REWARD MODEL
Per-Second Streaming Rewards
Flywheel Protocol uses continuous, per-second reward streaming — not epoch-based snapshots. Every block that passes accrues rewards proportionally to each depositor based on their share of the total pool. This eliminates timing games and creates predictable, fair yields.
Reward Accrual Math
Reward Per Token
rewardPerToken += (newRewards × PRECISION) / totalDeposited
Updated every time new rewards are deposited into the vault. Uses a high-precision fixed-point representation to avoid rounding errors over many small deposits.
Pending Rewards Per User
pending[user] = (deposits[user] × rewardPerToken / PRECISION) - checkpoint[user]
The checkpoint system means rewards only need to be computed when a user deposits, withdraws, or claims. At any moment, a simple multiplication yields the user's accrued rewards since their last interaction.
Proportional Share
If you deposit 1,000 tokens and the total pool is 10,000 tokens, you earn exactly 10% of all future rewards. If the pool grows to 20,000 tokens, your share dilutes to 5% — but only for rewards deposited after the dilution event. Past rewards are already locked in.
Activation Period
New deposits enter a configurable activation period before they begin earning rewards. This prevents “deposit-and-claim” attacks where users deposit right before a large reward distribution, claim, and immediately withdraw.
Default: 1 hour
During activation, deposited tokens are visible in the vault but earn zero rewards. After activation completes, rewards begin accruing from that point forward. Activation time is configurable per deployment — set higher for volatile reward streams, lower for stable ones.
Why Activation Matters
- • Prevents MEV extraction on reward deposits
- • Ensures rewards go to committed, long-term participants
- • Creates economic cost for reward gaming
Early Withdrawal Penalty
Depositors who withdraw before the minimum deposit duration incur a burn penalty. This aligns incentives toward long-term participation and protects remaining depositors from dilution by short-term capital.
Default Penalty: 5%
If you deposit and withdraw within 24 hours, 5% of the withdrawn amount is permanently burned. After 24 hours, withdrawals are penalty-free. The burned tokens reduce total supply, increasing the proportional share of remaining depositors.
Where Burned Tokens Go
Burned tokens are sent to the zero address (0x0000...dead). They are permanently removed from circulation. This is deflationary — total supply decreases while the reward pool remains unchanged, creating a positive feedback loop for loyal depositors.
LP Staking Bonus
Beyond simple deposits, Flywheel supports staking LP tokens for bonus rewards. Liquidity providers who supply both the deposit token and the reward token to a DEX pool can stake their LP NFT in the vault to earn additional rewards on top of standard DEX swap fees.
How It Works
Bonus Allocation
Default split: 90% of converted rewards go to depositors, 10% go to LP stakers. This split is configurable and can be adjusted per deployment to balance incentives between passive depositors and active liquidity providers.
No Inflation, No Emissions
Flywheel Protocol never mints tokens for rewards. Every reward token distributed was first purchased on the open market using real protocol revenue. This is the fundamental difference from inflationary staking — rewards are backed by actual value, not dilution of existing holders. When revenue is low, rewards are low. When revenue is high, rewards are high. The protocol does not print money — it redirects value.