In order to bootstrap the Elrond Mainnet, at Genesis, we have deployed a closed staking and delegation system. This meant a temporary no-in and no-out for validators or delegators.
The bootstrapping process was designed to achieve escape velocity and gather a sufficiently large community around the Elrond Network. Another goal we had in mind was to create prohibitive economic deterrents against network attacks, ensuring that the larger the supply locked for staking, the larger attack costs for malicious actors.
We are now ready to move on and prepare the transition from this bootstrapping period to a sustainable growth model. The transition will be done in 4 phases. Today we are going to cover Phase 1 and 2. Phase 1 will go live on Wednesday, 14 October, at 14:00 UTC.
It's important to note that the current Delegator and Validator rewards will remain unchanged during Phase 1 and 2. The proposed Delegator and Validator queues are temporary complementary measures.
Phase 1: Incentivized Delegation Queue
Thus, next week on Wednesday, we intend to deploy an updated delegation smart contract that will create a new incentivized queue for eGold delegation. This incentivized queue will allow new community members to join the queue by delegating their eGLD tokens, reserving a spot in the queue, and receiving a reward for the time spent in the queue. This queue will also allow existing delegators to withdraw their delegation if they wish to, thereby replacing them with the first delegation that have been reserved in the queue.
During this phase, delegation will still be done towards Elrond community nodes, while the next phases will open delegation to staking providers as well.
The purpose of the queue is to keep an ordered list of the new eGLD that are to be delegated, so that when some currently delegated eGLD is unstaked, it can be replaced 1-to-1 with eGLD from the queue. The idea is to ensure the number of Elrond foundational nodes doesn't change and remains fixed at 1454.
Actions available in Phase 1:
- Delegate: Anyone can express their intention to delegate their eGLD through a transaction that will add them to the queue, reserving their spot, starting their reward tracker, and as soon as a previous delegator signals their intent to un-delegate, the funds registered by the new user in the queue will replace those of the user that wants to un-delegate. There is a minimum of 10 eGLD that needs to be delegated in order to be accepted in the queue.
- Un-delegate: Delegators can express their intention to un-delegate through a transaction. After a 10 epoch un-bond period passes, the funds can be withdrawn. If in those 10 epochs the place opened by the un-delegate is not fully taken over by other delegators, only the filled tokens can be withdrawn. As soon as the queue receives new funds, more un-bonded eGLD can be withdrawn.
Queue Reward Rules: Each Monday, rewards will be distributed for all eGLD present in the queue during the entire past week and still present on Monday’s snapshot (00:01 AM UTC). If you withdraw from the queue before Monday’s distribution snapshot you will not receive any rewards for the past week. If your delegation is accepted and moved from the queue into the protocol you will receive rewards only for those days you were in the queue in the past week.
To incentivize a high delegation queue participation, we have designed an elastic reward mechanism. Thus we will start with a total reward pool of 4000 eGLD per week, which will be distributed proportionally to all eGLD that have been on the queue for the last 7 days and still present in the queue when the distribution snapshot is taken. The APR (%) will be limited to a maximum of 20%.
Here is a table with different reward scenarios based on how much eGLD will be registered to the delegation queue, given a cap of 4000 eGLD paid each week.
Phase 2: Validators Queue
The first mainnet upgrade scheduled to go live in the next 3 weeks, provided the testnet version will not reveal any critical issues, will include the phase 2 features that will enable the possibility for any validator to un-stake or stake their eGLD.
These actions will be achieved in phase 2 by creating a specific queue for new validators that want to stake and run nodes.
The purpose of the queue is to keep a list of the new nodes that want to join, so that when a node or more are un-staked they can be replaced 1-to-1 with nodes from the validator queue. The idea is to ensure the number of nodes doesn't go below 1920 so that 3 shards and 1 metachain can be formed, and at least another 80 nodes can be maintained on each shard waiting list.
Actions available in Phase 2:
- Stake: validators that want to add more nodes or new validators that want to join the Elrond Network with their first node, will now be able to join the validator queue by staking 2500 eGLD per node. By doing so, they will be registered in the queue with a timestamp and order, so that as soon as a validator has signalled his intention to un-stake the first in the validators queue is chosen to replace him.
- Un-stake: validators express their intention to un-stake through a transaction. If the minimum active node threshold is met after this un-stake (more than 1920 nodes), the un-stake is accepted immediately, and after a 10 epochs un-bond period passes, the funds can be withdrawn. If the minimum active node threshold is not met, the un-stake transaction is rejected.
Queue Reward Rules: Each Monday, rewards will be distributed for all eGLD present in the queue during the entire past week and still present on Monday’s snapshot (00:01 AM UTC). If you withdraw from the queue before Monday’s distribution snapshot you will not receive any rewards for the past week. If your staking is accepted and moved from the queue into the protocol you will receive rewards only for those days you were in the queue in the past week.
Once the validators queue goes live, the existing weekly rewards pool will increase from 4000 eGLD to 5000 eGLD. These rewards will be distributed proportionally to all eGLD that are on both validators and delegation queues. The APR (%) will be limited to a maximum of 20%.
Here is a table with different reward scenarios based on how much eGLD will be registered to the both queues, given a cap of 5000 eGLD paid each week.
The new queue incentive for delegation and validation is planned to stay enabled until Phase 3 of staking goes live. When phase 3 staking will become available, the queue incentives will be disabled.
Important next steps
Phase 3 and 4 schedule to go live 4-6 weeks after Phase 1 and 2 are enabled, will include much awaited features like: increasing the total number of nodes, the possibility of staking more than 2500 eGLD per node, open delegation with a new system delegation Smart Contract through which anyone can receive and accept delegations, and a new and improved (soft) auction system.
To finalize discussions about Phase 3 and 4, we will share a proposal with the Elrond validators and community, organizing several discussions in hangouts, Elrond forum and Telegram to receive more feedback. The transition to Phase 3 and 4 will very likely also include our first on-chain community voting.
Once things are shared, discussed within the community and voted upon, we will be ready to move forward, taking another step in the evolution of the Elrond Network.
Thank you for your ongoing support, and let the next Elrond staking phase begin!