Helium is a blockchain network with a native cryptocurrency (HNT) used to incentivise individuals around the world to provide coverage on a global peer-to-peer wireless network. This is done using a Helium compatible hotspot, which to date provides coverage for low-power IoT devices. Traditional networks such as WiFi do not suit IoT devices well because of their lower range compared to other types of networks such as LoRaWaN. To solve this problem, Helium pioneered LongFi, which represents a mixture of LoRaWaN and blockchain technology. In the past, there were not enough incentives for participants to operate LoRaWaN hotspots resulting in higher costs for companies using IoT devices. With the invention of LongFi and using HNT to reward participants to grow the decentralised network, IoT companies now have a cheaper alternative to use. Helium has already secured multiple partnerships with IoT companies, such as Salesforce, Lime, Airly, Nobel Systems, and more. Network users pay ‘Data Credits’ (fees) to the Helium network to transmit data for any IoT device such as a tracker, temperature sensor, water meter, etc. Hotspots earn rewards (paid for by companies with IoT devices) when an IoT device has used it directly for transmitting data (e.g. to update the companies’ servers about the geolocation of the IoT device). Previously, hotspots played a role in the consensus of the network. However, Helium governance has now voted in favour of introducing validators to replace hotspots in transaction consensus. The new proposal, HIP-25, alleviates the network pressure that hotspots currently endure from validating transactions and transfers consensus work to validators.
Helium introduced 4 core primitives to allow their decentralised wireless network to grow.
The first major design decision was to introduce HoneyBadgerBFT as the consensus layer for the network. HoneyBadgerBFT does not require a leader node, tolerates corrupted nodes, and makes progress in adverse network conditions.
The second major design decision was to introduce hotspots. Helium hotspots are the epicenter of the Helium wireless network. Hotspots are purchased from external providers (currently ~$500) and then plugged into a power source and connected to WiFi. Hotspots act similarly to a WiFi router but with a coverage range orders of magnitude greater (5–15 kilometers); their primary role is to send and receive messages from Helium compatible IoT device sensors and update data from IoT devices to the cloud.
The third major design decision was Helium’s invention of LongFi. LongFi is a type of network design that utilises LoRaWaN and blockchain, which is especially designed for low-bandwidth data (5–20kbps) and variable packet sizes — perfect for IoT devices.
The fourth major design decision of the Helium network was to introduce Proof-of-Coverage. Put simply, Helium hotspots verify the location of hotspots in the LongFi P2P network. Hotspots issue challenges (via challengers) every 240 blocks to targets (other hotspots), whereby the target hotspot must prove their geolocation via transmitting radio frequency packets back to the hotspot challenger. Other hotspots in close proximity to the transmitter (up to 5) must witness and attest to the challenger that the target has responded to the challenge. Previously in the Helium network, 6% of HNT inflation rewards were dispersed to hotspots sending, submitting, and witnessing location proofs. All that is about to change with the introduction of HIP-25.
Due to the sheer growth Helium has experienced, it proved no longer feasible for Hotspots to act as block producers in Helium and issue, submit, and witness location proofs. In general, more hotspots joining the Helium network should be encouraged to join. However, right now, there is a trade-off whereby the more hotspots that join the network, the slower the network becomes. A slow network is detrimental for Helium because the network relies on large volumes of transactions being sent at rapid speeds due to the wide plethora of use-cases Helium network enables (e.g. pet-tracking, air-quality monitoring, art temperature checking, car-park availability alerting, COVID-19 case tracing and much more). When block times are slower, inflation of HNT is also slower, which also impacts the viability of setting up a hotspot to participate in the network. Hotspot addresses change and move, perfect for connecting IoT devices but not so much for verifying on a blockchain undergoing exponential growth. To alleviate the pressure off of hotspots, governance voted on introducing validators in HIP-25 that will run infrastructure to secure the Helium blockchain allowing Hotspots to focus on their core purpose. The role of the validator is a specialised one in blockchain and it is understandable that Helium now wants to utilise reliable node operators to ensure network performance is optimal. We were excited by the news that we would now be able to contribute to such a unique network and are strong believers in the long-term potential of Helium.
The introduction of node operators onto Helium introduces one key change to the staking economics of the network because those participating in consensus have changed. Previously, when hotspots participated in Proof-of-Coverage consensus, they received a consistent share in relation to all other hotspots of the 6% annual HNT inflation rewards. The economics of Helium Network are clear — there is approximately 5M HNT minted every month. Validators now participate in the consensus group and stand to earn 6% of the 5M HNT inflation that hotspots used to earn as rewards.
This means that the consensus group stands to earn 300,000 HNT per month, or 1.8m HNT annually. To run a node on Helium, there is a 10,000 HNT self-bond requirement. The requirement per node on Helium is strict, meaning you cannot be below or above 10,000 HNT per node. If you are below you will not be able to earn staking rewards and if you are above you will not earn any extra rewards for over-staking. The capital and technical requirement in Helium’s Proof-of-Stake network is high. For this reason, Chorus One is offering a Validator-as-a-Service solution for HNT holders that have enough HNT to stake, meaning we will provide infrastructure for HNT stakers who do not have previous experience running nodes. From our calculations, we estimate a staking APR between ~6–36% for HNT stakers.
There are still meaningful incentives for users to set up hotspots given the rewards allocations to data transmission and Proof of CoverageHotspot owners will continue to earn proportionate HNT rewards (up to 32.5% of the inflation rewards per epoch) if IoT devices utilise their hotspot during the duration of an epoch (30 minutes). Hotspot owners will also continue to earn rewards for verifying geographic locations of their hotspot or others in their vicinity (known as challenges, mentioned above).
