> For the complete documentation index, see [llms.txt](https://docs.primestaking.xyz/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.primestaking.xyz/for-partners/reward-mechanics.md). # Reward Mechanics This section explains how XDC liquid staking rewards are generated and distributed under V3. The model is **NAV-based**: rewards are not handed out via a manual `claim` flow; they are embedded in the psXDC vault share price. *** ## Reward Source PrimeStaking generates yield through XDC Network masternode operations. Validators participate in the XDPoS consensus process and receive protocol rewards derived from block production and network activity. Unlike ETH-based liquid staking protocols, XDC Network **does not implement punitive principal-slashing mechanisms comparable to Ethereum Casper**. XDC's slashing instead penalizes downtime: a masternode that fails to sign any block during one full epoch (900 blocks, \~30 minutes) is excluded from block production for the next 4 epochs (\~2 hours) and forfeits rewards during that window. Validator penalties are therefore limited to operational demotion and reward impacts, without destruction of the underlying staked capital. This creates a materially lower staking risk profile for institutional partners and end 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 V3 | | ---------------------------- | ------------------------------ | --------------------------------------------------- | | **Minimum** | 10,000,000 XDC | None | | **Infrastructure** | Run and maintain a masternode | Fully managed | | **Liquidity** | Locked until unstake | Liquid (psXDC is ERC-4626, transferable, tradeable) | | **Principal-stake slashing** | None (XDC model) | None (XDC model) | | **Reward rate** | Depends on your node's uptime | Pooled across optimized validators | | **Composability** | None | psXDC usable as ERC-4626 collateral in DeFi | | **Withdrawal UX** | Wait the network unstake delay | Instant when buffer allows; FIFO queue otherwise | *** ## How rewards reach holders ``` XDC validators │ block rewards ▼ PrimeStakedXDC_V3_2 vault │ totalAssets += rewards │ totalShares unchanged ▼ exchange rate (totalAssets / totalShares) ↑ │ ▼ every psXDC share is worth more XDC ``` | Aspect | Detail | | -------------------------- | ------------------------------------------------------------------------------------------------------------ | | **Source** | XDC Network masternode block rewards | | **Accrual mechanism** | Reward XDC enters the vault → `totalAssets` rises → exchange rate rises automatically | | **User claiming** | None; value is already inside each share | | **Settlement event** | When the user redeems shares (instant or queued), the higher rate translates directly into more XDC returned | | **On-chain verifiability** | Yes. Every reward inflow event and the exchange rate are public | There is **no `notifyRewardAmount` admin call** in V3 (V2-era behaviour). There is **no per-user `claim` flow** for the base reward layer. Both were removed when V3 replaced the time-based APY model with the share-based NAV model. *** ## Calculation | Parameter | Detail | | ---------------------- | ------------------------------------------------------------------------------------------------------------------- | | **Gross APY** | Determined by XDC Network masternode economics (network staking ratio, validator performance, operator throughput) | | **Protocol fee** | Percentage of gross validator rewards retained by the protocol (exact figure available under partner due diligence) | | **Net user APY** | \~5.5% net (variable; depends on the above) | | **Distribution basis** | Pro-rata over psXDC shares **automatically through share price**, not at claim time | 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 for the operators the vault is delegating to. * **Protocol fee.** Retained percentage before reward XDC is reflected in `totalAssets`. *** ## NFT boost layer (separate from base APY) XDC NFTs earn an **additional** XDC stream on top of base NAV via the Synthetix-style accumulator inside `XdcNftStakingVault`. The boost is **separate** from validator rewards and follows its own funding model: * Boost is pushed into the NFT vault by [`XdcNftBoostHarvester`](/products/xdc-staking-nfts/boost-harvester.md) via `notifyBoost(amount)`. * The boost slice is distributed pro-rata to each NFT's weight (`stakedShares × (rarityMultiplier + level + lockBonus)`). * Boost **is** claimed (`claim(tokenId)`) and paid in XDC. Boost is a product-side reward stream, not validator economics. The **floor** for every NFT position is the **base \~5.5%** (psXDC v3 NAV appreciation, automatic, never goes away regardless of rarity / lock / boost cadence). When the harvester is feeding the accumulator, the combined APY ranges from **\~5.75% (Plentiful unlocked)** up to **\~7% (Handcrafted locked)**; the delta over the floor is the boost slice. → [Reward Model: Base NAV + Boost](/products/xdc-staking-nfts/xdc-nft-staking-reward-system.md) *** ## Key Parameters for Partners | Parameter | Detail | | ---------------------------------- | --------------------------------------------------------------------------------------- | | **Reward asset (base layer)** | XDC, accruing as share-price appreciation of psXDC | | **Reward asset (NFT boost)** | XDC, accruing into the NFT vault's Synthetix accumulator | | **Distribution frequency (base)** | Continuous via share-price growth (no batches) | | **Distribution frequency (boost)** | Each `notifyBoost` event; cadence is an operational choice (typically weekly or daily) | | **Claim flow (base)** | None. Rewards are realized on redemption | | **Claim flow (boost)** | User-initiated `claim(tokenId)` from the NFT detail page | | **On-chain verifiability** | Yes, both layers emit events indexed by the public subgraphs | | **Principal-stake slashing** | None. XDC penalizes downtime via \~2h exclusion + missed rewards, never burns principal | *** ## Loss Reporting Validator outcomes can be reported via `reportValidatorLoss(operator, assets)` (gated by `RISK_MANAGER_ROLE`). The function is bounded by: * `maxLossBpsPerReport`: cap per individual report. * `maxDailyLossBps`: cap over a rolling 24h window. Both caps are themselves governed by **delayed governance**: changes are scheduled, wait for `governanceDelay`, then execute. Reports emit the attributed operator (`outstandingValidatorPrincipalByOperator` is updated atomically). This bounds the blast radius of any single risk-management call. *** ## Transparency & Verification * Every reward event is logged on the XDC blockchain. * Exchange rate is a deterministic function of `totalAssets` and `totalShares`, auditable at any block. * Historical exchange-rate data is available via the public subgraph for forecasting and reporting. * psXDC v3 supply and total assets are verifiable on-chain at any time on [XDCScan](https://xdcscan.com/address/0xDc74c0DaED82ae94486DeeF22991d2F54173c734). → [Liquidity Model](/for-partners/liquidity-model.md) → [Risk & Compliance](/for-partners/risk-and-compliance.md) → [How Rewards Work (user-facing)](/products/xdc-liquid-staking/xdc-staking-rewards.md)