System Income

Every time a block is added to the system's blockchain, it calculates System Income. System Income is equal to Swap Fees plus Block Rewards. System Income is then split between Node Operators and Liquidity Providers. This split is set according to the costs each role bears and the Balancer, i.e. the degree of balance in the system.


Swap Fees
Block Rewards
Total
1500
Not representative numbers
Bonded:Pooled Rune
Income Split
33%67%
Fee Difference
Node Rewards
Total
1000
From Block Rewards
1005
Swap Fee Supplement
0
Liquidity Rewards
Total
500
From Swap Fees
495
Block Reward Supplement
0

Explainer

Every time a block is added, total income is calculated. System Income is made up of Swap Fees and Block Rewards.

Example System Income
Example System Income

System Income is split according to—

Node Operators bear higher costs than Liquidity Providers. So the protocol splits System Income 67% to Node Operators and 33% to Liquidity Providers. This should leave income for the two roles roughly equal.

Default Income Split
Default Income Split

If the system's capital balance becomes unsafe or inefficient, the Balancer tweaks the split to favour either Node Rewards or Liquidity Rewards. For example, if the system is unsafe because Pooled Rune is equal to Bonded Rune, Balancer will push the income split in favour of Node Rewards.

Income Split when Pooled Rune equals Bonded Rune
Income Split when Pooled Rune equals Bonded Rune

The amount of Swap Fees may be higher than the amount specified by the Income Split. This could happen later on as the network is more established and Block Rewards are lower. In this case, these extra Swap Fees are used to supplement Node Rewards.

Swap Fees supplement Node Rewards
Swap Fees supplement Node Rewards

The opposite may be true – Swap Fees may be lower than the amount specified by the Income Split. This could be the case in the early days of the network when usage and Swap Fees are low. In this case Block Rewards are used to make up the difference and are passed on as Liquidity Rewards.

Block Rewards supplement Liquidity Rewards
Block Rewards supplement Liquidity Rewards
This Spotlight was commissioned by the THORChain team to help spread knowledge and develop the community. Members of the Rebase team had holdings of RUNE exceeding $100 in value throughout the project.

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