[FINAL] Retroactive Validator Rewards Program #1 | QF and RPGF Rounds

Protocol Validators
1

Authors: Luuk (LuukDAO), Jessan (Jessan), Aaron (Thylacine)
Aligned Public Goods Bucket: QF and RPGF Rounds
Funding request: 250,000 CELO

Summary
The Retroactive Validator Rewards Program 1 (RVRP1) is a CeloPG program that issues Retroactive Grants of up to 25,000 CELO to Validator Groups based on their past contributions to the well-being of the Celo Ecosystem.

The opt-in program aims to reward active Celo Validator Groups for their past activities, including operating healthy nodes, participating in governance, creating tools for the ecosystem, actively participating in conversations amongst the validator community, and providing technical input and support.

As CeloRPGF0 only aims to distribute half of the allocated 500,000 CELO budget for RPGF programs, we request a budget of up to 250,000 CELO for this Retroactive Validator Rewards Program #1. Any unspent CELO from the Validator Rewards Program on June 31st will be returned to the Celo Community Treasury.

Motivation
Celo Validator Groups are essential leaders in the Celo Network. They are elected to build each block and to reach a consensus on whether the transactions follow the protocol’s rules.

Having a diverse ecosystem of high-quality and active Celo Validator Groups increases the resiliency and security of the Celo Network.

Recently, some smaller validator groups have articulated the growing costs of running a single validator and argued for increasing the validator rewards to compensate for these costs.

While we believe small validator groups are essential for the health of the Celo Network, especially if they actively participate in the ecosystem’s development and governance, we don’t believe making large-scale changes to the validator reward structure is the right solution.

Restructuring the existing validator reward structure could result in the following:

  1. Increase rewards indiscriminately of actual costs incurred and contributions made
  2. Remove the network safety mechanisms that reduce the cUSD spend when the price of Celo is below target
  3. Potential unintended consequences of changing the payouts to community funds and the underlying voting rewards.

Instead of making large-scale validator reward structure changes, we propose to run RVRP1, a retro grants program that recognizes and rewards the value contributed by validation groups.

By rewarding past net-positive activity, the program hopes to increase these positive behaviors among Validation Groups that support the Celo community and provide a path for existing and new Validation groups to run additional validators within their groups so they may add value to the Celo Ecosystem.

Metrics and KPIs
The following metrics will be tracked and reported at the end of the program:

  • Number of Validator Groups who successfully apply for the program
  • Publish the review framework used for RVRP1 voting
  • Number of Validator Groups who received a grant
  • Total CELO allocated to Validator Groups
  • An assessment of new Validator & Validator Group activity for groups awarded Celo

Specification
RVRP1 will be the first Retroactive Validator Rewards Program. It aims to create positive feedback loops for active validators to continue contributing to the well-being of the Celo Network ecosystem. In addition to rewarding positive behavior, the program will also increase transparency around Validator Group activities.

How the program would operate
As this is an initial program, we aim to run it lean yet efficiently. If successful, the program could expand and improve afterward to continue supporting active validator groups. Future programs’ exact details and frequency will be determined after RVRP1 and based on other factors, such as the CEL2 transition and market developments.

Applications: Applications for the RVRP1 will open one week after this proposal passes through a public Celo Forum thread. The application thread will at least include a description of the Validator group, their past contributions to Celo, and their future intentions for contributing to the Celo Ecosystem.

Review: Five Celo stakeholders from different backgrounds will form a review committee tasked with creating a simple, data-driven review process to guide the allocation of Retro validator rewards. Each reviewer will be allocated an on-chain and revocable Role on Hats Protocol, and all votes will be held in a public to-be-created Snapshot space.

The proposed reviewers are specified in the Team section of this proposal but represent various corners of the Celo Ecosystem.

Rewards: Each validator group can apply for Retroactive rewards and earn up to 25,000 CELO. The rewards are calculated using the framework below based on public information.
If a majority of the reviewers (3 out of 5) confirm a distribution, the grant is formalized, and the CELO is transferred from the RVRP1 program multi-sig to the Grantee’s address within 72 hours.

