Reward Scaling Models

Reward scaling models are mechanisms that adjust the rewards distributed to participants based on factors like the duration of their commitment, the amount of capital supplied, or the risk they take. These models are used to encourage more desirable behaviors, such as providing liquidity for longer periods or during times of high market stress.

By tailoring rewards, protocols can more effectively manage their liquidity and incentivize the behavior that contributes most to the protocol's success. These models are a sophisticated tool for aligning participant interests with protocol goals.

They require precise quantitative modeling to be effective.