Rewards

With a starting APY of 8%, rewards are dynamically adjusted based on market conditions, strategy performance, and protocol optimizations to ensure stakers receive competitive and sustainable yields.

Rewards on LiQ are generated entirely through DeFi yield strategies, ensuring maximum capital efficiency without reliance on validator commissions or staking penalties. The primary yield sources include:

1. Lending Strategies – Staked MNT is supplied to lending protocols e.g Lendle, to earn interest income.

2. Yield Farming – stMNT is deployed into liquidity pools and incentivized DeFi programs to capture additional rewards.

3. Cross-Chain Yield Aggregation – The protocol uses staked MNT as collateral to borrow stablecoins (USDT/USDC) and deploys them across multiple DeFi protocols for optimized yield.

4. Automated Vault Strategies – Assets are allocated to structured DeFi strategies that use compounding and dynamic rebalancing to maximize efficiency.

At launch, these strategies will collectively generate an estimated 8% APY, with the potential for optimization based on strategy performance and market conditions.

Reward Accrual Mechanism

Real-Time Yield Accumulation

• Rewards are continuously accrued in real-time as DeFi strategies generate yield.

• Every strategy deployed by the protocol feeds earnings back into the staking pool, ensuring that all stMNT holders benefit proportionally.

• Unlike traditional staking models with fixed epochs, LiQ’s yield accrual is non-linear and responsive to market conditions.

APY Adjustments Based on Strategy Performance

• The protocol monitors yield fluctuations and dynamically adjusts allocations to sustain a competitive APY.

• If lending rates increase, a higher proportion of assets may be directed into lending pools.

• If yield farming opportunities decline, capital is reallocated to stable, high-yield vault strategies.

Buffer Pool Integration for Instant Yield Allocation

• The LiQ Buffer Mechanism ensures that a portion of accrued rewards remains liquid and accessible for fast withdrawals.

• The buffer captures excess yield from lending and farming strategies before it is fully distributed to stakers.

Reward Distribution Logic

Compounding Model

• LiQ employs an auto-compounding mechanism, where yield is automatically reinvested into the staking pool.

• This allows stakers to benefit from compound interest, increasing their stMNT holdings over time without manual intervention.

• Stakers earn rewards in the form of stMNT, which grows in value relative to MNT.

Reward Calculation Formula

The total rewards generated for a given period are calculated using:

$$\text{Total Rewards} = \sum (\text{Yield from Lending} + \text{Yield from Farming} + \text{Yield from Aggregation} + \text{Yield from Automated Vaults})$$

The individual staker’s reward share is determined by:

$$\text{User Rewards} = \left( \frac{\text{User stMNT Holdings}}{\text{Total stMNT Supply}} \right) \times \text{Total Rewards}$$

Where:

• User stMNT Holdings = The number of stMNT a user holds in the staking pool.

• Total stMNT Supply = The total circulating supply of stMNT in the protocol.

• Total Rewards = The aggregate yield generated from all DeFi strategies.

This formula ensures that each staker earns rewards proportionally to their share of the staking pool.

Claiming & Compounding Rewards

Automatic Compounding (Default)

• By default, rewards are automatically reinvested into the staking pool, increasing the user’s stMNT balance over time.

• This means that no manual claiming is required, and users passively benefit from compounded returns.

Reward Frequency and Distribution Timing

Continuous Accrual & Streaming Rewards

• Unlike traditional staking models with fixed reward intervals, LiQ provides continuous reward accrual through real-time streaming.

• Stakers earn yield every second, with their balance increasing dynamically as strategies generate returns.

Real-Time Tracking & Transparency

The protocol provides an on-chain rewards dashboard, allowing users to track their yield accumulation in real-time.

Users can monitor:

• Current APY estimates

• Total rewards earned

• Breakdown of yield sources

APY Sustainability & Long-Term Yield Optmization

To maintain a sustainable APY over time, LiQ implements several optimization mechanisms:

Dynamic Yield Allocation

• The protocol continuously reallocates assets to the highest-yielding strategies.

• If market conditions shift, the system automatically rebalances funds to prevent yield deterioration.

Automated Reinvestment of Fees

• A portion of protocol fees is reinvested into the staking pool, ensuring additional compounding effects for users.

Strategic Yield Diversification

• By utilizing multiple yield sources (lending, farming, aggregation), LiQ avoids over-reliance on any single strategy.

This ensures that APY remains resilient even during periods of market volatility.

Buffer Liquidity Reserve for Stability

• A liquidity reserve is maintained to smooth out fluctuations in reward distribution.

This prevents sudden APY drops and ensures consistent yield payouts.