Holding coins in Gridcoin blockchain allows to earn interest (~1.5% / year). To collect interest, you need to stake coins – come online. A large holder can come online for a few hours just once in a few months and earn whole accumulated interest. He could earn slightly more (due to compounding interest) if staking daily, but difference is negligible. This mechanism is causing low weight of the network that leads to several problems. To force higher network wait, Constant Block Reward (CBR) mechanism is researched. Each new block will reward staker with around 10 coins (exact number not decided yet). As coins need to mature for 16 hours to be able to stake, miner with just one UTXO will be able to stake no more often than just once within 16 hours (cooling down or maturing) period. Splitting balance between a number of UTXOs will allow, especially for whales, to maximize CRB rewards. Let’s assume you have 1 million coins and there are 10 million coins trying to stake a block. Out of each 640 blocks you can stake on average ~ 64 blocks. But with all coins in just one UTXO, after staking all of them would would have to mature for the next 640 blocks. As a result you would get only up to 1 / 64 of the possible reward.
The questions are: How to split coins? Does CBR mechanism impact small holders as much as large holders?
NOTE: An equation you will find below needs another pair of eyes to review and myself I have to re-check some steps. This is still a draft.
N – number of coins you hold
t – (time) number of blocks to mature (or cool down) – 16 h = 640 blocks in case of Gridcoin
M – total coins staking in the network
F – efficiency factor
B – (time) maximum number of blocks that N coins can stake within 16 h when M is a total number of staking coins
S – number of coins in staking state
C - number of coins that already staked during the last t blocks and now are maturing (maturing, resting or cooling down)
I – number of UTXOs that N coins are split between
n – number of coins in a UTXO
Now we can answer some interesting questions. How many UTXOs one needs to collect ~99% of possible rewards?
Case1) Let M = 10 million, (M = 100 million in the second table), N = 1 million, t = 640
One would need to split balance to over 6 thousand UTXOs to collect ~99% of possible rewards or close to 600 if ~90% is enough. At higher difficulty one needs to split balance into smaller number of UTXOs.
Case2) Let M = 10 million, N = 1 thousand, t = 640
With a low balance of 1,000 coins it still makes sense to split, but there is little to gain.
Case3) Let M = 10 million, N = 10 thousand, t = 640
With a still quite low balance of 10,000 coins it still makes sense to split; at low network difficulty gains can be huge, at high network difficulty gains might be negligible.