to illustrate the contribution of each parameter.
From these simulated *Inflation Schedules*, we can also project ranges for token issuance over time.
From these simulated _Inflation Schedules_, we can also project ranges for token issuance over time.
![](/img/p_total_supply_ranges.png)
Finally we can estimate the *Staked Yield* on staked SOL, if we introduce an additional parameter, previously discussed, *% of Staked SOL*:
Finally we can estimate the _Staked Yield_ on staked SOL, if we introduce an additional parameter, previously discussed, _% of Staked SOL_:
%~\text{SOL Staked} = \frac{\text{Total SOL Staked}}{\text{Total Current Supply}}
In this case, because _% of Staked SOL_ is a parameter that must be estimated (unlike the _Inflation Schedule_ parameters), it is easier to use specific _Inflation Schedule_ parameters and explore a range of _% of Staked SOL_. For the below example, weve chosen the middle of the parameter ranges explored above:
In this case, because *% of Staked SOL* is a parameter that must be estimated (unlike the *Inflation Schedule* parameters), it is easier to use specific *Inflation Schedule* parameters and explore a range of *% of Staked SOL*. For the below example, weve chosen the middle of the parameter ranges explored above:
- _Initial Inflation Rate_: 8%
- _Dis-inflation Rate_: -15%
- _Long-term Inflation Rate_: 1.5%
- *Initial Inflation Rate*: 8%
- *Dis-inflation Rate*: -15%
- *Long-term Inflation Rate*: 1.5%
The values of *% of Staked SOL* range from 60% - 90%, which we feel covers the likely range we expect to observe, based on feedback from the investor and validator communities as well as what is observed on comparable Proof-of-Stake protocols.
The values of _% of Staked SOL_ range from 60% - 90%, which we feel covers the likely range we expect to observe, based on feedback from the investor and validator communities as well as what is observed on comparable Proof-of-Stake protocols.
![](/img/p_ex_staked_yields.png)
Again, the above shows an example *Staked Yield* that a staker might expect over time on the Solana network with the *Inflation Schedule* as specified. This is an idealized *Staked Yield* as it neglects validator uptime impact on rewards, validator commissions, potential yield throttling and potential slashing incidents. It additionally ignores that *% of Staked SOL* is dynamic by design - the economic incentives set up by this *Inflation Schedule*.
Again, the above shows an example _Staked Yield_ that a staker might expect over time on the Solana network with the _Inflation Schedule_ as specified. This is an idealized _Staked Yield_ as it neglects validator uptime impact on rewards, validator commissions, potential yield throttling and potential slashing incidents. It additionally ignores that _% of Staked SOL_ is dynamic by design - the economic incentives set up by this _Inflation Schedule_.
### Adjusted Staking Yield
A complete appraisal of earning potential from staking tokens should take into account staked *Token Dilution* and its impact on staking yield. For this, we define *adjusted staking yield* as the change in fractional token supply ownership of staked tokens due to the distribution of inflation issuance. I.e. the positive dilutive effects of inflation.
A complete appraisal of earning potential from staking tokens should take into account staked _Token Dilution_ and its impact on staking yield. For this, we define _adjusted staking yield_ as the change in fractional token supply ownership of staked tokens due to the distribution of inflation issuance. I.e. the positive dilutive effects of inflation.
We can examine the *adjusted staking yield* as a function of the inflation rate and the percent of staked tokens on the network. We can see this plotted for various staking fractions here:
We can examine the _adjusted staking yield_ as a function of the inflation rate and the percent of staked tokens on the network. We can see this plotted for various staking fractions here:
![](/img/p_ex_staked_dilution.png)