Updated: 28–2–2019

Mainnet is due, time for an update then. In this guide you will find the reward mechanism explained. This means we can estimate a Return On Investment (ROI) for running a masternode should you choose so. Scroll to the bottom for my tentative calculation. Tl;dr 57% for validators and 39% for miners.

Note: previous info was tentative as explained by the matrix team. It turns out some last-minute changes were made to the block reward.

Let’s summarize the important points real quick first and then I’ll make a calculation for you. Scroll to the bottom for a summary including the payout. Note that I calculate with averages, actual rewards may be higher. I consider this a minimum.

Block reward

Block reward is 10 MAN and is changed every year as far as we know. So for now, consider this the ROI for running the node for the first year.

The entire mining network receives a share of 30% of each mined block.

The entire validator network receive a share of 70% of each mined block.

Note that this relates to the sum of all miners/validators. Individual rewards differ.

Block time

Block time is currently set at 6 seconds.

Election cycle

Each election cycle lasts 300 blocks. This means if we look at the block time of 6 seconds, a newly formed delegate committee will be chosen from all available nodes every half hour.

This committee will exist of 21 mining nodes and 24 verification nodes (5 of these are backups deployed by matrix themselves).

10 MAN is mined every 6 seconds = 100 MAN per minute = 3,000 MAN per half hour (election cycle)= 52,560,000/year. For the sake of simplicity I refer to this as the total masternode pool now.

The entire mining network receives a share of 900 MAN / half hour = 15,768,000 / year. For the sake of simplicity I refer to this as the mining pool now.

The entire validator network receives a share of 2,100 MAN / half hour = 36,792,000 / year. For the sake of simplicity I refer to this as the validator pool now.

Note that these are total rewards distributed within the entire mining/validator network. The odds of being a delegate in this network is randomized.

Annual staking reward of 3% extra for all nodes

An extra staking reward of 3% is given to all nodes, assuming 100% uptime.

This “extra” reward was also chosen in part due to your node not being selected as a supernode forever. The odds of selection of nodes for every election cycle is randomized. Hence the network remains decentralized.The staking reward can be considered an incentive to keep your node active while still competing in the lottery for each selection cycle.

Odds of selection for both nodes

Two elections take place every hour x 24 hours x 365 days equals 17,520 election chances each year.

21 miners selected each time x 17,520 possible election cycles = 367,920 chances to be selected as a miner.

Currently i have no idea how many wallets have 10k, the 1000th wallet has 20k, so lets just say 2000 possible miners (I’d imagine this would take a while to get to that number but for the purposes of the math we will use this number). The odds of being chosen as a miner node is thus 21/2000 every cycle. There are 367,920 chances in total.

24 validators each time x 17,520 = 420,480 chances to be selected as a validator.

Currently 259 addresses have the 100k or more required for validator nodes, and with an equal election chance each cycle that’s 24/259 every cycle. There are 420,480 chances in total.

Individual rewards

Each election cycle 3,000 MAN is created. 30% of this goes to the entire mining pool = 900 MAN. 70% to the validator pool = 2,100 MAN.

Miners

Each block miner receives 40% of the mining pool share (=1.2 MAN per mined block). The remaining elected miners share in 50% of the block rewards according to their weighted stakes(= 1.5 MAN per block to be distributed). The more MAN you have staked, the more you receive. 10% always flows back into the hands of the foundation.

Validators

Individual block validators receive 50% of the validator pool rewards per block (=7 MAN per block * 0.5= 3.5 MAN per validated block). The remaining 40% will be shared among the remaining elected validators according to their weighted amount of MAN staked. The more MAN you have staked, the more you receive. 10% goes back to the foundation.

Extra rewards

Furthermore, masternodes that aren’t selected as a delegate can still earn rewards by providing computing power to external parties. They will receive a substantial reward in the form of MAN.

Additionally, raffles are held every 300 blocks. 6 random transactions will then be selected for a configurable reward. These include one 1st prize, two 2nd prizes and three 3rd prizes.

Further details about AI server maintenance incentives will be published at a later date.

Details on these extra rewards will be mentioned by the Matrix team.

So, how do I calculate a return on investment?

This all depends on the odds of selection (which is somewhat randomized) and the weighted amount of MAN staked. Some people ran a tentative calculation based on the current amount of 10k wallet holders and 100k wallets holders respectively.

If we take the odds of selection from above and take into account ALL of the current wallet holders having 10K or 100K MAN respectively while assuming equal distribution this would translate to an ROI of 57% for validators and 39 % for miners.

Here is the math, please note we are using averages and calculate with conservative estimates.

Miners

Mining pool = 15,768,000 MAN / year

At present we assume 2,000 addresses with >10K MAN

Chances of mining node election / year = 367,920

If we assume equal chances among all 2,000 addresses. This would mean 15,768,000 / 2000 = 7,884 MAN awarded each year. That’s an ROI of 78% if we assume 10K MAN staked. Obviously not that simple though. Let’s dig deeper.

The mining pool shares in 3 MAN per block. 50% go to supporting miners and 40% goes to the block creator. That’s 1,2 MAN to the individual miner of the block and 1,5/20 = 0,075 MAN for each supporting miner.

Let’s take a conservative approach and assume you are always a supporting miner. If we take the chances of mining node election 367,920 and subtract the number of block creators (1/21) per election cycle (17,520 total) you get 350,400 chances to be a supporting miner.

Assume equal chance among all 2000 eligible addresses and we have 350,400 / 2000 = 175 times chosen as a supporting miner on average.

175 x 300 blocks (amount of MAN created each cycle) = 52,500 blocks / year if you only are a supporting miner. And thus have to share in 50% of the mining reward with the other 20 miners, hence a worst case scenario.

Conservative ROI miner node node = 52,500 x 0.075 = 3937 MAN per year. Which is ~39,3% ROI if the minimum of 10K is staked. Not bad!

Validators

Validator pool = 36,792,000 MAN / year.

At present 259 addresses have > 100K MAN.

Chances of validator selection / year = 420,480.

This calculation does not take into account being an actual block verifier (all verifiers get 50% of the block reward). If we take the worst example possible of you not being a block verifier AT ALL and sharing only in the 40% rewards pool for non-verifiers this would amount to 7 MAN per block x 40% = 2.8. Divided by amount of supporting validators in a cycle (23) = 2.8 / 23 = 0,1217391304347826 MAN PER BLOCK for each supporting validator.

There were 420,480 chances to be elected as a validator. Subtract this by the number of block verifiers (assuming you never get to be block verifier out of all 24 validators) and we get 420,480–17,520 = 402,960 chances to be a non-block verifying validator. Divided by number of 100K+ addresses is 402,960 / 259 eligible addresses = 1,555 times chosen on average.

1,555 elections x 300 blocks per election is 466,500 blocks per year which you validate. With a very conservative approach to calculating ROI this would mean the ROI / year is:

Conservative ROI validator node = 466,500 x 0,1217391304347826 = ~ 56791 MAN per year. Which is ~56,7% ROI if the minimum of 100K is staked. Not bad!

~Special thanks to @Pencekey on Telegram who made the math possible.