RFC: Add a block reward and improve Collators cycle

Good day Community :raised_hand:
We, Governance and Coordination Group, would like to ask Centrifuge Community and CFG token holders for feedback regarding this proposal. Any feedback, comment, or suggestions from the Community are highly appreciated.

Author(s): Governance and Coordination Group (ImdioR, Orhan)
Advisor(s): Cassidy, Miguel
Technical/non-technical proposal: Technical
Date proposed: 2022-11-16

  • Short Summary
    • Implement a block reward to Centrifuge Parachain
    • Improvement of Collator Reward Cycle
  • High-level objective
    • This proposal is aimed to improve Collators management and implement a block reward to the Centrifuge Parachain and funding the Centrifuge Treasury, which will solve a number of issues.

Background
The standalone Centrifuge chain had a 3% block reward that was distributed to its validators and stakers.

Once Centrifuge became a parachain, the original staking pallet and block reward functionality could no longer be used. In this regard, the validators stopped securing the network, because Polkadot began to ensure the security of all parachains. It was expected that a new staking pallet would be developed and become available for parachains that had transitioned to using collators. However, such a pallet has yet to be developed to a state that Centrifuge can utilize it.

Though collators do not need the same incentives as validators did (given they do not require the same security guarantees or have as much at stake), there is still some desire to reward these collators for providing work to the chain. In addition, there is a desire to begin to fund the on-chain Centrifuge Treasury in order to fund community grants on-chain. The Treasury currently has ~15.76 CFG because protocol fees have yet to be turned on.

The Burn rate is currently set to 0, but this parameter could be reevaluated in the future once the Treasury begins to accumulate CFG.

Each month, 1000 CFG is paid out of the Treasury to each collator in accordance with the previously passed Council Motion. At the moment, the treasury is empty, so payment to collators from the treasury is impossible and must be done manually.

Therefore it is proposed to implement a block reward that will both fund the Treasury in the short-term (before the protocol becomes self-sustaining and can rely solely on protocol fees) as well as to provide some reward to collators (which will replace the manual reward process currently used to compensate collators).

Detailed description of the proposal

The Treasury has primary importance in the development and future of any project.

Any activity or project that benefits Centrifuge can be funded by the Treasury. This could include, but is not limited to: infrastructure deployment and continued operation, сross-chain application development, network security operations, collaborations with chains/projects, marketing activities (advertising, paid features, collaborations, video content), community events and outreach, software development, research, education, etc.

We believe that on the way to decentralized management and successful development of the project and interaction with other projects, it is crucial to have a well-funded Treasury that entities can apply for funds from.

Based on this proposal, the current amount of CFG tokens to be paid out to each collator is 1000 CFG per month. Out of the minted block reward, everything will go to the treasury, except the amount that will be distributed to the collators.

It is technically difficult and inefficient to implement this reward per block, therefore it is proposed to use an epoch mechanism to distribute the block reward to the treasury and to collators. The epoch period suggested is 12 hours. The collator set changes every 12 hours (2 sessions), so matching the epoch end to the collator cycles will minimize the situation where a collator that is removed from the set in the first half (for example) will not get any reward at the end of the epoch.

If the reward period for collators is reduced to 2x daily, then that amount would be 1000CFG / 30 days / 2 = 16.65 CFG/epoch

At each epoch close 16.65 CFG * number_of_collators will be distributed to collators and the remainder of the block reward will be minted into the Treasury.

This block reward is important for the future of the Centrifuge protocol and the Community and we would like to keep the same rewards rate as before, 3%. This parameter could be reevaluated by the Community in the future if needed.

Calculation:

  • Inflation - 3% (14.67M CFG)
  • Total Supply - 489.019M CFG
  • Block production ~12 sec/block,3600 blocks/12 hours, 7200 blocks/day, 2628000 blocks/year.

Every epoch 20, 096 CFG is minted into the on-chain Treasury.

Calculation of block rewards:

The amount will be minted every epoch (12 hours):

1 epoch =( Block Rewards x 3600 blocks/12 hours)=(5.5824 CFG/block x 3600 blocks/12 hours)= 20,096 CFG

In this regard, and in connection with the foregoing, I propose:

Change or improvement:

  * Activate block rewards and mint 20096 CFG each epoch into the on-chain Treasury.
  * Set daily collator rewards in line with epoch - 16.65CFG/epoch
  * Set epoch period for rewards - 12 hours 

Responsible to implement: k-factory

Alignment to the mission of Centrifuge DAO:

We believe that the Treasury should be funded in order to unlock new partnerships and new development, and improvement of the protocol.

With a funded Treasury, any individual or group following CP Framework could offer to provide service to the protocol and be paid.

