Real Reward Rate

The Real Reward Rate in the context of staking is a measure that adjusts the nominal reward rate (the rate of return before considering inflation) by taking into account the inflation rate of the cryptocurrency. This provides a more realistic view of the actual returns an investor can expect after factoring in the decrease in purchasing power caused by inflation. The formula you provided appears to be a version of this calculation:



  • SRBrSRB^r is the Staking Real Reward Benchmark Rate.

  • SRBSRB is the nominal staking reward rate (i.e., the rate before accounting for inflation).

  • ii is the inflation rate.

The formula effectively adjusts the nominal reward rate by the inflation rate. The logic behind it is that if the inflation rate is high, even if the nominal return on staking is also high, the real value of those returns might be significantly lower when adjusted for the reduced purchasing power of the currency.

Here's how to interpret this:

  1. If the inflation rate ii is zero, the real and nominal rates are the same, as there's no loss in purchasing power.

  2. If there's inflation (i.e., i>0i>0), the real reward rate will be lower than the nominal rate. This reflects the decreased purchasing power of the rewards due to inflation.

  3. The greater the inflation rate, the more it will erode the nominal returns, leading to a lower real reward rate.

This formula is essential for investors who want to understand the true value of their staking rewards. It’s particularly relevant in the context of cryptocurrencies with high inflation rates, where the nominal returns might look attractive but are significantly less valuable when adjusted for inflation. This calculation helps in making more informed investment decisions by providing a clearer picture of the actual earning potential after considering the effects of inflation on the value of the rewards.

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