Validators and Staking Pools

Each IOTA validator maintains its own staking pool to track the amount of stake and to compound staking rewards. Validator pools operate together with a time series of exchange rates that are computed at each epoch boundary. These exchange rates determine the amount of IOTA tokens that each past IOTA staker can withdraw in the future. Importantly, the exchange rates increase as more rewards are deposited into a staking pool and the longer an amount of IOTA is deposited in a staking pool, the more rewards it will accrue.

When IOTA is deposited to the staking pool in epoch E, those IOTA tokens are converted into staked tokens at the epoch E exchange rate. As the staking pool earns rewards, the exchange rate appreciates. At epoch E', those staked tokens are worth more and translate into more IOTA. A global exchange rate table is used to track the accounting. Because all IOTA tokens in the staking pool are treated the same, regardless of whether they were originally deposited as new stake or as stake rewards, all IOTA tokens immediately count as stake and thus compound rewards immediately.

The staking pool is implemented in a system-level smart contract (staking_pool.move) and is part of the IOTA framework.

Validator Pool Rewards

At each epoch boundary, the system computes the staking rewards for each validator pool proportionally to the staked tokens in each pool. The staking rewards $rewards(i, E)$ for validator pool $i$ at epoch $E$ are computed as follows:

$$rewards(i, E) = \frac{ stakedTokens(i, E)}{\sum_i (stakedTokens(i, E)) }\times totalRewards(E).$$

$rewards(i, E)$ is then adjusted to consider potential slashed validators who have not met minimum quality requirements. Additionally, validators earn commissions on the staking pool's tokens. IOTA keeps track of the rewards accrued by both validators and delegators using a single global exchange rate table.

Validator Staking Pool Requirements

There are minimum staking requirements a validator must satisfy to become active and to stay in the active validator set.

More precisely:

• A validator candidate must accrue at least 2M IOTA of stake before they can request to join the validator set.
• If an active validator’s stake falls below 1.5M IOTA, the validator has seven epochs of grace period to gain back the stake before being removed from the validator set.
• If an active validator’s stake falls below 1M IOTA, the validator is removed from the validator set at the end of the current epoch boundary.

IOTA uses 24-hour epochs.