In its turn, сontinuous improvement of the protocol and new partnerships unlocks economic opportunity by connecting people to borrow and lend money transparently and cost-effectively.

The RFC will be open for 14 days.

Looking forward to any feedback and any concerns that you might have with this proposal.

Next steps

If there is support for this proposal, the next steps will be to submit it to the Proposal Repository on Github and create a snapshot vote. There will be a separate post here on the Forum once that’s done.

If the snapshot vote passes, this proposal will either be submitted as a motion by the Council or it will be part of the next Runtime Upgrade.

If you have any questions or comments, please feel free to reply to this post.

7 Likes

Hi, thanks for this!

Correct me if I’m wrong here (and I may be wrong) but to be clear, this proposal will:

  • Mint 20096 CFG every 12 hours.
  • 16.65 CFG goes to collators from this amount, every 12 hours. This == ~1000 CFG/month as before
  • Rest of minted CFG goes into treasury

So we’re effectively replacing the 3% inflation that went to individual stakers and validators with 3% inflation that goes to the treasury to be utilized by the Centrifuge DAO (with a very small amount of this going to collators). Is that correct?

2 Likes

Good day Devin

Yes, 3% will go into Treasury. Collators rewards will be directly distributed to Collators.
Please also note that soon we will extend the Collators Set (more info will be released soon).

Just now we have:
3 Centrifuge Collators
5 External Collators

Soon the external Collators numbers will be extended. So we should expect at least 10000 CFG that should be paid monthly to collators.

I would like to emphasize that recently we introduced the Burning rate (now the value is 0 but could be changed at any time) and we also increased x33 the cost of the fee.

However, we can find the balance and trade-off in the future between inflation and the burned transaction fees. I believe that we will stabilize the total supply of CFG tokens over time.

1 Like

Thanks Imdior for writing this up. We believe this idea is reasonable. Mainly because the reward would cover our current hardware cost with the current market price and we have to start somewhere. It also beats the current treasury proposals that are currently happening with Altair for collator operation compensation.

A couple of things I would like to see also see discussed the proposal or it might not be the place for it.

  • Altair collator block rewards, currently is set to 2500 AIR and is no close to the rewards of CFG while same costs occur. Should this be tested on Altair first and with same parameters ?
  • It would be nice to note in the discussion how flexible setting and changing this will be when market conditions change even further down or even in some time for now are much better ?
3 Likes

Good day Ilhan and thank you for your interest and your comment.
We highly appreciate any input and feedback provided from the Community and most of all the feedback from our Collators.

Your first question I think could be a good start for a separate topic on the forum where all Collators could discuss and explain their point of view and leave relevant feedback for the Team.

  • Answering your second question.

This proposal is regarding Centrifuge Collators and Centrifuge rewards. I don’t want to give you the wrong information, K-Factory member could give you a much more explained answer tomorrow on the governance call or here on the forum.
I think that Centrifuge Team will first check these parameters on Altair and implement them on Centrifuge after.

  • How parameters are flexible?

I would like always emphasize that I’m not the Dev, but as I can see collator reward value could be changed manually. So the answer is yes, this parameter looks flexible =)

2 Likes

Hey @ImdioR, thanks for bringing this topic up, I think it’s very useful to automate rewards instead of manually supplying them for the treasury every month.

Just a few notes

  • Why is this not getting implemented on Altair first since it’s your canary network and the reward system is basically the same as on Centrifuge at the moment?
  • 2500 AIR is currently around $20 which is definitely not enough to even cover the infra costs - thus we basically running the collator for free since the inception of the network
  • Are the collators going to get a portion of fees as well when they are enabled?
  • As you mentioned other infra deployments - does that mean that community contributions like bootnodes or RPC nodes are welcomed in this stage of the project?
  • also I second @Ilhan suggestion to make these parameters flexible and review them once in a while (although I hope that market-wise we won’t go much lower than this :slight_smile:

Thanks for the answers
Have a great day :slight_smile:

1 Like

Good day Pmensik
Thank you for your feedback and answer.
I will try to answer all questions that I can answer.

Altair already has Treasury Funded, so there isn’t any reason why Reward Block should be implemented on Altair.
What about Collator Cycle, as I already answered above :

K-Factory member could give you a much more explained answer tomorrow on the governance call or here on the forum.
I think that Centrifuge Team will first check these parameters on Altair and implement them on Centrifuge after.

But please wait for the answer from K/F member.

This proposal is regarding Collator Cycle and Block rewards.
But I think could be a good start for a separate topic on the forum where all Collators could discuss and explain their point of view and leave relevant feedback for the Team about the Collator Rewards.

