EOSIO 2.2 Release Candidate: Feature Summary
EOSIO platform releases take into account the collective feedback and input of the EOSIO community.
This post is a summary of Block.one’s thoughts regarding the Stake-Based Voting and Rewards mechanism. The Prysm Group’s economic analysis can be found in the Staking Rewards Proposal.
As many know, we are a participant in the EOS public blockchain community and we believe EOS is poised for explosive economic growth in the coming months and years because it remains one of the most advanced public blockchain networks in operation today. On top of technological prowess, EOS is one of the most aligned platforms available with regard to the interests of its participants because the platform consistently prioritizes the token-holder. EOS governance has continued to manifest this through the recent adoption of the new PowerUp resource model in which PowerUp fees are paid back to all token-holders who opt to receive them.
To contribute to the ongoing effort of achieving incentive alignment between network participants, Block.one engaged Prysm Group, a leading consulting firm specialized in the economics and governance of blockchain and digital assets, and has developed a proposal that addresses network inflation, as well as the structure of block producer pay and performance. Today, we’re releasing the economic analysis that was produced as a result of that engagement. This Staking Rewards Proposal is meant to begin a conversation and its suggestions are not prescriptive. We are concurrently releasing a software testing program in order to collaborate with the rest of the EOS community on the model and the underlying code. For the sake of starting the conversation, we are publishing possible parameters for the model but ultimately those choices must be made by consensus.
Today, elected Block Producers and Standby Producers are awarded each day with newly issued EOS tokens in the amount of 1% of the total supply per annum. This is commonly referred to as inflation. This 1% inflation is divided among different Block Producers based on their rank. Underpinning this ecosystem of block producer candidates are the voters who delegated their stake to Block Producers, who do not receive rewards directly from the system. This delegation of stake is necessary to secure the network, and is the namesake function of DPoS, or Delegated-Proof-of-Stake, the consensus model upon which EOS is built. So, while voting is necessary and voters incur costs by voting, such as loss of liquidity, they are not necessarily rewarded in kind. This is not as aligned as it could be.
Proposal: We are proposing a staking pool system that can directly reward token-holders in exchange for their vote (required) and securing the network.
Token-holders who elect to receive staking rewards will be required to vote for at least 21 block producer candidates or proxy their vote to a registered proxy.
Through this method, voters can be rewarded for their participatory role in securing the network itself and remunerated for the cost of that participation. We believe this further increases the alignment between the economic success of the network and the token-holder, and also positions EOS more competitively as a store and transfer of value platform.
As a starting point, Prysm has generated example parameters for how this staking pool could be configured, but the ultimate configuration is up to the rest of the EOS token-holders to decide should they opt to move forward with this proposal.
Block Producer rewards can vary widely based on rank. On one end of the reward spectrum we have the top 21 who benefit exclusively from 25% of all block producer rewards on EOS in exchange for actively producing blocks. The Top 21 earns this in addition to their pro rata share of the voting rewards, which comprises the other 75% of total rewards issued and is not exclusive to the top 21. This concentration of 25% of rewards makes sense on its face; producing blocks is active work and should be rewarded. But in practice, the difference in rewards between #21 and #22 is ~40%, despite #22 running nearly identical infrastructure in the case that they are rotated into live production and having less than a half a percent vote difference between them. The top 21 pay cliff has created a vote concentration which exacerbates this reward gap. Despite ~65 rewarded block producers (block producer and standby block producer candidates), the top 21 Block Producers receive an estimated 56% of all votes across actively rewarded block producer candidates, and 72% of all rewards issued per day. For example, between #22 and #26, where there is a significant vote gap, there is 30% drop in rewards.
Proposal: To reduce this gap we are proposing the removal of bpay rewards and instead propose to distribute all rewards through vpay.
Proposal: To help facilitate a healthy distribution of vpay rewards all votes must include 21 block producer candidates.
Block Production is a cooperative effort between all candidates to ensure blocks are produced smoothly. Despite that, there is no real-time accountability measure baked into the technology to ensure this cooperation.
Proposal: We are proposing that Block Producers who underperform, or fail to produce blocks at their designated time, will create a penalty effect that decreases the total inflation in the system.
This means that if Block Producer A fails to produce then the rewards for all Block Producers and token-holders who are voting/staking also drops for a period of time. When all network participants are affected then we are more likely to see a rapid response from voters to adjust their votes (who now participate in inflationary rewards directly) and fellow block producers to be available to cooperatively diagnose any issues that may be present. To help aid in increasing the efficiency of handoffs between block producers within the schedule, we are proposing that schedule ordering be modified from alphabetical order to declared location order. In this way we incrementally reduce handoff difficulty and decrease the likelihood that blocks are missed and inflationary penalties are enforced.
We believe that if the EOS community adopts these proposals, then together they will spur economic growth and increase alignment between all network participants. In addition, we see an opportunity where groups of token-holders may choose to pool their rewards in order to support a particular purpose, such as supporting a public good that can benefit the network as a whole. There are many dynamics and variables at play in this model and we encourage all community members to discuss the model openly and share feedback through the testing program we have released.
We will add participation in this process of testing and feedback to our discretionary voting criteria to encourage block producers to engage with testing this model. We ask that Block Producers publish their opinions and submit them through our feedback form, in order to further develop the conversation about this proposal and to be considered for our associated voting program.
Please review the Stake-Based Voting and Rewards Mechanism code here.
Please submit bug bounties here.
Read the economic analysis Staking Rewards Proposal here.
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