The following metrics will be used to evaluate the Validator group’s contributions.

Metric Description
Validator Score
Calculated by analyzing the uptime score from the past 12 months. Between 0-5 points based on a to-be-created uptime evaluation scale.
Governance Participation
Calculated by analyzing governance participation in the past 30 proposals. Between 0-5 points based on a to-be-created governance participation scale.
BONUS: Small Validator group +2 points if running 1 validator, +1 points if running 2 validators
BONUS: Additional contributions to Celo +2 points for significant contributions, +1 point if clear contributions

The total reward per Validator group equals the points they have scored * 2500 CELO with a maximum of 25,000 CELO per validator group.

Example: A validator group with 2 validators with 99.9% uptime that has participated in most of the recent governance votes would score 5 points at Validator Score, 4 points at Governance Participation, and receive 1 bonus point for being a small validator group for a total of 10 points = 25,000 CELO.

Timeline
The program will open for applications one week after this proposal is approved. Grants will be reviewed on a rolling basis and allocated on a first-come, first-served basis until the program ends on June 30th, 2024, or until the complete 250,000 CELO program budget has been allocated.

Current status
This is a new program built on the lessons from previous Validator Programs run by the Celo Foundation.

Payment Terms
Transfer in two tranches of 125,000 CELO. If and when the balance of the RVRP1 program multi-sig reaches 25,000 CELO, a request will be made for the second tranche. Any unspent CELO at the end of the program will be returned to the Celo Community Treasury.

Team
The proposed RVRP1 review committee will consist of the following community members:

  • Eric, Governance Guardian and Celo Foundation
  • Jessan, cLabs
  • Luuk, Lead CeloPG Steward
  • Juan, Active CeloPG Steward and Governance Guardian
  • Aaron, Celo Validator Operator and Advisory CeloPG Steward

Additional support/resources
None

14 Likes
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This is exactly what we need as a small validator group at Grassroots Economics. I’m against proposals the alter the inflation curve of CELO but in order to reach a full 5 validators in our group we really could use support like this.
Thanks @LuukDAO and all for finding solutions that build the eco-system.

4 Likes
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Thanks for drafting this, Luuk.

Unfortunately, this proposal misses the mark because it doesn’t address the underlying problem which is that validator expenses keep going up and revenue keeps going down. Validator expenses are incurred in USD, so denominating the majority of validator rewards in USD, not CELO, has always been a benefit of running infrastructure on Celo compared to other networks. Resetting validator rewards back closer to where they were several years ago is the best solution to the problem of increased costs and reduced income.

3 Likes
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It is possible to suggest that rewards be issued in cUSD instead of CELO. Also, as it’s a retro program, validators can decide to sell their CELO received if they need to cover costs, but not everyone might want to do that.

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Thanks for your reply, Luuk.

Everyone has to cover their operating expenses, not paying infrastructure bills is not an option. This proposal doesn’t provide certainty to validators. I read it as “validators spend money to run hardware, then they apply for retroactive funding, and maybe they’ll be compensated, but maybe they won’t because the decision to compensate is subject to a committee vote”. Whereas cUSD validator rewards are programatic and guaranteed which provides certainty to validators.

Again, I really appreciate you putting forth the effort to draft a counter proposal, however the right approach to solving the problem of reduced income in an environment of increased expenses is to revert the validator rewards back to where they were several years ago.

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Hello!

I personally strongly appreciate the effort taken to draft this proposal but it has multiple issues that makes me overall to be against this approach. I will list a few of my concerns bellow:

  1. every chain needs to have a solid and sustainable economical system in order to be reliable on the long run (this is valid for every ecosystem in the world that needs to survive). In this line we need to have clear rewards defined on the protocol level, we can’t rely on grants and other forms of payments that are subjective and subject to validation and approvals to some commissions or other 3rd party entities

  2. one of the core qualities of blockchain is the fact that comes without the need of the element of trust. Your suggestion is not in this line as we need to rely on some sort of validation and approvals to receive the form of payment, whatever that form may be

  3. things need to be simple and transparent. Everybody needs to know what they will receive and need to be able to put in balance if it’s worth or not. The validators are part of the core set of every PoS chain (no matter the PoS type) and they need to have rewards clearly defined at the protocol level. The main activity of a validator is to validate and that and only that need to be the basic part of it’s job and that needs to be rewarded from the protocol level. The other contributions to the broader ecosystem can of course be encouraged by using grants and other forms of payments but are not limited nor should be required for validators

  4. validators can’t rely on receiving grants and other forms of payments that are subject to subjective evaluation.

