Validator Payout Overview · Polkadot Wiki (2024)

Era Points​

For every era (a period of time approximately 6 hours in length in Kusama, and 24 hours inPolkadot), validators are paid proportionally to the amount of era points they have collected. Erapoints are reward points earned for payable actions like:

• issuing validity statements for parachain blocks.
• producing a non-uncle block in the Relay Chain.
• producing a reference to a previously unreferenced uncle block.
• producing a referenced uncle block.

Payments occur at the end of every era.

Era points create a probabilistic component for staking rewards.

If the mean of staking rewards is the average rewards per era, then the variance is thevariability from the average staking rewards. The exact DOT value of each era point is not known inadvance since it depends on the total number of points earned by all validators in a given era. Thisis designed this way so that the total payout per era depends on Polkadot'sinflation model, and not on the number of payableactions (f.e., authoring a new block) executed. For more information, checkthis stackexchange post.

With parachains now on Polkadot, a large percentage of era points will come from parachainvalidation, as a subset of validators are selected to para-validate for all parachains each epoch,and those para-validators can generate more era points as a result. Para-validators are rewarded 20era points each for each parachain block that they validate.

In this case, analyzing the expected value of staking rewards will paint a better picture as theweight of era points of validators and para-validators in the reward average are taken intoconsideration.

Payout Scheme​

No matter how much total stake is behind a validator, all validators split the block authoringpayout essentially equally. The payout of a specific validator, however, may differ based onera points, as described above. Although there is a probabilistic component toreceiving era points, and they may be impacted slightly depending on factors such as networkconnectivity, well-behaving validators should generally average out to having similar era pointtotals over a large number of eras.

Validators may also receive "tips" from senders as an incentive to include transactions in theirproduced blocks. Validators will receive 100% of these tips directly.

Validators will receive staking rewards in the form of the native token of that chain (KSM forKusama and DOT for Polkadot).

For simplicity, the examples below will assume all validators have the same amount of era points,and received no tips.

Validator Set Size (v): 4
Validator 1 Stake (v1): 18 tokens
Validator 2 Stake (v2): 9 tokens
Validator 3 Stake (v3): 8 tokens
Validator 4 Stake (v4): 7 tokens
Payout (p): 8 DOT

Payout for each validator (v1 - v4):
p / v = 8 / 4 = 2 tokens

Note that this is different than most other Proof-of-Stake systems such as Cosmos. As long as avalidator is in the validator set, it will receive the same block reward as every other validator.Validator v1, who had 18 tokens staked, received the same reward (2 tokens) in this era as v4who had only 7 tokens staked.

Running Multiple Validators​

It is possible for a single entity to run multiple validators. Running multiple validators mayprovide a better risk/reward ratio. Assuming you have enough DOT, or enough stake nominates yourvalidator, to ensure that your validators remain in the validator set, running multiple validatorswill result in a higher return than running a single validator.

For the following example, assume you have 18 DOT to stake. For simplicity's sake, we will ignorenominators. Running a single validator, as in the example above, would net you 2 DOT in this era.

Note that while DOT is used as an example, this same formula would apply to KSM when running avalidator on Kusama.

Validator Set Size (v): 4
Validator 1 Stake (v1): 18 DOT <- Your validator
Validator 2 Stake (v2): 9 DOT
Validator 3 Stake (v3): 8 DOT
Validator 4 Stake (v4): 7 DOT
Payout (p): 8 DOT

Your payout = (p / v) * 1 = (8 / 4) * 1 = 2

Running two validators, and splitting the stake equally, would result in the original validator v4to be kicked out of the validator set, as only the top v validators (as measured by stake) areselected to be in the validator set. More important, it would also double the reward that you getfrom each era.

Validator Set Size (v): 4
Validator 1 Stake (v1): 9 DOT <- Your first validator
Validator 2 Stake (v2): 9 DOT <- Your second validator
Validator 3 Stake (v3): 9 DOT
Validator 4 Stake (v4): 8 DOT
Payout (p): 8 DOT

Your payout = (p / v) * 2 = (8 / 4) * 2 = 4

With enough stake, you could run more than two validators. However, each validator must have enoughstake behind it to be in the validator set.

The incentives of the system favor equally-staked validators. This works out to be a dynamic, ratherthan static, equilibrium. Potential validators will run different numbers of validators and applydifferent amounts of stake to them as time goes on, and in response to the actions of othervalidators on the network.

Slashing​

Although rewards are paid equally, slashes are relative to a validator's stake. Therefore, if you dohave enough DOT to run multiple validators, it is in your best interest to do so. A slash of 30%will, of course, be more DOT for a validator with 18 DOT staked than one with 9 DOT staked.