In Proof-of-Stake networks, inflation is not the only element that contributes to staking rewards. Another key component contributing to staking rewards in PoS networks comes from transaction fees within the network. One interesting aspect of the economics in Helium is their use of data credits to pay for transaction fees. You can think of Helium as somewhat similar to how an algorithmic stablecoin network (such as Terra) would operate. The token HNT is burned to pay for Data Credits (DC), denominated in USD. One data credit is equal to USD $0.00001. In this sense, 100,000 DC would be equal to USD $1. Anyone is able to view the list of fees that are used in Helium. The most common transaction in Helium would include Hotspots sending or receiving IoT data, which costs 1 DC per 1 transfer of packet data. If hotspots needed to send and/or receive 100,000 packets of data and held 1 HNT in their wallet (worth USD $10 at the time), the user would burn 0.1 HNT to receive 100,000 data credits, enough to pay for 100,000 transfers of data to IoT devices.
Now we understand how the economics of the network works, we can dig in a little deeper to what is actually going on in the network right now. As of June 2 2021, there are 48,319 hotspots on Helium. Using the Helium block explorer, in 24h we calculated there to be ~200k transactions. In 30 days, extrapolated this would mean 5.9m transactions and in 365 days, extrapolated this would mean 71m transactions. Using the Helium block explorer, we can see that there were 22.5m DC spent in 30 days. In USD terms, that means that $225 was spent from users sending and receiving data across IoT devices in 30 days. If there are 5.9m transactions per month and this results in $225 USD of HNT burnt (for use as DC) — this means that every 26k transactions generates $1 USD (in other words $1 USD amount of HNT is burned). We can plug in the above current network activity and model it to find out just how much $USD will be used to buyback and burn HNT.
As you can see, a 100x in transaction growth on the Helium network is likely to lead to $270k worth of HNT being burned from circulation annually. Not only that, but stakers stand to earn between 6–36% APR annually as well. This means that there is demand for HNT to buyback and burn when network activity increases and stakers stand to benefit from this the most as their HNT stack increases over time from the staking rewards they are earning. In the past 30 days, the amount of hotspots that are connected in the Helium network increased from 34,550 to 48,130 (39% MoM). If the demand for hotspots continues at this monthly growth rate (CMGR) there will be 5,340% more hotspots than there are today by the end of the year (1.8m). One constraint of the Helium network is that sometimes there is so much demand there is not enough supply of Hotspots from manufacturers. However, more demand for hotspots over time will lead to economies of scale for hotspot manufacturers and is likely to entice competitors to enter the market to fill the demand. This in turn, translates to cheaper prices for hotspot buyers, meaning they can recover their initial costs (hotspot purchase) faster. Our friends at Multicoin capital called this the Flywheel Effect.
One small remark about the original Flywheel Effect envisioned by Multicoin is that it does not take into consideration the possibility of earning staking rewards (due to the removal of hotspots out of the consensus group). HIP-25 shifts 6% of inflation (consensus rewards) from hotspots to HNT stakers. This in turn, will lead to faster economies of scale for hotspot manufacturers and result in lower hotspot costs for network participants as the hotspots that will be created in future can become ‘dumber’ (i.e. not need to be built to understand the intricacies of consensus). The mining ROI mentioned in the original flywheel effect still applies to hotspots, the only change is that 6% of the hotspot mining ROI will now be earned by users staking HNT to secure the network. If anything, the flywheel effect accelerates with HIP-25 as hotspots will become more minimal and therefore cheaper to buy, thanks to specialised workers (validators) securing the network with specialised infrastructure. One might think of HIP-25 as an efficient re-allocation of resources.
We can hypothesise a consensus rewards model where delegation is possible (note: delegation is NOT possible in phase 1) to display what the offset might look like (ignoring other rewards hotspots earn). If the price of HNT and staking APR remains constant (est. 18%), we ignore the time value of money and assume that hotspot prices will come down to $100 (due to economies of scale) we can model the Proof-of-Stake economic equivalent to Proof-of-Coverage (i.e. what it takes for new participants to recover their initial investment).
Using the hypothesised model, if governance decided to activate delegation for HNT stakers, PoS economics become more attractive than PoC economics (disregarding other hotspot rewards e.g. data transmission) once the network reaches 179,000 hotspots. As of time of writing, there are 52,232 hotspots (growing 39% MoM as mentioned above). Helium’s transition to a PoS is a win-win for the network on the whole, introducing better network economics and performance through the introduction of Proof-of-Stake. It is important to know that this PoS model assumes delegation is possible, whereas right now delegation is not possible (nodes cannot stake less or more than 10,000 HNT from one address). In the future, governance might vote to turn on delegation when the Proof-of-Stake network matures. It is important to note that this model has many assumptions and disregards hotspot rewards earned through data transmission to IoT devices. Hotspot rewards earned through data transmission can be very inconsistent and are therefore ignored in this simple model.
The Demand-Side Helium Flywheel Effect — Companies Purchasing DC to Use Helium Network
The demand-side of HNT comes from IoT companies wanting lower cost networking services globally for their devices that do not require a lot of bandwidth. If a customer were to use a cellular modem for their IoT devices, they would pay 1000x more than if they connected to LongFi and have 200x less range. The benefits of IoT devices being able to connect anywhere in the globe where hotspots are available at a fraction of the cost are profound. The business model for Helium is B2B. Customers are companies that have low-bandwidth devices and want to connect to Helium for the cost-savings compared to connecting to a cellular modem. For example, Lime uses Helium to track the location of its scooters. Companies such as Lime are growing at a similar rate to Helium Network, expanding to countries worldwide. As more scooters and hotspots are set-up across the globe, more Data Credits will need to be burned from HNT in order to use the LongFi network. Helium already has 14 multinational companies using its LongFi network.
