All Prize Pools link to a global protocol Comptroller. The Comptroller is owned by governance, and determines the reserve rate and rewards.
The reserve rate is the portion of the prize that is allocated to the protocol and retained as sponsorship in the Prize Pool.
Governance can reward users of any Prize Pool with ERC20 tokens. Rewards are defined per-pool, and can reward users based on the balance they hold, their deposit volume for a time period, or for their deposit referral volume for a time period. Each of these are types of Drips. The tokens that are being distributed are called the drip token. The drip token can be any ERC20!
Users accrue a claimable balance of drip tokens. The Comptroller will hold a balance of the token being dripped, and transfer tokens to the user when tokens are claimed.
Balance Drips distribute drip tokens at a rate per second. If a Balance Drip drips out 1 token per second, then after 100 seconds 100 tokens will have been dripped out. Drip tokens are simply the ERC20s that are being distributed.
The "Balance" portion of a Balance Drip refers to the fact that each user is dripped tokens at a rate proportional to their share of tokens of the total supply of measure tokens. Measure tokens are the ERC20s that determine a user's share of the drip.
For example, let's define a Balance Drip for a Compound Single Random Winner Prize Pool called Weekly Dai:
The measure token is the Ticket token
The drip token will be Dai (users will accrue Dai by holding Tickets)
Drip rate of 0.01 tokens per second (about 40 Dai per hour)
If a user holds 50% of the total supply of Tickets for one hour, then they will accrue ~20 Dai as a claimable balance.
The Comptroller will hold a balance of the drip tokens. When a user claims their unclaimed balance, the Comptroller will transfer the unclaimed balance of tokens to the user.
Volume Drips distribute an amount of drip tokens per time period. For example, a volume drip may drip 1000 Dai tokens each week.
The "Volume" portion of the drip refers to the fact that a user receives drip tokens proportional to their portion of the deposit volume for that period.
For example, let's define a Volume Drip for a Compound Single Random Winner Prize Pool called Daily USDC:
The measure token is Tickets
The drip token will be USDC
The drip amount will be 1000 USDC
The drip period is one week and it starts on Friday at midnight
If a user deposits 5000 USDC during that week and a total of 10,000 USDC was deposited, then they will be able to claim 500 USDC from the Comptroller.
Referral Volume Drip work identically to volume drips, but they only apply to referrals.
You may recall the PrizePool#depositTo function: its last parameter is a referrer address. This address is used to calculate referral volume in the system.
Referral rewards allow Dapps to capture rewards and themselves benefit from the protocol.