Reward Distribution Mechanism

The CosmBank staking system is designed to deliver sustainable and compounding passive income to long-term participants. Rewards are distributed automatically to sCSM holders, proportionally and transparently.

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(1) Reward Sources

• Protocol Revenues: Including Flexi loan interest payments, trading fees from DEX liquidity pools, liquidation penalties, and more.

• Inflationary Subsidy (Initial Phase Only): In the early stages, a small portion of new CSM is minted to incentivize staking. This gradually transitions to a fully revenue-sharing-based model.

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(2) Auto-Compounding and Rebase Distribution

Rewards are automatically converted into CSM and distributed to sCSM holders daily, with no manual claiming required.

Distribution Formula

User Daily Reward = (sCSM Amount / Total sCSM Supply) × Daily Protocol Revenue

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Rebase Example

Assume:

• 100,000 CSM is staked

• 100,000 sCSM is in circulation

• The protocol distributes 1,000 CSM as rewards in one day

Outcome:

• New total in the staking contract: 100,000 (existing) + 1,000 (new rewards) = 101,000 CSM

• Still only 100,000 sCSM in circulation

To maintain the 1:1 peg between CSM and sCSM, the protocol mints 1,000 new sCSM (1%) via rebase to match the updated CSM balance.

Therefore, the daily rebase yield = 1%.

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Operational Details

• Auto-Compounding: Rebase is executed on-chain every 12 hours (2 times daily), automatically increasing users’ sCSM balance.

• Fair Distribution: Rewards are distributed based on proportional sCSM holdings — no extra steps or gas required.

• Effortless Growth: As long as users remain staked, their sCSM balance grows passively — compounding is fully automated.

CosmBank’s rebase mechanism transforms staking into a truly hands-free compounding yield experience.

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(3) Comparative Model: Traditional Rebase vs. CosmBank

Feature	Traditional Rebase (e.g. Olympus)	CosmBank Model
Reward Form	Minting new OHM (inflationary)	Direct distribution of CSM or stablecoins
Governance	Must convert to gOHM to vote	Staking CSM automatically yields veCSM
Price Impact	High short-term sell pressure	Lower inflation, stronger long-term value

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Rebase Summary

CosmBank sends rewards directly to the staking contract, increasing the CSM:sCSM ratio and triggering a rebase:

For example: 100,000 CSM staked + 1,000 reward → 101,000 CSM total. With only 100,000 sCSM in circulation, the protocol mints 1,000 sCSM to maintain balance. This results in a 1% daily rebase yield.

Rebases occur every 12 hours, and the system fairly distributes rewards to all sCSM holders.

No manual claiming is required.

Users simply remain staked, and their balance grows automatically via compound rewards.