Whilst most companies that are using the Helium network now are Western-based, there has been a surge of new hotspots being set-up in China in the past two months (May-June 2021). As new geographies grow and more hotspots are set up across the globe thanks to crypto-economic incentives, it becomes more viable for multinational companies to utilise Helium’s services across borders (e.g. to track an IoT across many countries in Asia).
As more hotspots come online on the Helium network, the range of the network increases, making the LongFi network more appealing for companies. This could be considered a Flywheel effect on the demand-side.
To conclude, we are very excited that Helium is transitioning to a Proof-of-Stake network and that we have the opportunity to be one of the first validators supporting it. We are long-term believers in Helium and can’t wait to help the network scale to reach its full potential. Hotspots for IoT devices are just the beginning for Helium. Helium governance recently passed HIP-27 to create the first consumer-owned 5G network in the world on Helium network. In the not so distant future, anyone with a phone may be able to connect to the Helium network’s 5G hotspots and save costs.
Helium’s ambition to launch new technologies by using crypto-economic incentives to enable consumer-owned economies is one Chorus One fully supports. Stay tuned for a future announcement on how HNT holders can stake their assets with Chorus One.
Our content is intended to be used and must be used for educational purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such. The information is general in nature and has not taken into account your personal financial position or objectives. Before making any commitment of financial nature you should seek advice from a qualified and registered financial or investment adviser. Chorus One does not recommend that any cryptocurrency should be bought, sold, or held by you. Any reference to past or potential performance is not, and should not be construed as, a recommendation or as a guarantee of any specific outcome or profit. Always remember to do your own research.
Chorus One is offering staking services and building protocols and tools to advance the Proof-of-Stake ecosystem.
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The Chainlink 2.0 whitepaper was published on April 15th. Chainlink 2.0 aims to create a decentralised metalayer through hybrid smart contracts by having a large number of oracle networks serve users on an individual basis. The end goal of this, would be to have smart contracts interact with multiple oracles, just as users interact with multiple APIs in web2 today. In essence, Chainlink wants to take as much load off of smart contracts as possible. The DeFi metalayer will look something like an off-chain outcomes data factory. Large amounts of data will flow into Chainlink oracle networks and there will be large amounts of nodes offering more specialised services to report on complex values that DeFi smart contracts will call for. Developers will have the flexibility to pick and choose what oracles they need, which in turns allows them to simplify their smart contract code.
The way Chainlink generates one standardised value to send to a smart contract is by aggregating all values it receives from individual nodes for a given variable. A service level agreement (SLA) normally defines how much an individual node can deviate from the aggregated result considered to be correct by the network (usually ~1%). Values are aggregated by the oracle and a median value is sent to a smart contract. This means if there are over 50% of nodes reporting a false value, this false value will be reported to a smart contract (which could have detrimental effects on the functioning of the smart contract it has been sent to). Nodes could have incentive to deliberately report false values if it is in their financial interest to do so. For example, nodes could have information asymmetry if they report false values of crypto-assets and conduct arbitrage across different exchanges reporting different values of crypto-assets (that they have contributed to). There are many different options or reasons that a node might have to report a false value to an oracle. Nodes can also be bribed to report a false value for the benefit of another agent.
Chainlink uses implicit and explicit economic incentives to ensure oracle nodes do not behave maliciously. Explicitly, Chainlink requires two ‘deposits’, one deposit that can be slashed for reporting an incorrect value not agreed upon by the aggregate network and another deposit that can be slashed for falsely reporting that a network of nodes have collectively reported a false value to an adjudicator known as a ‘second-tier’ (more on this later). Implicitly, Chainlink assumes rational economic actors (nodes) will send correct values to oracles because it is in their best interest to do so (i.e. there is an opportunity cost of rewards a node misses out on for behaving maliciously). Implicit incentives are known as the ‘future fee opportunity’ (FFO) in Chainlink. Chainlink are aiming to measure implicit incentives with their ‘Implicit-Incentive Framework’, a revolutionary attempt at quantifying opportunity cost of nodes that includes a node’s performance history, data access, oracle participation and cross-platform activity (e.g. nodes that might be on other networks such as Chorus One and how they perform on their with regards to downtime, slashing etc.). In fact, Chainlink has gone so far as to create an equation to find the implicit incentives of nodes, which can be found below:
This formula defines why a node in Chainlink would implicitly continue to report correct values to oracles because if they do not, they stand to lose their future fee opportunity (found in the equation above).
