01_concepts.md

Concepts

In Proof of Stake (PoS) blockchains, rewards gained from transaction fees are paid to validators. The fee distribution module fairly distributes the rewards to the validators' constituent delegators.

Rewards are calculated per period. The period is updated each time a validator's delegation changes, for example, when the validator receives a new delegation. The rewards for a single validator can then be calculated by taking the total rewards for the period before the delegation started, minus the current total rewards. To learn more, see the F1 Fee Distribution paper.

The commission to the validator is paid when the validator is removed or when the validator requests a withdrawal. The commission is calculated and incremented at every BeginBlock operation to update accumulated fee amounts.

The rewards to a delegator are distributed when the delegation is changed or removed, or a withdrawal is requested. Before rewards are distributed, all slashes to the validator that occurred during the current delegation are applied.

Reference Counting in F1 Fee Distribution

In F1 fee distribution, the rewards a delegator receives are calculated when their delegation is withdrawn. This calculation must read the terms of the summation of rewards divided by the share of tokens from the period which they ended when they delegated, and the final period that was created for the withdrawal.

Additionally, as slashes change the amount of tokens a delegation will have (but we calculate this lazily, only when a delegator un-delegates), we must calculate rewards in separate periods before / after any slashes which occurred in between when a delegator delegated and when they withdrew their rewards. Thus slashes, like delegations, reference the period which was ended by the slash event.

All stored historical rewards records for periods which are no longer referenced by any delegations or any slashes can thus be safely removed, as they will never be read (future delegations and future slashes will always reference future periods). This is implemented by tracking a ReferenceCount along with each historical reward storage entry. Each time a new object (delegation or slash) is created which might need to reference the historical record, the reference count is incremented. Each time one object which previously needed to reference the historical record is deleted, the reference count is decremented. If the reference count hits zero, the historical record is deleted.