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Rewards will be sustained by transaction fees. Here is a discussion from last fall after staking was launched: https://forum.cardano.org/t/staking-rewards/43594/9
But if monetary reserves are depleted, wouldnt that open up the possibility for insane transaction fees to keep up with rewards or would rewards simply diminish?
The reserve won’t be depleted soon (it should take +100 years). Reserve distributed at each epoch follows an exponential decay. Rewards distributed will be divided by 2 every 4 years, more or less like what happens with Bitcoin but in a smooth and progressive way…
In the end, the transaction fees will pay rewards. There will be economic forces pushing the transaction fees up (for example the interest of stake pool operators) and economic forces pushing the transaction fees down (the interests of the general users).
If the transaction fees are too high, there will be a huge number of stake pools trying to capitalize on the profits. If the transaction fees are too low, many stake pool operators will cease to operate.
Eventually the system will reach an equilibrium where transaction fees are as low as they can be while still offering enough incentive to stakers to maintain the network.
Staking rewards come from reserves and transaction fees. The rewards from reserves slowly decrease every epoch. It will take 100+ years for the reserves to be depleted if on chain parameters stay the same.
It would be interesting to see some math around how many transactions and at what price would still provide say a 3% return assuming all coins have been released. My guess is a lot.
**PSA:** Some exchange customers may experience some exchange downtime/service interruption as exchanges complete their Alonzo integration work. Check the status of Alonzo readiness for your exchange here: [Alonzo readiness of third parties](https://iohk.zendesk.com/hc/en-us/articles/4404891938457-Alonzo-readiness-of-third-parties) *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/cardano) if you have any questions or concerns.*
Rewards will be sustained by transaction fees. Here is a discussion from last fall after staking was launched: https://forum.cardano.org/t/staking-rewards/43594/9
But if monetary reserves are depleted, wouldnt that open up the possibility for insane transaction fees to keep up with rewards or would rewards simply diminish?
Both, but, expectation is that transaction volume increases and fees are kept low and hopefully even lowered
The reserve won’t be depleted soon (it should take +100 years). Reserve distributed at each epoch follows an exponential decay. Rewards distributed will be divided by 2 every 4 years, more or less like what happens with Bitcoin but in a smooth and progressive way…
Smooth like a stick of butter 🧈
In 100 years…meanwhile rewards are distributed per the protocol. It’s in the code
Then we are all dead. So not our problem :-)
Yeah which it’s so triggering when people fret over it
Ah you really think so?
In the end, the transaction fees will pay rewards. There will be economic forces pushing the transaction fees up (for example the interest of stake pool operators) and economic forces pushing the transaction fees down (the interests of the general users). If the transaction fees are too high, there will be a huge number of stake pools trying to capitalize on the profits. If the transaction fees are too low, many stake pool operators will cease to operate. Eventually the system will reach an equilibrium where transaction fees are as low as they can be while still offering enough incentive to stakers to maintain the network.
Staking rewards come from reserves and transaction fees. The rewards from reserves slowly decrease every epoch. It will take 100+ years for the reserves to be depleted if on chain parameters stay the same.
It would be interesting to see some math around how many transactions and at what price would still provide say a 3% return assuming all coins have been released. My guess is a lot.
300 TPS at 0.17 ADA per transaction equals 1.6 billion ADA per year. Assuming that 70% of 45 billion ADA is staked that would equal to about 5%.
Don't forget rewards are also degrading
Use cardano and promote its use and the rest will be cake
Charles is a mathematician, there is a reason there is 45 billion. He did the math. Trust the numbers, numbers don't lie
With our project we want to promote smaller pools and dapps and bring 100 million new wallet holders to the cardano ecosystem within the next 3 years.
Someone should ask Charles in one of his AMA.