Thread by @hodl_farm

I am going to explain why the $XTZ rewards for last cycle were so low. TLDR: since the Carthage upgrade, the rewards fluctuate a lot before cycles, but on average, over time, they even out (thread)

As a #tezos baker, we provide two essential services to the blockchain: baking and endorsing. We are encouraged to perform these operations by a reward, which is added to our balance. We then transfer these rewards to our delegators in proportion of their stake, minus the fee.

For the #carthage upgrade, the power-that-be decided that the rewards for baking and endorsing would be changing.

Before: 16 XTZ for baking, 2 XTZ for endorsing
After: 40 XTZ for baking, 1.25 XTZ for endorsing

These values were changed after some analysis was performed, which showed that some selfish strategies and attacks would be prevented. So now our blockchain is more secure 🤓

Baking and endorsing rights are assigned by an algorithm 5 blocks in advance. My favorite site to look at the rights is tzstats.com.

tzstats.com/tz1gg5bjopPcr9…

For example, these are our rights for cycle 215. The dot that looks different is a baking right, the other dots are endorsing rights. So for cycle 215, we will bake one block.

As soon as the magic algorithm generates the rights for a future cycle, we immediately pay you your share. For example, we just paid rewards for cycle 217. We are the only baker doing this !

To view the most recently generated rights for our baker, go to our page on tzstats.com, then on the Performance tab, click on the right arrow next to the cycle number until you can't click anymore.

As you can see, we will not bake any block for cycle 217. 😭 As a small baker, it does not always happen. Most of the time, we do bake one block, sometimes 2 or 3.

Before Carthage, you would not really notice the difference because endorsements paid a lot. But now, the baking rights really matter more, at 40 XTZ apiece. Your payout will JUMP if we bake blocks, and it will be really tiny if we don't.

Big bakers don't care. They have so much at stake that they bake and endorse tons of blocks, and the payout difference between cycles is just small noise. That's obvious if you look at tzstats. For example, these are Polychain Capital's rights

But the key thing is that it does not matter ! The magic algorithm ensures that over time, the rewards paid by bakers small and large will be equal to the actual #tezos inflation minus the fee 🤓

So if you HODL your tezzies, you should not be too worried by small payouts because you know there is a big payout coming ! Just check tzstats at the beginning of every cycle and look out for baking slots ! It's fun, just like playing roulette. End of thread.