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.
Decentralization in Proof-of-Stake is a multifaceted topic. Many theories and designs have been suggested in the wider ecosystem on how a PoS system may decentralize power over multiple entities. The Cosmos Hub is one of few of these experiments that has been live for a couple of months. The following analysis covers stake distribution and diversification on the Cosmos Hub and aims to shine some light on how token holders have actually engaged with this early PoS network.
In a PoS network, the way token holders decide to participate in staking influences power distribution in the network. Do holders stake tokens themselves, do they pick one validator and stick with it, or do they diversify across validators? Diversifying stake should come with benefits: it lowers the impact a slashing would have on the token holder and helps to support different entities, thus strengthening decentralization and the ecosystem in general.
To find out how Atom token holders are participating in staking, I took a snapshot of data from the 5th September using the Stargazer API (thanks to Certus One for providing this API). The data takes into account all active delegations, as well as their size and the corresponding delegator and validator addresses. It should be noted that addresses don’t equal entities, there could be holders that hold their funds in different addresses, or holders that share addresses (exchanges/custodians), which will not be reflected in the following analysis.
Let’s start with a summary of the snapshot data. In total, at the time of the snapshot, 177,771,881 Atoms were being staked. The snapshot contains 11,387 active delegations from 6,459 addresses on the Cosmos Hub, which means the average address has 1.76 active delegations. From that we can already see that a large number of holders don’t seem to diversify.
Before we go more in-depth regarding stake diversification, let’s first consider the stake distribution. The following graph shows Atoms at stake with validators ordered by stake and colored according to the commission rate bracket that the validator belongs to (5% or lower, between 5–10%, and greater than 10%).
Looking at this we can see that the largest validators either charge a low commission rate below 5%, while others charge above 10%. These often signify funds that validate their own stake, or providers that focus on larger holders. Looking at the validator set ranked by stake visualizing the amount of addresses that delegate stake to them, we can see that low fee validators are popular especially among smaller holders. The top 3 validators by number of delegations charge no or a low fee:
This graph also contains some interesting outliers: e.g. Huobi Wallet on rank 43 has delegation from 636 addresses. Similarly, Coinone Node on rank 15 has 745 delegators. Both of these are exchange run validators. Another interesting mention is Cosmostation at rank 7, who managed to attract 678 delegators to their validator with a 12% fee, potentially a result of their successful wallet.
Now that we got an overview of stake distribution among validators, let’s take a closer look at delegations and the addresses they are coming from:
This data contains some interesting insights. For one, only about a quarter of addresses actually diversify their stake, but together these addresses account for about 64% of the total stake. What this means is that addresses that diversify on average hold about 5 times as many Atoms as those that don’t, providing us with insights that diversification is more popular with larger holders.
Taking a closer and counting the number of addresses given how many active delegations they have (n), we see a swiftly declining curve. While there are still 786 addresses with 2 delegations and 347 with 3; addresses with more than 5 delegations become very rare. There are a few interesting outliers that were cut off this graph. Specifically, an address maintained by B-Harvest sports 119 delegations with low Atom amounts that were carried for tracking purposes. 6 other addresses with seemingly similar patterns (<500 Atoms across 67 to 83 validators) exist.
Finally, if we visualize the Atom amount staked by addresses sorted by the number of validators they diversify amongst, we are presented with some more data points that stand out:
The peak of holdings with 36 delegations is from the Tendermint team address, which stakes ~21 million Atoms. Another peak with 46 delegations and ~7 million Atoms at stake is due to the ICF address. The most diversified address with significant holdings delegates to 51 validators. The two peaks with 16 and 18 delegations also signify well-diversified large holders.
In conclusion the data presented clearly indicates that Atom holders largely don’t diversify across multiple validators. In addition, we also saw a preference for low fees among smaller holders.
Our team at Chorus One believes that stake diversification is important to create a thriving validator set that engages with the network and contributes to ecosystem growth. It might be that currently token holders don’t care about diversification, are unaware of benefits, or that it is simply too hard, or not worth the effort to diversify (low slashing risks, diversifying requires increased research on validators, bad UX of having to carry out multiple transactions to delegate and to withdraw rewards,…).
We are researching ways to make participating in staking and diversifying easier. Join our Telegram to discuss and let me (@FelixLts) know what else you’d be interested in for future analysis. Interesting extensions could be to expand on differences between whales and small holders or to take a look at other Proof-of-Stake networks (e.g. Tezos). If you have a dataset for other PoS networks or want to help obtaining the relevant data please reach out.
Originally published at https://blog.chorus.one on September 10, 2019.
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