Nym mixnet APY — initial simulations for first quarter

The Nym mixnet is a global decentralized network that provides a privacy layer for digital communications for any application. The network…

Author: Nym

May 11, 20224 mins read

The Nym mixnet is a global decentralised network that provides a privacy layer for digital communications for any application. The network is composed of mix nodes that earn rewards for providing privacy. Those rewards are then distributed between mix nodes (for operating the infrastructure) and delegators (people who have delegated stake to that node).

Anyone holding native NYM tokens can stake into the Nym network by delegating tokens to mix nodes and earn a share of mix node rewards. In fact, this helps secure the network and ensure high quality of service.

As a NYM token holder, can simulations provide a guess about what APY you could expect from delegating to a mix node in the Nym network?

In a recent academic paper and blogpost we described results for simulations with a full supply of NYM tokens in circulation. But in the real world, the staking supply will be considerably smaller until August when it begins to increase quarterly. This impacts the APY, making it much higher in the first quarter while total stake supply is low, with it tailing off as quarterly vesting happens.

This is a blog post based on an academic paper and not an investment prospectus or financial advice. We use the term ‘APY’ in a loose generic sense, and are relying on hypothetical scenarios using experimental technology. Actual results using the technology will vary widely. It’s quite possible that this venture could result in loss of monetary funds for anyone who uses the software. Any participant in an actual network is expected to do their own research rather than relying on these simulation-based experiments.

Results

The initial simulations for the first quarter show a median result of up to 45% annualised returns (about 3%-4% each month) for delegators to mix nodes with 90%-100% stake saturation. (Note that anything above this does not increase reward rates). The median returns for mix node operators can be significantly higher.

The max annualised returns are above 50% (for highest reputation, meaning fully saturated nodes). At the lower end of the reputation scale, calculations show an up to 10–20% APY for delegations to mix nodes with stake saturation around 20%.

How were these calculated

For those of you who want to understand the mechanics behind these simulations, here is a little more background.

Returns on delegations depend on total amount of rewards available (monthly emission of 2% of mixmining pool) and the supply available for staking (98.5m until August), as well as individual mix node parameters such as stake saturation. Here are the parameters and assumptions that returned the simulation-based results above:

The total staking supply for the first quarter will be approximately 98.5m (this is the total including the CoinList sale plus the rewards distributed to testnet participants).
The reward set of mix nodes is 720, of which 600 are active, and there are 1,440 bonded nodes with different compositions of bonded and delegated stake. All nodes have monthly costs of $40, take a profit margin of 10%, and are assumed to have perfect performance.
10% of the available staking supply (about 9.8m) is bonded to mix nodes and an additional 50% (49m) is delegated. The remaining 40% is assumed to not be staked.
The APY considers stakeholders that delegate their stake to high-reputation nodes (defined as having at least 90% saturation), and it’s computed as the median APY of all high-reputation nodes.
Delegate returns and APY are calculated after operator costs and 10% in profit fees have been deducted by the node operator.
Actual returns depend on the node parameters — read more delegating here and on mixmining here.

Find a mix node to delegate to. Consider their stake saturation and profit margin as that will directly affect your returns. You can also have a scroll through this channel where mix node operators have the chance to describe what they do and why.

Download wallet and transfer your native NYM tokens to your Nym wallet address to start delegating

Watch this video on how to delegate

Make sure you monitor performance of the mix nodes every once in a while — you can undelegate / delegate to someone else at any time.

We will shortly be releasing further information about the simulation, APY, the network parameters that affect it going into the future, as well as a calculator to help people use the simulator more easily.