An interesting point to note about implicit incentives from Chainlink’s whitepaper is that of ‘speculative FFO’. New nodes that go live on Chainlink are betting that their expenses will be outweighed by their future fee opportunity. In essence, those running a node on Chainlink in the early stages are taking a speculative bet on the fact that they will earn considerable fees in the future. The ‘speculative’ side of FFO (i.e. betting on the future success of Chainlink) multiplies the implicit incentive for nodes to ensure they are behaving correctly because they have a stake in the network performing well. The speculative FFO is an interesting take on what the true value of this implicit incentive is. At Chorus, we believe the value of this implicit incentive is only just now becoming more understood by networks. This implicit incentive can be further strengthened by giving node operators more skin-in-the-game. For Chainlink, an existing network, this could mean an airdrop to node operators of x amount of tokens to ensure they care about the success of the network. An even greater implicit incentive might be for Chainlink to offer supercharged rewards (i.e. 2x rewards such as can be found in Mina) to node operators who have the greatest reputational equity, which would be a positive externality for the entire crypto ecosystem as nodes want to increase their reputation across all networks. For new networks, the implicit incentive could be strengthened by offering tokens to node operators in private sales to make sure they have further skin-in-the-game from the inception of a network. Incentivised testnets can also work well for new networks to encourage validators to get actively involved. The earlier a validator has skin-in-the-game and the larger that skin is early-on, the more attention a validator is likely to pay to the future success and security of the network. We will discuss the importance of implicit and explicit incentives for node operators on other networks in greater depth in a future article.
Chainlink 2.0 introduces the concept of super-linear staking (or quadratic staking) to ensure nodes are incentivised to always report correct values (as agreed upon by other nodes). Chainlink has essentially created a second layer (known as tier in the whitepaper) that will be used as a backstop if a watchdog believes that an aggregated value being reported by a network of nodes is false. A watchdog is any node in the first-layer that alerts the higher second-layer when they believe a reported value is wrong. You can think of this system like a ‘dibber-dobber’ system. A watchdog is like a student in a class (tier 1) that the teacher (tier 2) trusts will always report back to him/her if the rest of the class misbehaves. To continue with this analogy, let’s say a teacher is leaving for 10 minutes and is offering a candy reward to all students if they do not misbehave when he/she is gone (this is like an explicit incentive deposit for all students) and a second reward for reporting if >50% of the class misbehaves (reward is given by stripping the explicit incentive deposit from misbehaving students). When the teacher leaves, over half of your class starts misbehaving, which means you cannot work because you are distracted. However, your misbehaving classmates want the best of both worlds, they want to misbehave and earn the reward (keep the deposit) from the teacher. Now let’s imagine that anyone can tell the teacher when over half the class is misbehaving to earn a reward but the teacher already has some randomised priority of how she will distribute the rewards from the explicit incentive of misbehaving students to a ‘winner-take-all’ system (i.e. only one student receives all the rewards ‘slashed’ from misbehaving students for dobbing on their peers). Now let’s imagine that the misbehaving students try to convince the behaving students to not report misbehaviour. If only 1 student reports misbehaviour, they will earn all of the rewards (deposit) of misbehaving students. Therefore misbehaving students need to pay more than the maximum reward one behaving student could receive to all behaving students. Keep in mind the priority, rewards are not even and therefore all rewards for a correct report of misbehaviour will go to one student. This is the super-linear quadratic effect of Chainlink 2.0 staking. It becomes much dearer to bribe behaving students (nodes) in the classroom because the maximum amount required to bribe an individual student is the maximum reward a student could receive from overall slashing of misbehaving students. The minimum adversaries must pay to ensure incorrectness is the maximum reward to every behaving student because if only one student tells the teacher, they stand to receive all rewards of misbehaving students (that’s a lot of candy). If rewards of misbehaving students were distributed equally, it would be much cheaper to convince (bribe) behaving students to falsely report to the teacher. In this sense, the tier system (having a second tier that has the final say) and watchdog priority (having a dibber dobber with some priority that stands to earn all rewards of misbehaving nodes for correctly reporting they are acting maliciously) ensures data integrity of reported values in Chainlink.
Using super-linear staking and adding capped future fee opportunities per node contributes to economies of scale that can be achieved by Chainlink. Each new user that joins a decentralised oracle network lowers the cost for other users on that network and lowers the average cost per unit of economic security. Chainlink supposes the average cost per dollar of network security is the future fee opportunity / number of nodes. If in future Chainlink decides to cap the future fee opportunity at x per n, any fees that are > x per n will be reserved for new nodes that stake in that network. This achieves economies of scale because it is cheaper for an existing user to join an already existing network rather than to create their own (i.e. fees signal where nodes should be, nodes stake and join that network and security is higher). Due to super-linear staking, the more nodes that exist in a network, the more economically secure a network becomes (quadratically!). Economic security is provided by stake, nodes provide this stake and this can be used to find a node’s average cost per dollar of economic security (how much one node contributes to security in a network, the cost is lower as more nodes join a network when FFO is capped and hence economies of scale are found). Therefore there is an implicit incentive in itself for Chainlink to make sure it grows its staking business. The more total value locked grows, the more smart contracts that need oracles, the more funds that can be exploited, the more at risk Chainlink is when oracles are exploited to drain smart contracts, the more reputational risk Chainlink has, the more funds they will require nodes to stake, the more secure the network gets, the less expensive it is for one dollar of stake to secure the network, the more economies of scale Chainlink achieves.
In any PoS network, it is critical that there is enough at stake of economic actors participating in the network to ensure they do not misbehave. To have more assets at stake in any network, barriers need to be lowered. Delegations were not mentioned in Chainlink 2.0, meaning holders of the $LINK token cannot natively delegate their assets to a node operator such as Chorus One. Currently, the only way for users to earn staking rewards in Chainlink 2.0 is by running their own node to report values for jobs that are assigned to them. However, delegation protocols are being worked on. For example, Linkpool are working on democratising staking rewards for $LINK holders via staking pools. The demand for $LINK delegation has been high since the inception of this service by Linkpool. We expect this demand to continue when Chainlink 2.0 goes live, especially because Chainlink 2.0 will likely require most nodes to have some collateral (stake) in order to report values for jobs. Delegation in Chainlink 2.0 gives users the opportunity to earn staking rewards on otherwise idle $LINK and allows nodes to report values on more jobs to increase their future-fee opportunity (FFO), both of which are a net positive for Chainlink. It is very possible that delegation demand could translate into a new era of $LINK liquid staking innovation.
