How to Choose a Nominator?

How to properly choose a nominator to maximize my earnings?

As we have discussed in this other article, it is important to know how to choose a set of committed and quality validators. Once we have a clear understanding of the basic concepts (important to read the previous article), we can optimize our rewards with very simple guidelines. We know that the amount of rewards to be distributed among the 69 validators in Val will always be conditioned by the volume of transactions on the Sora network, with more transactions yielding higher rewards and fewer transactions yielding lesser rewards.

Despite this variable, we can optimize the rewards we receive in each ERA (6 hours), mainly taking into account these 2 factors:

1.- Validator Commissions: This is the percentage that the validator takes as their reward. The commissions are deducted from the total rewards generated in that ERA. Therefore, the higher the commission percentage, the lower the proportion of rewards distributed to the nominators, which reduces the APY for them.

2.- Total Stake of Nominators (other stake): The total amount of XOR staked by all nominators in each validator determines the base upon which the rewards are distributed (minus the validator's commissions). A nominator will receive a portion of the rewards proportional to their share in the total stake of the nominators.

In this context, nominators should consider both the validator's commission rate and their own stake relative to the total stake of all nominators when evaluating their potential APY.

Let's consider several examples with a nominator named Bob:

Example 1: Impact of Validator Commission Percentage.

Assuming nominator “Bob” stakes 1,000 XOR.

Validator A: 10% Commission, Total Stake: 10,000 XOR

Validator B: 30% Commission, Total Stake: 10,000 XOR

Validator C: 50% Commission, Total Stake: 10,000 XOR

Rewards received by the validator according to the tx volume in one ERA: 10 Val; after deducting the validator's own commission:

Validator A: 9 VAL for nominators

Validator B: 7 VAL for nominators

Validator C: 5 VAL for nominators

Nominator “Bob's” ratio (1,000 XOR staked):

Validator A: 10% of 9 VAL = 0.9 VAL

Validator B: 10% of 7 VAL = 0.7 VAL

Validator C: 10% of 5 VAL = 0.5 VAL

Example 2: Impact of Total Stake by Nominators (other stake), relative to Nominator “Bob’s” Stake.

Assuming “Bob” stakes 1,000 XOR.

Validator A: 20% Commission, Total Stake: 50,000 XOR

Validator B: 20% Commission, Total Stake: 100,000 XOR

Validator C: 20% Commission, Total Stake: 200,000 XOR

Rewards received by the validator according to the tx volume in one ERA: 10 Val; after deducting the validator's own commission.

Validator A: 2% of 8 VAL = 0.16 VAL

1000/50000*100= 2%

Validator B: 1% of 8 VAL = 0.08 VAL

1000/100000*100= 1%

Validator C: 0.5% of 8 VAL = 0.04 VAL

1000/200000*100= 0.5%

Example 3: Combination of both factors, Commission and Total Stake by nominators (other stake).

Assuming “Bob” stakes 1,000 XOR.

Validator A: 15% Commission, Total Stake: 100,000 XOR

Validator B: 25% Commission, Total Stake: 50,000 XOR

Validator C: 20% Commission, Total Stake: 75,000 XOR

Rewards received by the validator according to the tx volume of one ERA: 10 Val.

Validator A: 10 VAL - 15% = 8.5 VAL 1% of 8.5 VAL = 0.085 VAL

Validator B: 10 VAL- 25% = 7.5 VAL 2% of 7.5 VAL = 0.15 VAL

Validator C: 10 VAL - 20% = 8 VAL 1.33% of 8 VAL = 0.106 VAL

In these examples, the amount of XOR staked by the nominator “Bob” is constant (1,000 XOR), which makes it easier to compare how different factors (validator commission and total stake of the group of nominators “other stake”) affect the APY. These examples illustrate how a nominator can receive different amounts of VAL as rewards depending on the validator's commission structure and their proportional participation in the total stake of the group of nominators (other stake).