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Epoch Rewards CGPs

33, 34

Work in progress / Controversial: 35, 36

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Why Epoch Rewards?

Incentivize

  1. Staking
  2. Validating
  3. Community
  4. Carbon Offset
  5. (Stability)

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Current State of Epoch Rewards

Protocol adjusts rewards for target schedule:

  • Scales down when over-rewarding
  • Scales up when under-rewarding

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Current State of Epoch Rewards

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Current State of Epoch Rewards

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System is generally working well, but at what point might the downscaling run the protocol into trouble?

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Goal of CGPs

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  • Preventive measures
    • Continue to make voting and validating attractive
    • Continue to ensure the security of the network

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  • Under intertemporal budget constraint
    • ‘What we spend today we no longer have for tomorrow’

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CGP 33

Activate Dynamic Voting Reward Rate Adjustment Factor

  • Goal: Ensure that users continue to stake in the face of a growing Celo defi ecosystem

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  • Target voting reward rate: ~6% annualized
  • Current voting reward rate: ~5.1% annualized

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  • Activate dynamic adjustment of voting target reward rate based on how much CELO is locked for voting vs. target.
    • Feedback loop between voting reward rate and voting fraction: makes voting rewards self-evolving
    • If voting fraction < target -> Increase voting reward rate
    • If voting fraction > target -> Decrease voting reward rate

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CGP 33

Activate Dynamic Voting Reward Rate Adjustment Factor

Proposal: adjustmentFactor=0.00000112799 (let’s skip the math here - it’s on GitHub or in the Docs)

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CGP 34

Increase targetVotingGoldFraction from 50% to 60%

Goal: Ensure that users continue to stake in the face of a growing Celo defi ecosystem

What is the optimal amount of locked CELO?

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Q&A

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33: Dynamic Voting Reward

34: Voting Fraction

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CGP 35

Reduce the Epoch Rewards Community Fund share from 25% to 5%

  • Difference: Celo Community Fund and on-chain ‘governance’ community fund
  • ~7 million CELO in the fund
  • ~5.5 million CELO growth per year
  • < 1 million CELO allocated

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  • Why not reduce growth until more funds are needed again to relieve epoch rewards downscaling pressure?
    • Proposal translates to ~1 million CELO growth per year

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CGP 35

Reduce the Epoch Rewards Community Fund share from 25% to 5%

  • Would decrease Epoch Rewards downscaling
  • No clear plans on how to use those funds
  • ~1 million per year is still higher growth than what is currently allocated
  • Growth could be increased again when helpful

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  • Sends demotivating message to community
  • Funds could be used in the future
  • Bad optics: Decrease community, increase validator rewards
  • Whales might not want to increase again

Propose to reduce to e.g. only 15%? Or park it?

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CGP 36

Increase Validator Target Rewards from 75k to 85k per year

  • Actual validator rewards ~64k per year and decreasing
  • Infrastructure requirements have been increased
  • Supposed to be ‘fairly’ constant, that’s why in cUSD

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  • With continuing downscaling, at what point do Validators start to reconsider?

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  • Proposal: Bump target to 85k, compensates for increased infra requirements and roughly restores 75k for now

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CGP 36

Increase Validator Target Rewards from 75k to 85k per year

  • Validator rewards < 10% of total epoch rewards - barely impacting downscaling
  • Some validators complain (obviously)
  • If CELO price increases, downscaling would affect cUSD validator rewards more than CELO rewards
  • Risk minimization approach

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  • High validating demand
  • Voices that validators are still rewarded very attractively
  • Bad optics: Increase validator, decrease community rewards
  • Miner extractable value (MEV)

Dependent on CGP 35: Community Fund reduction