Thank you for taking the time to submit the proposal, like I’ve said it’s highly appreciated but it’s a little out of scope and basics of PoS and validation

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@syncn0de @Patrick happy to continue this conversation ahead of Thursday’s governance call.

Validators are currently rewarded for running hardware. The current rewards are clear.

Dee’s breakdown showed that even single validators earn enough to cover hardware/ops expenses. However, once you become professional, the margins to operate a Validator without any other services on the side have become slim.

I think this is part of a bigger debate about the role of Validators in Blockchain networks, especially with Celo moving towards an L2. The value provided by a native validator set needs to be proportional to the value it contributes to the Network.

Raising the fixed rewards to create larger profit margins for validators, at the expense of over 4M additional CELO sales pressure a year, is a no-go for me.

Instead, I think that Validator will need to specialize further, either providing additional ecosystem support and services (such as active Governance involvement and open-source development) or increasing their operation (running more Validators with high up time to increase income) in order to continue to grow their role in Celo or any other Blockchain network.

The Retro Validator Program could potentially increase in size over time and ensure the suitable validator activities are rewarded. We’re happy to collaborate with Validator (we’re in conversation with two right now) to have proper representation in making the Retro evaluation framework based on the metrics that matter most. Ideally, a good chunk of the decision can be based on quantitative data points (such as on-chain vote participation and uptime) that Validators can optimize for afterward to ensure being rewarded.

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Well said @LuukDAO . This is our 4th blockchain since 2018 - the main reason we couldn’t run validators on other chains (and hence guarantee the (low gas) price of our services to folks in refugee camps) was because it was far to expensive to even get started.

The cost of actually running the validator was not the problem - it was how much you had to buy in. Currently on Celo you get roughly ~$70-100 daily running an elected validator - while you might try to explain that running a validator costs more than $100 a day (does running 5 cost more than $500 a day?) … well people in the know would simply jump at the current opportunity to be part of this eco-system at the infrastructure layer.

I’m all about having a cost for running a service that provides a competitive return above the raw cost of providing that service - and like how @LuukDAO is trying to make sense of things - rewarding activities … bringing more active users onto Celo etc. :peace_symbol:

4 Likes
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The problem here is that in order to run additional validators you have to solicit a lot of votes for your validator group which is usually out of scope for small independent validators. Average token holders usually vote for well-known names and don’t bother doing deeper research about validators. Look at some other PoS networks where institutional validators get much more votes even if they have higher commissions and/or poorer performance.

On other points, I agree with @syncn0de and @Patrick that this counter proposal unfortunately doesn’t solve the structural problem of ever decreasing rewards and growing costs. At some point, smaller validators will have to leave the set.

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This Retro program would likely solve the problem you describe of small independent validators not being widely recognized and voted on.

By publically reporting who’s behind a validator, what they contribute to Celo, and their plans, small validators can get into the picture, attract more votes, and receive additional funding.

In addition, it would make everybody aware of what metrics people could be looking at when reviewing validators.

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@LuukDAO I am sorry to be the one that tells you this but you are mixing things that are on different levels by dragging them all on the same level and trying to put them in balance which is by it’s nature a totally wrong approach. Who is able to evaluate the value of the contributions? All evaluations made by 3rd party entities are subjective and people involved in the evaluation process may be biased for different reasons (personally knowing a validator for example). That’s why avoiding this approach is preferable when discussing on validators rewards and mixing the rewards that should come from the protocol level with grants that should go to contributors. Grants for ecosystem contribution should remain as grants for contribution and validator rewards should remain at the protocol level. Things are that simple and should stay that simple.

