Graph Network. Fee Cut and Rewards Cut: How It Works.
- Fee/reward cuts percentages displayed in the fee/reward cuts columns don’t show the fact fee charged from delegators;
- Some Indexers have zero or even negative fee/reward cuts right now;
- To make this business cost-effective Ryabina will set up a fee floating model, depending on the sum of delegations it will have;
- In the near future, to make fact fee close to 10%, Ryabina will use a dynamic model of cuts. Fee/reward cuts% displayed on https://network.thegraph.com/ will be between 16% and 21% (estimates).
As we already know the relationships between Indexers and Delegators are regulated with the fee and rewards cuts.
Indexer stakes GRT to provide indexing and query processing services and earn query fees and indexers rewards while delegators in The Graph delegate stake to Indexers to contribute to securing the network. When delegating to Indexers, Delegators earn a part of query fees and rewards, earned by the Indexer they chose.
Indexer’s and delegators’ rewards are calculated based on the sum of Indexers self-stake and all assets delegated to the Indexer.
But Indexers self-stake doesn’t participate in the distribution of inflational rewards between delegators. Indexer has the only source of income — reward cut и fee cut. To act economically efficiently Indexer has to consider the size of its own stake and delegators’ stake and add a percentage rate of its own stake to desired fee.
The figures we see at The Graph network web-site in the fee/rewards cut columns are not actual Indexer’s fee in the ordinary sense. In fact some of Indexers now have zero or even negative Indexers fees. That means that they could earn more if they had no delegators at all, just made a 100% cut.
Calculation formula of the FINAL CUT:
FINAL_CUT = ( S + F*D ) / ( S + D ) , where
FINAL_CUT — a figure that is shown in the fee/rewards cut columns
S — Indexer’s stake,
D — Sum of all Indexer’s delegations,
F — % that Indexer wants to get from delegations rewards
Indexer’s self stake is S=100
Indexer was delegated with D=200
Let say Indexer wants to earn indexer’s rewards (for its own stake) and get 5% additionally from delegators’ rewards.
Perform calculations and get a Final Cut:
FINAL_CUT = ( 100 + 200 * 0,05 ) / 300 = 0.367, i.e. 36.7%
When delegating to the Indexer with 36.7% cut (100 own, 200 delegated), delegator is charged for 5% fee.
As for Ryabina, you could notice that our cuts are quite low, and actually we share our own indexer’s stake rewards with our delegators instead of earning a fee from delegators rewards.
In the near future we are going to change our reward cut to the dynamic model. This model will be changing our reward cut depending on the ratio of our own stake and quantity of delegated tokens and our actual fee will be close to 10%
The more delegations we have the less % cut will be shown at the Rewards cut column, but the actual fee of each delegator will remain close to 10%.
With the fee update you will see cut% between 21% and 16%. With the delegations sum growth percentage of fee/reward cuts will decrease to 16%.
Current fee/reward cuts will be changed in the 24 hours, so our delegators have some extra time to enjoy negative fees.
Ryabina indexer’s addresses:
1). graph-node-1-cp0x-hosted-by-ryabina.eth: 0xbb784d9b398271b7a64f975bebde869409691915
2). graph-node-1-cp0x-hosted-by-ryabina.eth: 0x8a1729fe84c53c231c7ae53a5bec3f6e9953cb4b
3). ryabina.eth: 0x9238584c74e5fa445a8f72a4d4ef4699dd783852