To conclude, Chainlink 2.0 is secured by implicit (e.g. FFO) and explicit incentives (e.g. super-linear staking). The importance of oracle security has never been higher, as the value that oracles secure in DeFi grows every day. Any oracle exploitation is disastrous for DeFi, so it is important oracle networks such as Chainlink improve their security at the same rate that DeFi grows. The proactive approach of Chainlink to change their economics to capitalise on network effects (incentives to run more nodes) and economies of scale (security becomes cheaper as more nodes join) is timely and likely to sustain Chainlink’s position as an oracle market leader well into the future.
On February 10 the Solana community passed a vote to enable inflation on mainnet. SOL holders delegating their tokens to validators on the network will now start to earn staking rewards.
Solana is a composable, unsharded blockchain focused on maximizing transaction throughput through various hard- and software optimizations. Like most smart contract platforms, the Solana network is secured through Proof-of-Stake.
This post is an overview of the staking economics on Solana going into the factors that influence rewards, as well as the risks and restrictions associated with staking SOL tokens.
Staking-related updates in Solana happen at epoch boundaries. An epoch is the length of a certain amount of blocks (in Solana: “slots”) in which the validator schedule of Solana’s consensus algorithm is defined. To stakers this means that beginning and stopping to stake, as well as reward distribution, always happen when epochs switch over. An epoch is 432,000 slots, each of which should at a minimum take 400ms. Since block times are variable this means epochs effectively last somewhere between 2–3 days.
The SOL staking lifecycle is divided into three phases:
Staking rewards on Solana are determined by a variety of factors, some of which are related to the chosen validator, while others depend on the global network state. Rewards are automatically added to the active stake to compound, which means withdrawing earned rewards also requires the cooldown phase to pass.
To ensure that validator nodes act according to the rules, penalties may be enforced by Solana’s protocol in the event of provable misbehavior. In Solana, this relates to voting on conflicting forks in the consensus process. Slashing in Solana would be applicable to both delegators and validators. In the early phases of the network, slashing is not activated yet. The Solana team is exploring models in which the slashed amount would adjust based on correlated faults, as well as based on the duration since the last vote (to discourage validators waiting to vote to avoid getting slashed).
Changing the validator node you are delegated to or staking with multiple validator nodes on Solana is easily possible through splitting and merging stake accounts. Read the documentation below to learn more.
You can stake your SOL tokens on Solana mainnet and earn staking rewards with validators by following the official staking delegation guide. Currently, staking is supported e.g. through the SolFlare wallet built by Dokia Capital.
Chorus One operates a highly available Solana validator and is among the top contributors to the protocol, e.g. as part of the Tour de SOL competition, where we uncovered multiple vulnerabilities in preparation for getting Solana mainnet ready. By delegating to our node you are supporting our work and involvement in Solana.
To observe the current blockchain state and validator nodes, visit the Solana Beach block explorer by Staking Facilities. To learn more about Solana, visit the official website.
In case you have questions, feel free to reach out to reach out to us on Telegram, Email (support[at]chorus.one) or through our live chat feature on our website.
This post was created based on Solana’s official documentation and this post on the Solana forum. Thanks to Dave from my team and Eric from Solana for clarifying details and answering my questions.
Originally published at https://blog.chorus.one on February 11, 2021.
Chorus One has received a joint grant from the Celo Foundation and the Interchain Foundation to develop the building blocks for a bridge that will allow Inter-Blockchain Communication (IBC) between Celo — an EVM-based, mobile-first blockchain platform focused on financial inclusion — and networks built on the Cosmos SDK, such as the Cosmos Hub.
A bridge built upon these components will enable users of the Celo platform to tap into the vast ecosystem of IBC-compatible blockchains and vice versa. Some exemplary use cases include bringing the Celo cUSD stablecoin to the Cosmos ecosystem, as well as including Cosmos-based assets like ATOM, BAND, LUNA, or KAVA in the Celo Reserve.
At Chorus One, we are committed to the “Internet of Blockchains” vision and believe we’re still in the first inning of blockchain interoperability. As of today, we are already operating validation and other node infrastructure on 14 different live networks. Currently, these are still mostly isolated, but in the upcoming months various interoperability efforts such as ChainBridge, Peggy, Solana’s Wormhole bridge, as well as ambitious protocols like IBC — which will go live on the Cosmos Hub soon via the Stargate upgrade — will usher in a new era of cross-chain decentralized applications.
Our work on WASM-based light clients (see also our previous Substrate <> Cosmos SDK project here) represent our first contributions to this space. Our goal with these efforts is to make it easy to add support for new blockchains and upgrades to clients without requiring the full governance process to establish new connections in the IBC ecosystem.
“As one of the top validators on both the Cosmos and Celo networks, I’m absolutely thrilled to see Chorus One working to connect the Cosmos and Celo ecosystems with a fully trustless bridge between these instant finality chains. The work adds to their growing body of past contributions to both networks, including the excellent Anthem staking platform.”
Marek Olszewski — Co-Founder at Celo
We are excited to contribute to realizing a world of interconnected blockchains and would like to thank the Celo Foundation and Interchain Foundation for their support.
