Introduction
Hello Meterians,
We take this opportunity to propose a formalized incentive program to decentralize the Meter Network further to remain true to the ethos of blockchain.
Through this incentive program, Meter ecosystem nodes should get Foundation vote delegation to ensure they are profitable while securing the Meter Network further.
The key focus of this incentive program is;
Higher decentralization
Ensuring liveness and security of the Meter ecosystem thereby cementing our claim of the most decentralized side-chain scaling solution* - The immediate goal is to increase the node count.
Showcase the efficacy of the ‘HotStuff Consensus’
Maintaining the speed and performance of the ecosystem while supporting a higher number of nodes.
Note: With this program, we propose to increase the committee size from the current ‘300’ to ‘500’ so that all validators continue to get emission rewards
Higher Staked MTRG generating passive income
By incentivizing the nodes, we anticipate an additional lock-up of 700,000 MTRG in the nodes. However, this lock-up is expected to take effect over a broader horizon.
Streamlined process for Node creation and incentives
Current Foundation Delegation to Node Operators
The Foundation has been delegating the votes to the Node Operators on a first-come-first-serve basis. However, the process of delegation is not formally communicated. The votes delegation was in the range of 200K (Earliest node operators and active community participants) down until 50K (newly added nodes). Theoretically, the current allocation requires 50 nodes for network stalling.
This proposal focuses on the equitable distribution of MTRG going further.
Proposal for Foundation Delegation Strategy
While the purpose of the incentive program is highlighted earlier, the key guiding principles for the Foundation Delegation strategy are;
- Ensure equitable allocation of Foundation votes to node operators
- Ensure incentives to node operators are maintained by increasing the committee size from ‘300’ to ‘500’
- Assign utility to the ‘Founding Validator’ NFT
- Strike a balance between returns received by the community;
- Staking – The overall staking APY should remain >10%
- The founding validators (Total 100 NFTs) receive higher APY than non-founding validators
- The non-founding validators receive significantly higher APY than staking
Foundation Delegation
| Foundation Votes Delegation | MTRG Allocation | Total Nodes | Total Allocation |
|---|---|---|---|
| Founding Validators (Nodes 1-100) | 50000 | 100 | 5,000,000 |
| Nodes 101-500 | 22500 | 400 | 9,000,000 |
At first glance, this allocation is lower than the current delegation of 50000 votes to nodes. However, the ecosystem can now support a substantially higher number of nodes of 500 compared to the current 150 nodes.
IMPORTANT: The Total MTRG allocation cannot be increased substantially as this will reduce the APY to both Node Operators and Staking
- Current Foundation Votes reallocation:
- The foundation should recognize the contribution by the early adopters and should continue the allocation of the current votes to the nodes who have received more than the proposed votes
- We estimate that the increase of nodes from the current 150 to 500 will potentially materialize over a broader horizon.
- The foundation should delegate 22500 MTRG to any new node created while ensuring that staking returns are not degraded substantially under 10% APY (increase delegation further reduces overall staking and node operation APY)
- After exhausting the available delegation, the approach would be to reduce allocations of existing nodes to meet the proposed delegation amounts
Total Annual MTRG Earnings by Node Operators for 2000 MTRG
| Node | Total Rewards |
|---|---|
| Founding Validators | 838.45 |
| Nodes 101-500 | 509.06 |
Percent APY of Node Operation net of annual node operation cost of $580 USD
| MTRG Price | 5 | 10 | 15 | 20 |
|---|---|---|---|---|
| Total Returns net of Node Operation cost | ||||
| Investment Value | 10,000.00 | 20,000.00 | 30,000.00 | 40,000.00 |
| Founding Validators | 3,612.27 | 7,804.54 | 11,996.81 | 16,189.08 |
| Nodes 101-500 | 1,965.31 | 4,510.61 | 7,055.92 | 9,601.23 |
| APY | ||||
| Founding Validators | 36.12% | 39.02% | 39.99% | 40.47% |
| Nodes 101-500 | 19.65% | 22.55% | 23.52% | 24.00% |
| APY – Delegation to Node | 10.78% | 10.78% | 10.78% | 10.78% |
The returns are net of Node Operations cost of ~$40 USD per month with a buffer of $100 USD (Total $580 USD).
There are few insights from the vote delegation;
- Rewarding the founding validators
- The APY of founding validators is larger which achieves 2 purposes
- Rewards nodes that helped bootstrap the ecosystem
- Creating a secondary market for the founding validators NFT
- The APY of founding validators is larger which achieves 2 purposes
- Creating a node is considerably more profitable than staking your MTRG
- The APY changes with an increase in MTRG price due to the effect of fixed operational cost of $580 USD
IMPORTANT – Increasing the Foundation delegation further reduces the staking and node operation APY due to a greater number of MTRG locked in staking.
Additional Comments
- The vote delegation should be re-evaluated when the node operation APY increases substantially. There are 2 counter mechanisms to reduce the node rewards;
- Reduce the emission rate – This would provide a long-term effect of lesser MTRG in circulation and would be a preferable option
- The Foundation might also re-evaluate MTRG delegated to the nodes in case there is an additional MTRG requirement for liquidity incentives
- Active community members would get higher MTRG delegation within the supply constraints
- Users holding ‘Tesla Founding Validator’ NFTs should reach out to the Foundation with the below information;
- Ethereum address holding the NFT
- Candidate address of Node to avail benefit of higher allocation
- It is the responsibility of the community members holding the NFT to reach out to foundation to reap additional delegation benefits (@sg_meter)
This topic is recreated. Original creation date was March, 2022. The corresponding governance proposal can be found here - Snapshot