recently there’s been some discussion on validator rewards. I’d like to learn more about it here, get some clarity on whether the current validator rewards are appropriate, and kick off a discussion on how the protocol can keep the incentives to participate in validating attractive in the future.
Some earlier discussion was on epoch rewards in general. All epoch rewards are currently downscaled by ~87% due to rewarding ahead of schedule. To me the downscaling of the fixed validator rewards doesn’t feel right, as they have been fixed to cover operational costs independent of the CELO price. From the 75k cUSD communicated around 65k cUSD are actually rewarded.
@asa came up with the following recommendation:
To ensure that Celo continues to be a desirable network on which to validate, we bump the target annual rewards up to 85k cUSD, which, with a rewards multiplier of 87%, roughly restores the original 75k cUSD validator rewards. It’s worth noting that the total value being paid to validators is less than a quarter of what’s paid to voters, and so a 13% increase here is small wrt the total CELO issuance.
I’d love to hear some thoughts from the community and from validators how you think and feel about this. To better understand this, I’d like to especially learn more about:
- Validator infra + operation costs, how many hours of setup and maintenance work, and how much is left as profit. What would be a fair reward and at when would you think about stopping to validate?
- Miner Extractable Value (MEV): To what extend is this already happening on Celo and is this / can this be a significant part of a validator’s reward?
- If I would run a Validator I would always be in favour of higher rewards, so what does the community think about increasing the validator rewards according to the recommendation above ?
- @CodyBorn had another interesting thought. USD inflation. Since rewards are paid in cUSD, validator rewards are subject to inflation and increasing costs. Should the protocol compensate for that? Are there ways to automatically increase validator rewards accordingly?