Maximising Engagement in DeFi: A Deep Dive Into Minterest’s Loyalty Reward System

Retaining and rewarding user commitment is a key challenge in DeFi. Introducing Minterest’s Loyalty Reward System which is designed to drive capital retention and ongoing protocol participation.

The Minterest Loyalty Reward System operates on a simple yet effective principle: the longer and more you stake $MINTY, the higher your rewards generated from Minterest’s Buyback System, making it attractive to both new and long-standing users. It’s a dynamic system that adapts to the user’s level of interaction with the protocol.

Users can earn up to 24% greater staking rewards by moving up the Loyalty Reward system by simply staking and staying. Users can freely stake and unstake as they wish, however those who stay staked are the ones who will be beneficiaries of the highest rewards.

This article explores the workings of Minterest’s Loyalty Reward System, its role in enhancing user engagement, and the value it adds to the platform’s ecosystem.

Incentivising Sustained Participation

At the core of Minterest’s system is the motivation for users to stay engaged by offering increasing loyalty bonuses over time. These bonuses not only elevate a user’s weight in Governance rewards but also maintain a balance with partial unstaking options, blending flexibility with enduring benefits.

System Overview: Understanding Minterest’s Loyalty Reward System

How the Loyalty Reward System Works

Minterest’s Loyalty Reward System segments users into four tiers, known as “Loyalty Groups.” Each group has its range of ‘Loyalty Factors,’ serving as multipliers for rewards. To be eligible for loyalty rewards, users must meet a minimum $MINTY staking requirement. Advancement through tiers hinges on two main criteria:

1. Time-Based Progression: To advance within a loyalty group, users earn greater multiplier boosts (from 0% to 24%, called loyalty factor) over time within their current group. This value is used to calculate the additional weight a user gains in the reward distribution system. Progression requires time spent within the entire loyalty factor range for a loyalty group. Once reaching the maximum loyalty factor for that loyalty group, they can only progress to the next tier if they have staked enough $MINTY to qualify for it. 

2. Staking Threshold Requirement: Moving up to a higher loyalty group tier also hinges on meeting a predefined minimum staking threshold. This means that in addition to spending the required time in their current tier, users must also ensure they have staked enough $MINTY tokens to qualify for the next group.

It’s important to note that both these criteria – time spent in the current loyalty factor level and meeting the staking threshold – are necessary for a user to progress to a higher loyalty group. Failing to meet either of these conditions means that users remain in their current group, eligible only for the maximum loyalty factor applicable to that group.

Unstaking and Loyalty Factor Adjustments

Users can unstake at any time after Minterest’s public launch. However, to maintain the same multiplier boost there is a limit to the amount that can be unstaked before a penalty kicks in, called the ‘Loyalty Core’. If unstaking more $MINTY than the loyalty core value permits, the system reduces the user’s loyalty factor based on a value called the ‘Sanction Factor’.

Technical Implementation of Minterest’s Loyalty Reward System

The Loyalty Reward System is engineered to track and reward user participation. Here’s a breakdown of how it works:

Tracking User Participation

• Start Time: A user’s journey within the Loyalty Reward System commences when they execute the ‘participate()’ function in the Buyback contract.
• Staked $MINTY Threshold: To be considered an active participant in earning loyalty rewards, a user’s total staked $MINTY from all sources must meet or exceed the Loyalty core value.

Reward Calculation

• Loyalty Reward: Once the conditions are met, the system multiplies the user’s staked $MINTY by a loyalty factor. This calculation results in the loyalty reward, which contributes to both the Buyback and Voting weights of the user.
• Factor Growth: Within each loyalty group, the loyalty factor grows over time. It is applied to the total claimable $MINTY to form an additional Buyback weight.
• Growth Limiting: The loyalty factor’s growth stops once it reaches its maximum limit within the user’s current loyalty group.

Dynamic Loyalty Core

• Definition: The loyalty core represents the minimum $MINTY a user must maintain within the protocol to preserve their loyalty factor.
• Calculation: It is dynamically calculated for each user based on the loyalty allowance – a percentage that defines the amount of $MINTY a user is permitted to unstake without affecting their loyalty status.
• Balance Updates: Every update to a user’s $MINTY balance leads to a corresponding adjustment in the loyalty core, in line with the loyalty allowance percentage of the $MINTY income.
• Unstaking Impacts: If a user unstakes $MINTY but maintains a balance above the loyalty core, the loyalty factor continues to apply to the remaining claimable $MINTY, forming the loyalty reward.