I am curious what is your contribution as validator and infra provider in the space and also what is your contribution to the CELO ecosystem. In this way I could evaluate maybe better your expertise and I could try to understand better the benefits from your perspective to your suggestion. Possible I am missing something

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As outlined, there are current standardized rewards for validators. We’re not aiming to replace that.

This program is based on requests from small validator groups (1 to 2 validators) to earn more income to continue operating.

This program aims to do that by providing opportunities for (small) validator groups to earn additional income while increasing the transparency and awareness of validators.

The initial reviewers are named in this proposal, and the evaluation framework will be made public to the broader Celo community. The applications and review process will be done in public.

Along with the others named in the proposal, I have a proven track record of operating and supporting many elements of the Celo ecosystem.

I am looking forward to discussing this further on Thursday, and if we are unable to find alignment, have both proposals up for vote and let Celo voters decide.

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Hi everyone, and I appreciate the proposal @jessan and @LuukDAO

Along with @Dee I was one of the initiators of the current validator rewards governance proposal, and have been pushing and discussing it for a couple of years now.

Whether I like it or not, I’m starting to feel the reality is that the proposal to increase cUSD validator rewards doesn’t yet have a strong community consensus (even though all validators would serve their self-interest by voting Yes for it).

I feel the RVRP1 program proposed here is simply a small way for the Celo treasury / community fund to say thank you for those validators who are feeling the crunch right now. My small infrastructure company would be happy to apply and receive something extra for the work I’ve put in over the years, but to mirror many of the other comments here: a once-off retroactive goodwill payment does not really change the long-term viability and economics for anyone. So I see it only as a simple recognition payment.

Further, I also don’t see participation in the RVRP1 program as either/or situation regarding the previous proposal to increase validator rewards. Direct governance has always been, and always should be, the final backstop for contentious proposals. If any proposal is well-formed and passes all of the pre-conditions we have, the community can ultimately decide to vote the change or not. So I would recommend in addition to designing the RVRP1 program, we simply send the validator rewards proposal to governance and let the CELO voters decide.

Operationally, I would prefer RVRP1 to automated as much as possible. Define a performance criteria, let it run for a time, then automatically pay out to the top 10 winners at the end of the period. There’s no application process, no human gate-keeping, it just happens by an auditable or minimally trusted process. All the humans in this system should do is create the criteria, calculate the winners, then refill the bucket by governance if the program is successful and the community agrees.

Personally, I don’t really vibe with all these buzzwords and acronyms and committees and sub-committees and programs, it all feels like a Monty Python sketch turning blockchain into a bureaucrat’s theme park. That said, we are moving closer to Optimism now and they (maybe Gitcoin, citation needed) somewhat popularized the lingo, and as a community - including the validators - we could probably do worse than connecting closely with that ecosystem and getting heavily involved. If we set up various programs that align nicely with OP it seems very likely we could get financial support from there too.

Supporting the efforts on developing what the validator set technically and economically look like in 12 months, and having strong opinions there will probably be a better long-term ROI for all of us as validators.

TL;dr

  1. I co-developed and still support the proposal to responsibly increase epoch validator rewards
  2. I support this RVRP proposal as form of simple recognition
  3. I would like to put myself forward as one of the review committee as a representative of the validators (and holder of a lot of useful performance data that I want to shape into something resembling validator rankings - coming soon to vido.atalma.io)
6 Likes
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Hello Celo Community :colombia:

We are new at the dynamics of the validators but we still believe that running a validator should offer enough rewards to be desirable to perform the task and it is fundamental to keep the PoS solid, increasing the amount of possible validators in the infrastructure layer of the blockchain.

The further specialization shouldn’t be part of the picture since it will raise barrier walls to new validators and the activity should be profitable on its own understanding that every day the cost tends to go up just by the USD loss of value and should avoid uncertainty that is usually associated to grant kind rewards; the cost should be as predictable as the compensation.