Our CTO Meher Roy will present on this project that we aim to deliver in Q1 2021 during the upcoming Interchain Conversations online event taking place Dec 12 and 13. Register here in case you are interested to learn more about our work and other awesome initiatives in the wider Cosmos ecosystem.
Chorus One is offering staking services and building protocols and tools to advance the Proof-of-Stake ecosystem.
We provide staking services on both the Celo blockchain, as well as on multiple Cosmos networks; specifically: the Hub, Terra, Kava, Band, Secret Network, and Microtick. Visit our website to learn more and support our work by staking your tokens with us.
Website: https://chorus.one
Anthem Staking Platform (with support for CELO staking on Ledger): https://anthem.chorus.one
Monthly Newsletter: https://chorusone.substack.com
Twitter: https://twitter.com/chorusone
Telegram: https://t.me/chorusone
Originally published at https://blog.chorus.one on November 13, 2020.
Solana has developed from an initial idea of how one could timestamp events in a distributed setting (Proof-of-History) into a full-fledged, scalable smart contract platform that is able to host high throughput applications supported by an ever-growing ecosystem of validators and developers.
As one of the first validators engaging with Solana, we wanted to write a post about our view of the ecosystem and how it came to be. To do that, I’d like to begin with an anecdote:
In the summer of 2019 in Berlin, back when in-person conferences were still a thing, I was at an afterparty of ETH Berlin with some other early Solana validators including Aurel from Dokia Capital, who likened Solana to a YouTube clip of a guy starting a dance party at a festival. Now, more than a year later, it seems like that analogy is holding up well!
In the beginning, Anatoly managed to convince his co-founders of the Proof-of-History idea. The legend says it may have been after a round of underwater hockey, or maybe surfing at Solana Beach above San Diego, which ended up providing the project’s name. Together, they raised a seed round in March 2018, which allowed them to hire a team — many of the which they had worked with before at companies like Qualcomm.
With some money in the bank, the team started to build at breakneck speed and hasn’t stopped since. The ambitious task to launch a performant blockchain that doesn’t require sharding relies on 8 core technologies, many of which had to be built from scratch.
As soon as the core features of the Solana blockchain were there, the team began launching testnets. Realizing how important external validators are, the Solana team took a proactive approach and inspiration from the Cosmos ecosystem — launching a multi-staged incentivized testnet competition titled Tour de SOL. This competition has been ongoing ever since and has seen multiple attacks and bugs that were subsequently fixed ensuring that the mainnet, which launched in March 2020, became and remains a stable and secure environment for application developers to build upon.
Speaking of applications, as much as we ❤ validators, no blockchain is of any use if there is nothing running on top of it. Solana has from the get-go been focused on delivering something of value and engaged with projects building or seeking to build decentralized applications.
One of the first projects that announced its plans to migrate was Kin. In summer 2020 the biggest news so far hit when Project Serum, an ambitious project seeking to build DeFi applications based around a CLOB (central limit order book) DEX on Solana plus a bridge to Ethereum (learn more about Wormhole here), was announced.
For a breakdown on Serum, and its role within the Solana ecosystem, check out the recent Unchained podcast episode with Sam Bankman-Fried, the CEO of FTX and Alameda Research, and Anatoly Yakovenko, the co-founder and CEO of Solana Labs.
Various programs including the Solana Accelerator, as well as the Solana Foundation continue to support application developers that are looking for a platform to build scalable, decentralized applications. If you plan to join the Solana ecosystem, make sure to check out the upcoming hackathon (starting Oct 28).
Information on the network can be found on explorers like our very own Salty Stats or Staking Facilities’ Solana Beach. If you are planning to stake SOL, we recommend the SolFlare wallet.
Chorus One is offering staking services and building interoperability solutions for decentralized networks.
Our validator node is live on the Solana mainnet. Support our work by delegating to us and make sure to earn staking rewards once they are activated. Learn more here.
Website: https://chorus.one
Twitter: https://twitter.com/chorusone
Telegram: https://t.me/chorusone
Solana is a web-scale blockchain with speeds up to 50,000 transactions per second powered by Proof of History.
Website: https://solana.com/
Twitter: https://twitter.com/solana
Telegram: https://t.me/solanaio
Originally published at https://blog.chorus.one on October 9, 2020.
The Celo mainnet recently launched with over 50 validating entities participating after a successful multi-stage incentivized testnet competition. Celo is an open platform seeking to give access to decentralized financial tools to anyone with a mobile phone. Part of that vision is a sophisticated on-chain governance process that decentralizes power over protocol features and parameters, including Celo’s stablecoin stability mechanism. This post will provide an overview over the currently implemented governance mechanism that was already used to activate transfers and staking rewards on the network.
Any Celo account can submit a proposal to change features or parameters on Celo by sending a transaction containing all the necessary data such as a title and link to the proposal description together with a deposit of currently 100 Celo, the network’s native token, to the network. Once issued on-chain, proposals enter a queue and Celo holders can signal their belief that this proposal should be voted on by the entire network for up to 28 days [1]. Locked Celo tokens can simultaneously partake in staking with validator groups, as well as signaling and voting in governance.
Every day, three proposals with the highest amount of upvotes, measured in locked Celo signaled by token holders, can leave the proposal queue and move into the referendum stage in which the entire network will decide on whether the proposal should be implemented.
However, the referendum stage is not initiated automatically. There exists a multi-signature address that must approve the promotion of proposals to the referendum stage (“the approver”). This step is an extra protection to quality check proposals before they are voted on by Celo holders. At launch, the approver is controlled by the Celo Foundation, the plan is to decentralize it to be controlled by a DAO.
