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I was reading this article, which states:

Although Tezos users can still make a good income, the good times are unlikely to last. The influx of more XTZ into staking wallets will likely diminish each users’ chances of creating a block, making it unlikely that Tezos users will have similarly high yields this time next year.

Is this the case? If so, is it due to the fact that inflation, i.e the rate at which the supply of tezos grows (exogenously?) is fixed? So the proportion of "new tezos" to be distributed has to be shared among more bakers? In the limit, if all tezos are baking, what is the rate of return?

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On the aspect of how inflation in tezos changes over time i refer you to this other question discussing this:

Inflation rate and economic incentives

In summary tezos inflation is set at a maximum of 80XTZ per block so that inflation as a percentage of total supply is set to decrease over time (absent protocol amendments on this).

So at inception tezos inflation as percentage was 5.5% but if nothing changes it will slowly go down.

It was discussed several times that this choice was just made for simplicity. As the network matures we will probably see an amendment to switch to a constant inflation model where time to time the rewards would increase a little bit in order to adjust for the change in total supply.

Last but not least all of this previous conversation has to do with inflation, now the individual validator’s reward is proportional to this inflation and the number of baking rights per year. But this number of baking rights increase if the staking participation rate decreases (each baker bakes twice if only half of tezos rolls are baking).

Note also that if this staking ratio goes down, like we said bakers get more rights which implies they also (from protocol rules) have to post more security deposit as collateral to their activity. More details is available in

Security deposit calculation

Therefore the effective expected gross yield return on baking (what people sometimes mention as ROI but it is more a ROC) is higher than 5.5% because currently 80% of the rolls are staking in tezos so this gives an effective expected yield of around 7.3%.

Of course this yield is an expectation. Realized yield can be lower (or higher) because of a number of factors that can create variance (missed blocks, slashing, steals, operational costs, cost of capital if you need to borrow to post the collateral, fees if you delegate etc...).

In light of this it is not really straightforward to make a precise prediction on the expected yield next year: if the staking ratio goes up or down it can significantly impact the ROI as we saw.

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