Reward Manager

The Reward Manager is an optional but highly recommended component that automates the calculation and distribution of staking rewards. While the Native Minter precompile handles the actual token minting, the Reward Manager determines how much each validator and delegator should receive based on their staking duration, stake amount, and network parameters.

Without the Reward Manager enabled, rewards are set to zero—validators receive only their original stake back when they unstake, no reward UTXOs are created, and transaction fees are burned rather than distributed. This eliminates economic incentives for validators beyond minimal transaction fee revenue, significantly weakening the security model of Proof of Stake and reducing decentralization.

How the Reward Manager Works

The reward system operates through a proposal-commit/abort mechanism on the P-Chain. When a validator's or delegator's staking period ends, the system automatically calculates and distributes their rewards.

Reward Calculation

When a validator's or delegator's staking period ends, the system calculates rewards using the reward.Calculator which considers:

1. Staking Duration: How long tokens were staked
2. Stake Amount: The weight of the validator (own stake + delegated stake)
3. Current Supply: The total token supply affects reward rate
4. Network Parameters: Configured reward rates and caps

The calculation follows this general formula:

reward = (stake_amount × staking_duration × reward_rate) / supply_factor

The reward rate typically decreases as supply increases, creating controlled inflation.

Reward Distribution Process

1. Block Building

When a staker's end time is reached, the Block Builder creates a RewardValidatorTx transaction. This transaction proposes to:

• Remove the validator/delegator from the active set
• Calculate their earned rewards
• Return their stake plus rewards

2. Execution Phase

The RewardValidatorTx is executed as a proposal transaction by the Proposal Executor:

• The Reward Calculator computes the potential reward amount
• The P-Chain State is queried for staker information
• A reward UTXO is prepared (if reward > 0)

3. Commit or Abort

The transaction can follow two paths:

Commit Path (Normal Operation)

• Validator receives: Original stake + validation rewards
• Delegators receive: Their share of rewards (minus delegation fees)
• Delegation fees are either:
  • Post-Cortina: Accumulated for the validator to claim later
  • Pre-Cortina: Paid immediately to the validator

Abort Path (Network Issues)

• Validator receives: Only their original stake (no rewards)
• Potential rewards are burned (supply decreased)
• Accumulated delegation fees are still returned
• This protects the network from rewarding validators during unstable periods