Staking on Saga

Saga depends on stakers for the economic security of the Mainnet and, by extension, the security of each Chainlet. To ensure sufficient economic security for the system, Saga employs a staking inflation schedule very similar to that of the Cosmos Hub. The network targets a specific stake rate by varying the inflation rate. The annual inflation is capped between minimum and maximum rates. If more than ⅔ of SAGA is staked, the block rewards decrease gradually down to a floor of a minimum rate of annualized inflation. If less than ⅔ of SAGA is staked, the block rewards increase gradually up to a ceiling of a maximum annualized inflation.

With the Cosmos Hub, each validator posts a commission that they take from each delegator. With Saga, the network determines a universal commission rate that every validator takes from their delegators. This design is due to the fact that in our system, each validator is already posting their Musical Chair auction price. We do not think asking delegators to choose between a high-cost validator with low commissions and a low-cost validator with high commissions is a productive tradeoff. Saga simplifies the validator selection process by keeping the commission rate consistent across all the validators.

Selecting the right validator will be key to maximizing delegator rewards. As mentioned in the Musical Chairs section, delegators delegated to validators in the Losing Set of Musical Chairs may not earn any inflation rewards. It is important for delegators to redelegate to validators who post the cheapest prices.

A commission still exists to ensure that the Saga validators have ways of economically sustaining themselves without any Chainlet activities. Over time, we expect validators to price Chainlets at-cost or below-cost, and having an inflation commission buffer helps the Chainlet price decrease to such levels.