Compound Staking Rewards

It is also important that we automate the compounding of staking rewards for users. After all, who wants to manually claim staking rewards every block?

To address these needs, we have designed a system that will update the exchange rate and compound staking rewards simultaneously.

Compounding Staking Rewards Process

Here’s a step-by-step breakdown of what happens in the background:

1. Claim and Transfer: The Coordinator periodically claims staking rewards on behalf of the users and transfers them back to the Initia L2 Staking Contract

2. Exchange Rate Update: The Staking Contract rebalances the rate based on the above formula.

3. Auto Compound: Rewards are then staked back to the validators by repeating steps 3–5 in the Staking process.