Handling Unstaking and Loyalty Group Adjustments

Sanction Factor Application: If unstaking reduces the user’s $MINTY balance below the loyalty core, the protocol recalculates the appropriate loyalty group based on their remaining balance and duration of participation. The sanction factor is used to determine the new loyalty group.

• Example 1: With a sanction factor of 2, a user in Loyalty Group Tier-3 who unstakes below the loyalty core but remains in Tier-3 will be reset to Tier-1.
• Example 2: With the same sanction factor, a user in Tier-4 who unstakes below the loyalty core and falls into Tier-3, will be further reset to Tier-1, effectively moving down three groups in total.

Loyalty Factor Adjustments: Following unstaking and group adjustment, the loyalty factor is set to the maximum of the current group in Example 1 and to the minimum in Example 2.

The loyalty reward and loyalty core are recalculated based on the current claimable $MINTY amount, considering the loyalty allowance. This system monitors user participation, dynamically adjusts rewards based on stake levels, and recalculates loyalty standings in response to user actions.

Minterest’s technical approach to the Loyalty Reward System is intricate yet user-centric, ensuring a balanced and fair reward mechanism. 

Understanding Groups and Loyalty Factors in Minterest’s Loyalty Reward System

The growth and application of loyalty factors help align incentives with long term participants. Here’s an in-depth look at how these factors function within the system:

Loyalty Factor Growth

• Duration: The loyalty factor grows over a period of 24 months.
• Growth Pattern: The increase in the loyalty factor is non-linear, occurring monthly. However, the actual update on the blockchain is contingent upon user activity.
• Storage and Administration: The value of the loyalty factor for each month is securely stored in the contract. 
• Monthly Factors: The protocol supports a total of 24 loyalty factors, correlating to each month within the two-year growth period.
• Grouping: These factors are organised into loyalty groups, each encompassing a range of these monthly factors.

Factor Application Post 24 Months

Loyalty factor growth spans 24 months, with monthly increments stored securely in the contract. Post 24 months, long-term users who meet the highest group’s threshold have their loyalty factor growth capped but continue to benefit from it. Users in lower groups are capped at the maximum factor for their group, regardless of staking duration.

Calculating Loyalty Reward and Loyalty Core Value in Minterest’s System

Minterest’s Loyalty Reward System employs precise methods to compute rewards and maintain its loyalty structure. Loyalty rewards are calculated as an additional Buyback weight, increasing both the user’s influence and share in Governance rewards. Understanding these calculations is essential for grasping the system’s reward mechanism.

Loyalty Reward Calculation

• The loyalty reward is provided as an additional Buyback weight, boosting the user’s influence within the protocol and increasing their share in Governance rewards.
• The calculation formula is: additionalBuybackWeight = accumulatedClaimableMnt * loyaltyFactor.
• Here, accumulatedClaimableMnt encompasses all claimable $MINTY from vesting, Buyback stakes, and RewardsHub.
• The loyaltyFactor is a multiplier reflecting the user’s loyalty status.
• This additional Buyback weight simultaneously increases the user’s voting power, linking loyalty to governance influence.

Loyalty Core Value Calculation

• The loyalty core value is recalculated with each change in $MINTY balance.
• The formula used is: loyaltyCore = mntIncome * (1 - loyaltyAllowance) + previousLoyaltyCore
  • In this formula:
    • – mntIncome refers to the $MINTY added to the user’s accumulated claimable amount since the last calculation.
    • – loyaltyAllowance is a variable percentage set by the protocol administrators.
    • – previousLoyaltyCore is the previously stored value of the loyalty core on the blockchain.
• Upon unstaking of funds, if the final $MINTY amount is below the loyalty core, the system recalculates the loyalty core using loyaltyCore = accumulatedClaimableMnt * (1 - loyaltyAllowance)
  • – accumulatedClaimableMnt here is the claimable $MINTY after unstaking.

If the $MINTY balance increases, the loyalty core also rises. Conversely, if there’s an unstaking event and the new balance is below the loyalty core, the value is adjusted based on the new balance and loyalty allowance. This may result in discarding additional Buyback weight and resetting the loyalty factor according to the current group.

Through these calculations, Minterest ensures a fair and dynamic allocation of rewards.

Summary

Minterest’s Loyalty Reward System is a thoughtfully structured mechanism to reward long-term commitment and strategic staking in the protocol. Users grouped by their $MINTY stake benefit from loyalty factors that grow over time, with the system adapting to user actions and DAO decisions. It’s a model that underscores sustained participation, offering users enhanced benefits through Governance rewards and calculated staking strategies.

To learn more about how Minterest is improving DeFi lending and borrowing, check out some recent articles, follow Minterest on Twitter, and drop by the Telegram or Discord channel for a chat!

21, November 2023