# Reward Mechanics

This section provides a technical overview of how XDC Liquid Staking rewards are generated, calculated, and distributed - the core economic engine that partners are integrating.

***

## Reward Source

Rewards come from **XDC Network validator staking**. PrimeStaking operates masternodes that participate in the XDC consensus mechanism and earn block rewards.

Unlike ETH-based liquid staking protocols, XDC Network **does not implement slashing**. This means staked capital is never at risk from validator behavior - a structural advantage for partners and their users.

***

## Why Use PrimeStaking vs. Direct Staking

Direct XDC staking requires running a masternode (10M XDC minimum, infrastructure management, uptime obligations). PrimeStaking removes all of these barriers:

|                    | Direct Staking                | PrimeStaking                                 |
| ------------------ | ----------------------------- | -------------------------------------------- |
| **Minimum**        | 10,000,000 XDC                | None                                         |
| **Infrastructure** | Run and maintain a masternode | Fully managed                                |
| **Liquidity**      | Locked until unstake          | Liquid (psXDC is transferable and tradeable) |
| **Slashing risk**  | None (XDC model)              | None (XDC model)                             |
| **Reward rate**    | Depends on your node's uptime | Pooled across optimized validators           |
| **Composability**  | None                          | psXDC usable in DeFi                         |

For partners, this means their users can access XDC staking yield with zero infrastructure burden and no minimum deposit.

***

## Calculation

| Parameter              | Detail                                                         |
| ---------------------- | -------------------------------------------------------------- |
| **Gross APY**          | Determined by XDC Network validator economics                  |
| **Protocol fee**       | Percentage retained by the protocol (contact us for specifics) |
| **Net user APY**       | \~4.5% (after protocol fee)                                    |
| **Distribution basis** | Proportional to psXDC balance                                  |

The net APY is variable and depends on:

* **Network staking ratio** - total XDC staked across the network affects per-validator rewards
* **Validator performance** - uptime and block production efficiency
* **Protocol fee** - the percentage retained by the protocol before user distribution

***

## Distribution

* Rewards accrue continuously as validators produce blocks
* Users claim rewards manually from the Rewards contract
* Reward amounts are calculated proportionally based on psXDC holdings at claim time
* All distributions are on-chain and verifiable

***

## Key Parameters for Partners

| Parameter               | Detail                                                             |
| ----------------------- | ------------------------------------------------------------------ |
| **Reward token**        | psXDC                                                              |
| **Frequency**           | Continuous accrual                                                 |
| **APY**                 | \~4.5% (variable)                                                  |
| **Claiming**            | Manual (user-initiated)                                            |
| **On-chain verifiable** | Yes                                                                |
| **Variable/Fixed**      | Variable (depends on validator performance and network conditions) |
| **Slashing risk**       | None                                                               |

***

## How APY Is Determined

1. **Validator economics** - XDC Network masternodes earn block rewards based on the network's consensus parameters
2. **Protocol fee** - A percentage of gross validator rewards is retained by the protocol
3. **Net distribution** - Remaining rewards are distributed proportionally to all psXDC holders
4. **Dynamic rate** - APY fluctuates with network activity, validator count, and total staked XDC across the network

***

## Transparency & Verification

* Every reward event is logged on the XDC blockchain
* Reward calculations are deterministic and auditable
* Partners can independently verify reward distributions via on-chain data
* Historical reward data is available for forecasting and reporting
* psXDC supply and staking pool balance are verifiable on-chain at any time via [XDCScan](https://xdcscan.com/token/xdc59e51346a6e1d05a0017c0e5f0501dcbba41bca1)