Running multiple validators does not absolve you of the consequences of misbehavior. Polkadotpunishes attacks that appear coordinated more severely than individual attacks. You should not, forexample, run multiple validators hosted on the same infrastructure. A proper multi-validatorconfiguration would ensure that they do not fail simultaneously.

Nominators have the incentive to nominate the lowest-staked validator, as this will result in thelowest risk and highest reward. This is due to the fact that while their vulnerability to slashingremains the same (since it is percentage-based), their rewards are higher since they will be ahigher proportion of the total stake allocated to that validator.

To clarify this, let us imagine two validators, v1 and v2. Assume both are in the active set,have commission set to 0%, and are well-behaved. The only difference is that v1 has 90 DOTnominating it and v2 only has 10. If you nominate v1, it now has 90 + 10 = 100 DOT, and youwill get 10% of the staking rewards for the next era. If you nominate v2, it now has10 + 10 = 20 DOT nominating it, and you will get 50% of the staking rewards for the next era. Inactuality, it would be quite rare to see such a large difference between the stake of validators,but the same principle holds even for smaller differences. If there is a 10% slash of eithervalidator, then you will lose 1 DOT in each case.

Nominators and Validator Payments​

Nominated stake allows you to "vote" for validators and share in the rewards (and slashing) withoutrunning a validator node yourself. Validators can choose to keep a percentage of the rewards due totheir validator to "reimburse" themselves for the cost of running a validator node. Other than that,all rewards are shared based on the stake behind each validator. This includes the stake of thevalidator itself, plus any stake bonded by nominators.

In the following examples, we can see the results of several different validator payment schemes andsplit between nominator and validator stake. We will assume a single nominator for each validator.However, there can be numerous nominators for each validator. Rewards are still distributedproportionally - for example, if the total rewards to be given to nominators is 2 DOT, and there arefour nominators with equal stake bonded, each will receive 0.5 DOT. Note also that a singlenominator may stake different validators.

Each validator in the example has selected a different validator payment (that is, a percentage ofthe reward set aside directly for the validator before sharing with all bonded stake). Thevalidator's payment percentage (in DOT, although the same calculations work for KSM) is listed inbrackets ([]) next to each validator. Note that since the validator payment is public knowledge,having a low or non-existent validator payment may attract more stake from nominators, since theyknow they will receive a larger reward.

Validator Set Size (v): 4
Validator 1 Stake (v1) [20% commission]: 18 DOT (9 validator, 9 nominator)
Validator 2 Stake (v2) [40% commission]: 9 DOT (3 validator, 6 nominator)
Validator 3 Stake (v3) [10% commission]: 8 DOT (4 validator, 4 nominator)
Validator 4 Stake (v4) [ 0% commission]: 6 DOT (1 validator, 5 nominator)
Payout (p): 8 DOT

Payout for each validator (v1 - v4):
p / v = 8 / 4 = 2 DOT

v1:
(0.2 * 2) = 0.4 DOT -> validator payment
(2 - 0.4) = 1.6 -> shared between all stake
(9 / 18) * 1.6 = 0.8 -> validator stake share
(9 / 18) * 1.6 = 0.8 -> nominator stake share
v1 validator total reward: 0.4 + 0.8 = 1.2 DOT
v1 nominator reward: 0.8 DOT

v2:
(0.4 * 2) = 0.8 DOT -> validator payment
(2 - 0.8) = 1.2 -> shared between all stake
(3 / 9) * 1.2 = 0.4 -> validator stake share
(6 / 9) * 1.2 = 0.8 -> nominator stake share
v2 validator total reward: 0.8 + 0.4 = 1.2 DOT
v2 nominator reward: 0.8 DOT

v3:
(0.1 * 2) = 0.2 DOT -> validator payment
(2 - 0.2) = 1.8 -> shared between all stake
(4 / 8) * 1.8 = 0.9 -> validator stake share
(4 / 8) * 1.8 = 0.9 -> nominator stake share
v3 validator total reward: 0.2 + 0.9 DOT = 1.1 DOT
v3 nominator reward: 0.9 DOT

v4:
(0 * 2) = 0 DOT -> validator payment
(2 - 0) = 2.0 -> shared between all stake
(1 / 6) * 2 = 0.33 -> validator stake share
(5 / 6) * 2 = 1.67 -> nominator stake share
v4 validator total reward: 0 + 0.33 DOT = 0.33 DOT
v4 nominator reward: 1.67 DOT