# V1: Reward Logic

**Note: The following is information related to Tokemak v1 , Tokemak v2 "Autopilot" docs are underway and will replace much of the below information. **

**Note: The following is information related to Tokemak v1 , Tokemak v2 "Autopilot" docs are underway and will replace much of the below information.**## General Introduction

Tokemak's reward logic governs the rewards for LDs and LPs. Its main goals are:

Balancing the demand of the Liquidity Directors (LDs) with what deployments would be most efficient for the system

Optimizing rewards based on the performance of the Reactors (performance based emissions)

Modulation of the impact that the difference in performance between reactors has in the overall rewards allocation

## Overall Reward Quantity

The overall quantity of TOKE rewards allocated to both LDs and LPs is determined using the rewards earned by Tokemak's deployment of LP tokens from a Token Reactor (using an 8-week rolling average, split between LDs and LPs) and a base allocation of rewards.

## Liquidity Director Reward Logic

The LD reward allocation to specific reactors takes into account the votes allocated by LDs and the Optimal Allocation (the theoretical optimal allocation of votes desired by the protocol required to maximize performance), and gives them appropriate weighting. A set of additional parameters modulates the impact of the relative reactor performance on the rewards allocated to a specific reactor.

LDs will receive the maximum amount of rewards when allocating their votes according to the Optimal Allocation. The amount of liquidity provided by LPs has no impact on the rewards LDs earn by allocating votes to a Reactor.

### Summary

The overall amount of rewards allocated to LDs is determined by the performance of the Reactors and has a baseline of rewards.

The share of rewards earned by the LDs is determined by the LD reward logic which balances:

The optimal vote allocation (“How would the protocol distribute the LD votes based on the performance of the Reactors?”) ensures that Reactors showing a good performance are incentivized accordingly.

The votes allocated by the LDs (“What do the LDs want regardless of the performance of the reactors?”) ensures that the decision made by the individual LDs is appropriately taken into account.

**Liquidity Director Equations**

**Liquidity Director Equations**

In order to define the actual rewards paid out to LDs of i-th Reactor, we first constrain the parameter Rew of i-th Reactor in two steps by defining Rew_a and Rew_b as

Then, the optimal % allocation of votes Opt(i) (optimal vote allocation) for the i-th Reactor is defined by

The % share of rewards paid out to the i-th Reactor is calculated using the following equation:

Finally, the reward amount for LDs the i-th Reactor are given by

## Liquidity Provider Reward Logic

In the new logic, whereas LD rewards are not impacted by the LP side of the Reactor, LP rewards are impacted by the factors responsible for the rewards given out in the LD side of the Reactor.

While this is very similar to the original “balance the reactors” logic, it now takes into account the optimal allocation Opt(i) as defined in the LD reward logic.

### Summary

The overall amount of rewards allocated to LPs is determined by the percentage of the overall Token Reactor TVL the Token Reactor represents, the percentage of votes allocated to the Reactor by the LDs and the optimal vote allocation.

**Liquidity Provider Equations**

**Liquidity Provider Equations**

The % share of rewards paid out to the i-th Reactor is calculated using the following equation:

Note that the share of rewards r_lp (i) makes use of the optimal allocation Opt (i). Finally, the reward amount for LPs in the i-th Reactor are given by

Last updated