Zama's staking innovation: Square root-based decentralization incentive model

The network staking mechanism that Zama Protocol revealed in early February employs an innovative reward system utilizing Delegated Proof of Stake (DPoS). According to BlockBeats, in this system, ZAMA token holders can delegate funds to infrastructure operators to participate in protocol maintenance. Currently, 18 active operators (13 key management service nodes and 5 fully homomorphic encryption co-processors) support the network.

How Delegated Staking Works with DPoS

In Zama’s DPoS approach, users do not directly operate nodes but instead delegate ZAMA tokens to trusted operators. This method reduces the technical burden on participants while achieving network decentralization.

The current ecosystem features a multi-layered structure, with Key Management Service (KMS) operators and co-processor operators functioning concurrently. KMS nodes handle encryption key management, while FHE (Fully Homomorphic Encryption) co-processors perform data processing while preserving privacy.

Reward Distribution Using Square Roots: A Design Favoring Small Operators

Staking rewards are generated from the protocol’s inflation mechanism, with an annual inflation rate set at 5% of the total ZAMA supply. A key feature is the innovative calculation method that uses square roots for reward distribution.

The distribution mechanism works as follows:

• KMS operators: distribute 60% of total staking rewards to delegators
• Co-processor operators: distribute 40% of total staking rewards to delegators

Rewards allocated to each operator are calculated based on the square root of their total staked amount. This design allows smaller operators to earn higher returns, automatically promoting network decentralization. It discourages capital concentration in large operators while economically supporting new entrants and small to medium node operators.

Operators are permitted to deduct up to 20% as a fee when distributing rewards to delegators, with the remaining rewards proportionally distributed among all delegators.

Flexible Liquidity Design: Unstaking and Dynamic Staking Certificates

To ensure user fund liquidity, Zama offers a flexible withdrawal mechanism. Standard unstaking requires a 7-day unbonding period, but users can transfer or sell their staking certificates during the waiting period. This design allows users to maintain liquidity without fully locking their funds, enabling timely access when needed.

Current Market Status of ZAMA Token

According to the latest data, the circulating supply of ZAMA tokens (ZAMA) is 2.2 billion, with a total supply of 11 billion. Over the past year, the price change has been -50.55%. Long-term protocol development and adoption expansion will be key to restoring the token’s value.