How the reserve rate is changed?

1

Hello, I’m trying to learn more about the reserve rate. In the user documents, it only said:

A portion of the vault contributions are captured as reserve. This portion serves two purposes:
	•	funds the incentives to award the draw
	•	provides a cushion when there is insufficient tier liquidity for prizes (some deployments may use the tierLiquidityUtilizationRate for this purpose instead and choose to use the leftover reserve for other motives)
The reserve can only be withdrawn by the draw manager contract.

It talks about what is the reserve rate, why need it, but nothing about how to set it?
I wonder:
The reserve rate is set automatically by the market,
or is set by the community via proposal? I’ve seen some proposal changing the reserve rate.

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Hey, best place to get a quick and good answer is our Discord! :slight_smile:
https://pooltogether.com/discord

The reserve rate is determined by the portion of the reserve shares in relation to the total shares. Your pic is from the dev docs, so you are in the right place, you can see an example of it in the next paragraph under “Distributing Tokens using Shares”
https://dev.pooltogether.com/protocol/design/prize-pool#distributing-tokens-using-shares
Like it’s mentioned there:
“The number of shares for each category cannot be changed after the Prize Pool contract is deployed.”
So it’s not possible to change it via any proposal.

There have been multiple iterations/versions of PT and the current one is V5.
The term “reserve” has been used in the past for different things.
Any proposals you might seen about changing it are from previous versions where it was implemented different.

There was some discussion around the optimal deployment params here in the gov forum, on Discord and during our weekly Community Calls before V5 was launched on Optimism as the first chain and all deployments are using the number of shares from the example in the docs.

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Also the deployments are using the tierLiquidityUtilizationRatefor sufficient tier liquidity.

So, apart from the negligible amount being used for incentivizing the draw), the reserve is being contributed on behalf of the Prize Pool Vault and so gives przPOOL holders win chances worth that amount on that chain.

In practice due to there being 7-8 Tiers most of the time, that means roughly a 5% reserve rate and so 5% of the yield going to przPOOL holders on that chain.

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3

Thank you! I understand it now!

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