Staking
Understanding the staking module
Staking is the primary reward distribution mechanism of the protocol. It is intended to be the primary mechanism of value accrual for the majority of users.
Protocol Mechanism
Whenever the protocol has an excess of reserves per token (when the RFV of the treasury is higher than the assets needed to back VAPOR), the protocol will mint and distribute tokens to the stakers. The amount minted and distributed is controlled by a variable named the reward rate.
This is the % of supply that is rebased. This massively slows down how fast the protocol expands supply, as doing so is detrimental to the health (rapid expansion without backing causes a price collapse).
VAPOR and sVAPOR have an increasing conversion ratio, meaning that the redemption amount is based on an increasing ratio accrued through protocol rebase.
When a rebase occurs, the treasury deposits VAPOR into the distributor contract, which deposits it in the staking contract. Since there is now more VAPOR then there is sVAPOR, the sVAPOR is rebased to keep them in parity.
Because not all VAPOR is staked, the user gains a larger piece of the share of rebases:
The annualized return rate can thus be calculated as follows:
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