# distribution
# Overview
This simple distribution mechanism describes a functional way to passively distribute rewards between validators and delegators. Note that this mechanism does not distribute funds in as precisely as active reward distribution mechanisms and will therefore be upgraded in the future.
The mechanism operates as follows. Collected rewards are pooled globally and divided out passively to validators and delegators. Each validator has the opportunity to charge commission to the delegators on the rewards collected on behalf of the delegators. Fees are collected directly into a global reward pool and validator proposer-reward pool. Due to the nature of passive accounting, whenever changes to parameters which affect the rate of reward distribution occurs, withdrawal of rewards must also occur.
- Whenever withdrawing, one must withdraw the maximum amount they are entitled to, leaving nothing in the pool.
- Whenever bonding, unbonding, or re-delegating tokens to an existing account, a full withdrawal of the rewards must occur (as the rules for lazy accounting change).
- Whenever a validator chooses to change the commission on rewards, all accumulated commission rewards must be simultaneously withdrawn.
The above scenarios are covered in hooks.md.
The distribution mechanism outlined herein is used to lazily distribute the following rewards between validators and associated delegators:
- multi-token fees to be socially distributed
- proposer reward pool
- inflated atom provisions
- validator commission on all rewards earned by their delegators stake
Fees are pooled within a global pool, as well as validator specific proposer-reward pools. The mechanisms used allow for validators and delegators to independently and lazily withdraw their rewards.
# Shortcomings
As a part of the lazy computations, each delegator holds an accumulation term specific to each validator which is used to estimate what their approximate fair portion of tokens held in the global fee pool is owed to them.
Under the circumstance that there was constant and equal flow of incoming reward tokens every block, this distribution mechanism would be equal to the active distribution (distribute individually to all delegators each block). However, this is unrealistic so deviations from the active distribution will occur based on fluctuations of incoming reward tokens as well as timing of reward withdrawal by other delegators.
If you happen to know that incoming rewards are about to significantly increase, you are incentivized to not withdraw until after this event, increasing the worth of your existing accum. See #2764 (opens new window) for further details.
# Effect on Staking
Charging commission on Atom provisions while also allowing for Atom-provisions to be auto-bonded (distributed directly to the validators bonded stake) is problematic within BPoS. Fundamentally, these two mechanisms are mutually exclusive. If both commission and auto-bonding mechanisms are simultaneously applied to the staking-token then the distribution of staking-tokens between any validator and its delegators will change with each block. This then necessitates a calculation for each delegation records for each block - which is considered computationally expensive.
In conclusion, we can only have Atom commission and unbonded atoms provisions or bonded atom provisions with no Atom commission, and we elect to implement the former. Stakeholders wishing to rebond their provisions may elect to set up a script to periodically withdraw and rebond rewards.