@Ilhan , as Altair Collator and an Altair Councilor, could help you to create a separate topic and initiated the discussion regarding increasing rewards for Altair Collators.

Any community member (Team member, external Developer, Influencer, Youtuber, Translator and etc.) is welcome. Following the actual CP Framework could propose a partnership, development, improvement and etc.
I’m not sure if Centrifuge required additional RPC/Bootnodes (please note i’m not Dev nor Team member), but you can always create a RFC-> CP proposal and get feedback from the Community and Team. :hugs: .
The short answer is yes. You can create a proposal and in case your proposal will be accepted you can provide additional RPC, bootnodes, or whatever else.

I don’t have the answer to this question.

:ok_hand:
We have now several parameters that could be changed:

  • Burning rate
  • Cost of fee
  • Collator reward

If this proposal will be accepted we will be able also to change parameters like:

  • Duration of epoch
  • Inflation value
  • Collator reward

So the answer is yes, these parameters are flexible and not fixed. They could be changed in the future ( and I think they should be changed because we would like to find the balance and trade-off).
P.S. I also hope that the market will not go much lower than the actual value.

3 Likes

I strongly believe that too and thus fully support this proposal :clap:

1 Like

As @ImdioR already mentioned to discuss the possibilities for increased rewards on Altair a separate RFC is needed to openly discuss all pros and cons with experts and devs.

The link to the Altair governance can be found below

2 Likes

Thanks a lot for your comments, now it’s pretty clear!

3 Likes

Instead of other staking rewards, the inflationary emission will now be granted to collators that stake 30,000 CFG. Sound right?

1 Like

Good day SYZ
First of all, thank you for your feedback during the Governance call!

The staking pallet was not developed yet (The Team initially supposed that this pallet will be developed by some parachain or Parity, but never happened yet. But if this pallet will be developed I think that the Team could implement it in the future to add more token utilities).

The inflationary emission will fund the Treasury and Collators.
In accordance with this proposal, each Collator will earn 16.5 CFG each epoch, 33 CFG daily, 1000 CFG monthly.

2 Likes

By the way, there are already a few staking pallets like one developed by Moonbeam (and utilized successfully by many projects and becoming kind of a standard) or LDPoS by Kilt that is for instance used by Amplitude/Pendulum. So just wanted to point out that there are already some options in the ecosystem.

1 Like

Moonbeam like Astar developed EVM staking pallet.

Kilt:
I can’t find the staking via polkadot.js

These are currently used within the KILT protocol, and Moonbeam.
*I dont know the full scope of the parachains pallet yet,
but will continue to update the issue with more information as time goes on.

Hmm, Moonbeam actually developed parachain-staking pallet that is completely independent of EVM. The list of projects using it I am aware of from top of my head

So like I said, I believe that Moonbeam`s parachain-staking pallet is the most used collator selection mechanism out there together with simple collator-selection from Parity. As a side note, Astar/Shiden don’t have staking at all, they have simple Aura consensus and dApp staking product.

1 Like

Yes, OAK, Bifrost, Zeitgeist, using Moonbeam staking pallet.

# Moonbeam Dependencies
pallet-parachain-staking = { git = "https://github.com/OAK-Foundation/moonbeam"

P.S.Manta, Zeitgeist, OAK some of them still should win the slot on Polkadot? :slight_smile:
image

Talking about Centrifuge staking as i know, once the solution will be fully ready with simple integration the Centrifuge Devs will integrate and deploy the staking pallet. :innocent:
The working time and efforts that should be dedicated to this task are definitely out of the actual developing list.

Yeah, I am definitely not saying you should implement it, I am just saying that a “standard” solution is already out there and other parachains are using it as well.
Well

  • Oak just won a slot
  • Bifrost already has one
  • Zeitgeist will stay on Kusama AFAIK
1 Like

I think @mikiquantum could bring more light on the staking pallet and “standard” and ready solution
:upside_down_face:

Yes, out of the 3% emission, a portion goes to the collators (16.65 CFG/collator per epoch) - the rest goes into the Treasury.

Hey everyone,

Just a few thoughts and hopefully clarification on the questions that have been asked.

  • Altair will implement the same reward mechanism, but the funds instead of minted (inflation - 3% yearly) they will be pulled from the treasury, that is already funded.
  • Most of the relevant parameters (collator reward … etc) will be configurable by governance
  • Regarding the Staking pallet, to be clear, we will adopt the staking pallet that is more widely used by the community, and parachain-staking seems that is going in that direction, for a more complex solution, that users can stake easily, see rewards and state it will require UIs, performance, audits etc. We are evaluating this constantly and we will propose a long term solution for voting as soon as we have the bandwidth to research and build an educated decision about this.

All the best,

3 Likes