Avalanche

The Consensus Token VCM enables the AVAX token to capture value by requiring the validator to stake a minimum of 2,000 AVAX for a period between 2 weeks and 1 year, to participate in the Avalanche network’s consensus process, securing the Primary Network, and subnets. The validator must lock up AVAX; representing the risk exposure, and incur a monthly fee of 1.33 AVAX to perform operations:

cumulative_validator_cost = min_stake + ∑^T_t=1 monthly_fee

• min_stake — the minimum 2,000 AVAX tokens required to be staked by a validator to participate in the Avalanche network’s consensus process, locked up and exposed to reward withholding risk.
• monthly_fee — the recurring operational cost of 1.33 AVAX per month incurred by the validator for running nodes and validating transactions.
• $\sum_{t=1}^{T}$ — the summation of the monthly fee over each month t from 1 to T, where T is the total number of months the validator has been actively participating in the consensus process.

Note: “Validator” is in reference to those operating on the Primary Network. The validator operating on a subnet solely incur the monthly fee.

For eligibility of receiving potential staking rewards, the validator must satisfy the conditional actions of node running and transaction validation.

This staked AVAX is subject to the risk of reward withholding for misbehavior, such as insufficient uptime, aligning the validators’ incentives with the network’s security and user trust. In return, the validator earns AVAX-denominated staking rewards for maintaining over 80% uptime.

The Stake Delegation VCM captures value for the AVAX token by enabling the delegator to stake a minimum of 25 AVAX and delegate it to a validator of their choice. The delegator’s staked AVAX, alongside the validator’s minimum 2,000 AVAX stake (jointly conditioned on the Risk Exposure), faces the risk of reward withholding due to validator misbehavior, with the delegator’s conditional action being the selection of a validator to delegate to. In return, the delegator receives a proportional share of the validator’s AVAX-denominated staking rewards, calculated after deducting the validator’s variable commission fee (which has a minimum rate of 2%):

delegator_share = delegator_stake × $\dfrac{total\_validator\_rewards}{total\_stake}$ × (1 − commission_level)

• delegator_stake — the amount of AVAX tokens staked by the delegator, with a minimum of 25 AVAX, to support a validator’s consensus participation
• total_validator_rewards — the total AVAX rewards earned by the validator for their node operations and transaction validation in a given period
• total_stake — the combined AVAX stake of the validator (minimum 2,000 AVAX) and all delegators’ stakes assigned to that validator
• commission_level — the variable commission fee percentage set by the validator, deducted from the rewards before distribution to the delegator