Rewards

Sharing is Caring

Cadmos implement a reward system to align interests between all Investment Pool stakeholders.

Rewards are automatically computed and paid out by the Protocol smart contracts. Five types of rewards are supported:

Overview

Administration Rewards

An annual percentage of the Pool TVL is granted to the Pool Administrator.

Administration Rewards can be paid out in cash or by minting new Pool tokens.

Management Rewards

An annual percentage of the Pool TVL is granted to the Pool Strategist.

Management Rewards can be paid out in cash or by minting new Pool tokens.

Performance Rewards

A percentage of the overperformance of the Pool NAV relative to its Benchmark is granted to the Pool Strategist. The Performance (or Incentive) Reward structure can be adjusted with two further parameters:

• Crystallization Period: This is the minimum time period between two Performance Reward claims. For instance, if the Crystallization Period is of one quarter then the Performance Reward can be computed and paid out at most once per quarter.

• Soft Hurdle Rate: This is the threshold rate of return in excess of the Benchmark that the Pool must achieve before Performance Rewards are paid out. The Hurdle Rate is 'soft' in the sense that full Performance Rewards in excess of the Benchmark are paid out once the threshold is crossed.

• Hard Hurdle rate: This is the threshold rate of return in excess of the Benchmark that the Pool must achieve before Performance Rewards are paid out. The Hurdle Rate is 'hard' in the sense that only Performance Rewards in excess of the Benchmark and hard hurdle are paid out.

Performance Rewards can be paid out in cash or by minting new Pool tokens.

Burn Rewards

At Withdrawal, a reward may be granted to remaining investors or to the Strategist. Burn rewards are always settled in cash.

Mint Rewards

At Deposit, a reward may be granted to existing investors, to the Strategist or to a Referrer. Mint rewards are always settled in cash.

Protocol Rewards

In the future, we plan to redistribute 10% of the Administration, Management and Performance Rewards of all Pools to Cadmos token holders.

Computation

Administration and Management Rewards

The administration and management reward rates are fixed at the Pool level by the Pool Administrator there is a hard cap at 2% (resp. 10%) p.a. in the smart contract for the administration (resp. the management) reward.

These rewards are periodically settled using the below formula:

$$M = TVL\times \frac{t-\tau}{Y}\times r_M$$

With:

• $M$: the due administration/management reward

• $TVL$: the current vault Total Value Locked

• $t$: the current timestamp

• $\tau$: the last timestamp streaming fees were paid

• $Y$: A year

• $r_M$: the annual Reward rate

Performance Rewards

The performance reward rate is fixed at the Pool level by the Pool Administrator (hard cap at 50% in the smart contract)

The performance reward is periodically settled using the below formula:

$$P = \left(TVL-HW\right)^+\times r_p$$

With:

• $P$: the due performance reward

• $TVL$: the current vault Total Value Locked

• $HW$: the Pool High Watermark

• $r_P$: the performance reward rate

The High Watermark is then updated: $HW = max \left( HW,TVL\right)$

The minimum period between two performance fee claims is configurable and called Crystallization Period

Performance Rewards are only paid if the Soft Hurdle threshold is crossed, i.e.

$$TVL > HW+ I_ {SH}$$

With $I_{SH}$ the Soft Hurdle Index, which grows at an annual rate specified by the Pool Soft Hurdle rate.

Further Note that the High Watermark is updated to take benchmark returns into account.

Burn Rewards

The burn reward rate is fixed at the Pool level by the Pool Administrator (hard cap at 20% in the smart contract)

The burn reward is levied at each withdrawal by materialising a discount to NAV at redemption:

$$NAV_{withdrawal}=NAV\times(1-BurnRewardRate)$$

Note: Burn rewards may be granted to the Strategist and/or to the Pool, in the latter case they are redistributed to all remaining Pool investors; they exist to compensate long-term investors of the inefficiencies caused by frequent withdrawals.

Note: Under current implementation, the Pool Strategist is not subject to burn rewards for direct withdrawals.

Mint Rewards

Mint Rewards are created by the Pool Administrator for a specific Referrer. All deposits originating from a referral link will result into a Mint Reward for the referrer. In case no referral id is specified, a default Mint Reward may be applied.

The mint reward is levied upon deposit by materialising a premium to NAV at suscription:

$$NAV_{deposit}=NAV\times(1+MintRewardRate)$$