Once approved, proposals enter a two day referendum stage [2]. During this phase, Celo holders are able to vote “Yes”, “No”, or “Abstain” on each proposal. Votes are weighted by the accounts locked Celo balance. There is currently no delegated voting contract meaning every Celo account is responsible to vote themselves. When a proposal enters the referendum phase, the deposited proposal collateral can be reclaimed by the proposer.
At the end of the referendum stage, the blockchain executes a tally of votes to determine whether the proposal has met the passing criteria to be implemented on-chain. This passing criteria consists of two factors:
If the tally at the end of phase 2 concludes that the proposal has been accepted, there is a final stage in which the proposal needs to be executed on-chain. This can be done by any Celo account by issuing a special transaction on-chain. This transaction then upgrades the protocol code meaning the change is implemented. Should no Celo account issue the execution transaction for three days, the proposal will automatically be rejected.
Finally, Celo’s governance protocol also specifies a different upgrade path for hotfixes like urgent security patches. For such upgrades, a quorum of validators [5] and the approver need to approve the hash of the hotfix proposal to execute updates immediately. Additionally, upgrades that require a hard fork, such as changes to the underlying consensus protocol, will set a “Minimum Client Version” parameter on the chain to inform nodes about the software version required to correctly operate on the network.
At Chorus One we seek to empower token holders to shape the networks they are invested in. Our staking platform Anthem will soon support Celo and allow Celo holders to stake, vote, and get access to portfolio data including staking rewards and transaction history.
Chorus One offers staking on Celo. Support our work by voting for our validator group and earn rewards knowing your tokens are staking on infrastructure that has been securing millions of dollars for more than a year. Visit https://chorus.one/networks/celo to learn more.
Thanks to zviad from Wotrust and Tim Moreton from C Labs for clarifying a bunch of the questions I had writing this post.
Governance Forum: https://forum.celo.org/c/governance/12
Governance Proposals Statistics: https://thecelo.com
Governance Documentation: https://docs.celo.org/celo-codebase/protocol/governance
CLI Instructions: https://docs.celo.org/celo-gold-holder-guide/voting-governance
[1] In practice Celo utilizes epochs to structure time. Every epoch consists of a certain amount of blocks targeting to correspond to a day in human time.
[2] An extension of this parameter to 2 weeks is already in discussion.
[3] Source: mainnet adaptive quorum code (formula)
[4] Proposals can even pass when the quorum was not met. This can take place when the ratio of “Yes” votes exceeds the constitutional threshold after counting votes that were missing to reach the quorum as “No” votes, i.e. if
Yes / (Yes+No+Votes Missing to Reach Quorum) > Constitutional Voting Threshold.
(sources: mainnet constitution code (parameter values), proposals contract code)
[5] ⅔ + 1 of all elected validator nodes.
Originally published at https://blog.chorus.one on May 20, 2020.
We recently launched Anthem, our staking platform that seeks to improve the experience of participating in decentralized networks.
Anthem is a powerful tool that provides Cosmos ATOM stakers with financially relevant insights and allows them to manage their staking positions. Users can access historical data for any account on the Cosmos Hub, helping them to figure out how much that account earned while staking and how its balance developed over time.
Try it out yourself with any Cosmos account at https://anthem.chorus.one
Aside from providing historical data for individual users, Anthem’s data also allows us to gain insights into how the Cosmos Hub has developed since launch. This post will focus on analysing and visualizing the first year of staking on the Cosmos Hub.
The Cosmos Hub produced its first block more than a year ago, on March 13 2019 at 11pm UTC. Since then, there were three hard fork upgrades that introduced various changes to how the network operates, all coordinated and approved via the on-chain governance process.
Staking rewards on Cosmos are paid in ATOM tokens, which means the circulating token supply is constantly growing, a fact that some popular crypto data sites routinely ignore. In practice, the circulating supply has increased from 236.2m ATOM at launch to 253.5m ATOM at the time of writing (Apr 4, 2020). The following graph illustrates how total and staked token supply developed:
Looking at this graph, we can already tell that the percentage of supply that is at stake has been growing over time.
The Cosmos Hub has one of the most advanced live staking models. One feature is that changes in staking supply dynamically adjust the network’s issuance rate over time. The issuance rate (in Cosmos: inflation) trends downward up to a minimum of 7% when more than ⅔ of the total supply is staked (more details here). Since this threshold was first breached on the first of July 2019 the ratio never fell below the ⅔ threshold again, leading to the inflation parameter reaching the lower bound of 7% on February 25, 2020.
When charting the staking ratio over time, one can clearly pinpoint the moment when the threshold was first breached:
We see that a large amount of ATOM (almost 20m) was delegated around the 1st of July. This is the Tendermint team delegating their ATOM to a variety of validators (check it out yourself on Anthem).
The chart above also plots changes in the inflation rate and the resulting reward rate. The reward rate is the metric most relevant to stakers. It takes into account that staking rewards are only distributed to those staking. The reward rate signifies the annual growth in holdings that someone delegating their ATOM would expect (before accounting for validator commissions and differences in block times). We can see that at launch the reward rate was relatively high since a smaller portion of the supply was staking. Delegators taking on the risk to stake early were rewarded with a larger portion of the rewards. Then, as the amount of delegated ATOM grew, the reward rate quickly adjusted and has been staying between around 9–11% ever since.
