Reward Distribution App

The Reward Distribution App extends the Credential Utility with a feature that facilitates the redistribution of rewards from Issuer to Holder. It also serves as a way for the Holder to top up their credential billing deposit.

When a Holder purchases a credential from an Issuer, the latter receives app provider rewards for the Canton Coin (CC) payments made as part of the credential billing process. The Issuer is encouraged to share a part of the rewards with the Holder as an incentive. An Issuer can use the Reward Distribution App to pass a portion of the rewards earned onto Holders or an Issuer can develop a custom app implementing the reward redistribution logic.

How it works

The Issuer can set up a Reward Share Agreement that describes how to share app rewards. This defines the percentage of rewards to share out of the total pool of rewards earned in a given round. For example, assume that the Issuer earns 1,000 CC in a round and there are two Holders, A and B. The Reward Distribution App offers two methods to configure what percentage to share:

  1. Base percentage: the rewards are distributed equally between Holders, irrespective of their assets under management (AUM). For example, if the Issuer sets the base percentage to 10%, there would be 100 CC to distribute equally. Both A and B would get 50 CC each.

  2. AUM percentage: rewards are distributed to Holders based on their AUM. For example, assume that the Issuer sets the AUM percentage to 10% (leaving 100 CC to distribute) and has issued an instrument INST. If A holds 2,000 INST and B holds 8,000 INST, then A would get 20 CC and B would get 80 CC.

The base and AUM percentage methods can be used individually or together. For example, a KYC provider might want to use the base percentage only, since they do not offer any assets. Alternatively, an asset issuer might want to use the AUM percentage, since rewards are shared only based on AUM. Both methods may be combined if there is one base pool of rewards that Holders share equally and another AUM pool that Holders share based on the amount of the asset they hold.

What happens to the rewards shared?

Generally, the distributed rewards are first used to fill the Holder’s credential billing deposit up to the target deposit amount, and the remainder is transferred to the Holder. However, if the amount to top up is lower than “minimumTopUpAmountUsd,” a top-up does not occur to avoid excess fees. Instead, the full amount is transferred to the Holder.

Which party receives the shared rewards?

The reward redistribution is implemented via the credential billing process. The recipient of the rewards redistributed by the Issuer is the credential Holder party. Most organizations use the same party as a Holder of both the credential and the asset. However, some organizations may use one party to hold the credential and another party to hold the asset. In this case, reward redistribution using the AUM percentage method requires a mapping between the parties holding the asset (identified when the reward amounts are calculated) and the parties holding the credential (that receive the reward). This mapping can be configured by the Issuer using “rewardPartyToHoldingParty” in the Reward Share Agreement. The asset holder parties not found in the “rewardPartyToHoldingParty” mapping receive the reward assuming the same party is used as the credential holder.

What is required to use this feature?

The Issuer must set up a Reward Share Agreement that specifies how much of the rewards to share and how to determine the amount that each Holder receives. This can be done in the Utilities UI.

The Reward Distribution App operator then distributes the agreed-upon amount on behalf of the Issuer. The Issuer must lock a sufficient amount of CC to the Operator in the Reward Distribution deposit. This can be done in one of the following ways:

  1. The Issuer can manually top up the deposit in the Utilities UI.

  2. The Issuer can run the standalone Top-Up App on their infrastructure, which regularly tops up the deposit according to the parameters specified by the Issuer.