Why are Cardano staking rewards decreasing, slowly going down

Fixed supply

We could argue that one of the greatest invention in cryptoassets is limited supply.

The reward pot

So given each epoch the rewards pot looses the ADA for that epoch. If this happened at the same pace the pot would be empty in a fixed number of epochs. This is not good as it should incentivize the adoption and should last for a long time. Therefore the idea here is that the rewards are exponentially smaller. Given that there will always be some rewards in the pot but the initial adopters will get more of the rewards.

Halvening

This is nothing new as we can turn and look to the first cryptoasset the famous BTC which kinda does the same thing. With BTC there is an event called the halvening and what it basically does is cut the rewards in half every 4 years. The goal of this system is the same… to extend the pot used for giving the rewards to the miners so it will last a long time.

Cardanos’ half life

As with BTC, Cardano also has a half-life, which is basically the time in which the rewards will be cut in half. The difference here is this is done continuously and not in a discrete fashion. Therefore Cardano ADA rewards are slowly getting lower from epoch to epoch.

The demand size of the equation

You could say that as Cardano rewards go down as time passes people will have less incentive to run pools and stake their ADA… but there is always the other side of the equation. So if the supply is fixed and if the demand is growing ADA should go up. Therefore the value per reward should on the long enough time frame decrease but if ADA value would increase the rewards should still be quite good. In the end there is still value in rewarding the first adopters.

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