Looking at the historical data, we can also see that the dynamic adjustment did not impact issuance much overall — annual inflation started out at 7%, peaked at 7.68% before the staking ratio threshold was breached, and went back down to 7%, where it stayed ever since.
One final interesting dimension to consider is how many accounts have been created on the chain and how many of those have active stake delegations.
Looking at this data, we can see that both overall accounts and those with an active delegation have been growing steadily. We can clearly see a jump and subsequent growth of accounts when ATOM transfers were first enabled with the launch of cosmoshub-2:
At the time of publishing there are around 16,000 staking accounts on the Cosmos Hub, or roughly 40% of the almost 40,000 accounts on the Cosmos Hub.
These are just a few observations from looking at on-chain data in one of the largest live Proof-of-Stake networks. We will follow up with further insights on networks we support in the future and will potentially add features to explore aggregate data within Anthem.
If you are interested in staking and this kind of data, please help us by taking one minute to answer three questions that will help us to improve the product:
Feel free to reach out to me, @FelixLts on Twitter or Telegram, if you’d like to get access to the raw data used in this analysis.
Support for other Proof-of-Stake networks is coming soon to Anthem — stay tuned for announcements by following us on Twitter or by subscribing to the Chorus One newsletter!
Originally published at https://blog.chorus.one on April 7, 2020.
Kava is the 10th project featured on Binance Launchpad. But what is the Kava platform trying to achieve and how does the $KAVA token play a role in it? This post will cover that by giving an overview of Kava’s design.
The Kava blockchain enables users to issue a stablecoin pegged to the USD (USDX) by locking a variety of cryptoassets on the platform using what is called a collateralized debt position (CDP). CDPs are the cornerstone of decentralized finance. One use case is allowing users to get leverage without requiring a centralized counterparty. MakerDAO, the first CDP issuance platform that is live on Ethereum, is leading this space with around $280m (almost 1.5% of the ETH supply) locked in their CDP system.
Kava is bringing CDPs to non-Ethereum-based cryptocurrencies (starting with BTC, ATOM, XRP, BNB, and USDT) by leveraging interoperability technologies developed for the Cosmos ecosystem. In addition, Kava is built as a sovereign blockchain uniting security, stability, and governance of the platform in one token: KAVA.
The KAVA token is designed to serve three purposes in the Kava ecosystem:
KAVA holders are rewarded directly for taking on these responsibilities by absorbing KAVA issuance and transaction fees in a variety of tokens (when staking), as well as indirectly through the burning of stability fees paid by CDP users on the blockchain.
KAVA paid as transaction fees from interacting with the blockchain and continuously minted KAVA tokens (block rewards) are distributed to stakers to ensure secure operation of the system. The amount received as staking rewards depends on the staking ratio (percentage of KAVA supply staking), the commission rate charged by validators, and transaction fee volume in the system.
The Kava system is issuing new KAVA tokens starting at a rate of 7% per year. The issuance rate gradually adjusts between a floor of 3% if more than ⅔ of KAVA tokens are at stake and a ceiling of 20% if staked KAVA supply stays below the targeted ⅔ ratio for an extended period of time. In addition, transaction fees paid by users transferring assets onto and on the blockchain, as well as opening and closing CDPs are paid to KAVA stakers.
On the flipside, KAVA stakers run the risk of losing a portion of their tokens (up to 5%) should a validator they are staking with get slashed for misbehaving or for being offline.
The Kava system keeps track of collateral in the system and incentivizes liquidation of CDPs that fall below their specified overcollateralization ratios to keep USDX stable at the price of USD. Should USDX lose its peg anyway, e.g. because the value of collateral fell faster than the liquidation system was able to auction off risky CDPs, KAVA tokens will be minted and used to buy up USDX to return to the peg. In case this rare scenario takes place, KAVA holders will be diluted to ensure the system stays stable.
Every CDP type levies an adjustable stability fee (set to 5% APR at launch) which has to be paid in KAVA when closing the CDP. This fee is burned, which reduces the total KAVA supply and thus indirectly benefits KAVA holders. As an example, an owner of a CDP with a debt of 10,000 USDX that was open for a year would need to pay (and burn) 500 USDX worth of KAVA.
Finally, staking KAVA holders are able to participate in the governance of the system either by delegating to validators or by voting directly. All features and parameters of the system, such as which assets to accept, as well as the specific stability fees and overcollateralization ratios are decided through the on-chain governance system.
We will soon publish more information on Kava staking. For further information please consult the Kava team’s post on token economics and our explainers on Cosmos governance and staking, both of which the Kava design is mostly identical to.
Chorus One is a pioneering operator of blockchain infrastructure and staking services focused on offering non-custodial, secure, and user-friendly ways to participate in Proof-of-Stake networks.
Chorus One will offer staking on the Kava blockchain. You can support our work and earn staking rewards by delegating to our validator node.
Website: https://chorus.one
Twitter: https://twitter.com/chorusone
Telegram: https://t.me/chorusone
Chorus One Podcast Episode with Kava Labs CEO Brian Kerr: https://chorusone.libsyn.com/18-kava-cross-chain-collateralized-debt-positions-with-brian-kerr
Kava is a cross-chain decentralized finance (DeFi) platform on Cosmos, allowing users to access decentralized leverage and hedging for major cryptocurrencies such as Bitcoin (BTC), XRP, Cosmos (ATOM) and BNB.
Website: https://www.kava.io
Twitter: https://twitter.com/kava_labs
Telegram: https://t.me/kavalabs
Originally published at https://blog.chorus.one on October 24, 2019.
