How are Rewards Generated?

On the Cardano Blockchain, stake pools receive rewards at the start of each epoch, which lasts 5 days. To do this, a virtual rewards fund is created that contains coins that will be distributed among the pools.

Two different sources contribute to the rewards pool:
transaction fees and monetary expansion .

There is a maximum number of coins to be issued, defined by the Network Protocol, called Ouroboros and it is 45B ₳. This is the total number of coins that will exist in the future.

Currently, about 31B ₳ are in circulation. A significant part of the quantity that is not in circulation makes up the reserves , which represents about 13B of ADA that will be issued over time, and distributed to the operators. This is the main source of rewards during the initial epochs of the network. However, the interference from this source gradually decreases as the amount of reserves begins to flow into the market.

At each epoch, a fixed proportion is withdrawn from the pools to make up the virtual reward pool. Currently, this proportion is 0.3% of the current amount in reserves.

These two sources make up the reward pool. A portion of the total fund goes to the treasure (the collaborative fund maintained by the community). Currently, 20% of the rewards fund automatically goes to the treasury. The rest of the rewards are finally distributed among the stake pools that produced blocks during the epoch, proportionally to the amount of stake they control.