That said, we believe that having this RVRP that @LuukDAO is proposing could be a great tool to promote and improve the decentralization creating a chance to support new unelected validators that are working for the network but aren’t economically compensated, nevertheless the problem for small validators keeps unsolved since is very difficult for the holders to delegate the votes due to the actual mechanism that doesn’t allow them to choose from unelected validators, creating larger concentration of voting power and working against the decentralization of the network.

And thinking about the future RVRP, in the criteria will be necessary for a validator to be elected in the past and sign some blocks?, because for example we have been running the validator for past month, but haven’t signed any block due to the small amount of delegation we have at the moment.

Thanks in advance :facepunch:

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I’ve updated the proposal after valuable feedback from different stakeholders.

The primary changes are:

  • Raised max reward from 20,000 CELO to 25,000 CELO
  • Added @Thylacine, one of the most active and respected Celo Validators, to the proposal as co-author and incorporated his feedback.
  • Made the review process much more objective and quantified (see table).
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Hello everyone,

Thank you for the efforts and putting up an alternative proposal @LuukDAO. I disagree with many of the premises and ideas but it could be attempted as a first experiment to see how it goes. This is not a binary situation and both proposals can co-exist. We’ll change the parameters and reduce the reward multiplier as we’ll assume that this proposal goes forward.

Personally, I will vote abstain and won’t be applying to the RVRP1 program but here are some suggestions related to the proposal:

  • Consider increasing the team size by adding two or more slots for validators
  • Ensure disbursements are made as much as possible from on-chain parameters
  • It may be beneficial for validators already supported by the Celo Foundation to be exempt from reapplying to this program, simplifying the process.

Below are the reasons on why I disagree on this approach:

  • This proposal doesn’t address the core issue that is the reward continues to decrease in an inflationary environment where running cost are escalating.
  • I don’t believe this is the right use of the Retroactive Public Goods Funding framework. This should not be applied to the validators set, or to sequencers in the future.
  • Having something on-chain, automated, should not be brought back to a grant funding mechanism. It’s human nature, there could be biases and conflict of interest. You have done a great job around the community fund but this could also lead you to believe that suddenly validators need to come and post in the forum to increase visibility and gather votes which is far from reality. It’s a misconception creating just more hurdles for validators.
  • The initial proposal will not add another 4m additional Celo. Currently, the epoch rewards show 11k celo going to the community fund and 25k celo going to validators. By reducing emissions to the community fund, there would be an additional of 2m celo over the span of 12 months. In reality, the impact will be less for the following reasons:
    • The transition to L2 is probably going to happen by end of this year (~ 8 months) and this is going to be reassessed
    • As we’re at the beginning of an upward cycle, the price will probably not stay at the current levels, reducing the amount of celo required for rewards
    • We’re further reducing the reward multiplier to its value 2 years ago so validator rewards will be lower than $75k (~$58.5k)

I would also advise that any team member who is considering becoming an active validator should carefully assess potential conflicts of interest. It’s important for such individuals to evaluate whether their involvement could impact their impartiality or the perceived integrity of the team.

4 Likes
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This is a good point. I wonder if there’s a nice way to incentivize new validator groups that don’t have a long history?

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Opinion: these types of conversations - even if they don’t result in anything - are good to see in the Celo ecosystem and I look forward to seeing more.

Putting forward new ideas is what will make this protocol great again, but it does take work and input.

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I think this proposal should be dropped and favor Dee’s (with a good justification of what the validator payments should actually be).

Fundamentally, I disagree that validators (or anyone FWIW) should get rewarded retroactively. They signed up for a protocol and the protocol responded as designed. If they they weren’t happy with the parameters they should have got involved earlier or stop doing it.

Secondly, I find it very unfair that it’s up to a group of humans to decide who should get the payment and who shouldn’t. To me, it should just be proporcional to their uptime, maybe rewarding more the ones that stayed online while there were empty slots. Anything unrelated to actual validating blocks should not be considered.

But I think this payment shouldn’t happen at all, that’s the reason we have a protocol. I also feel very strongly against tightening this to soft promises, when validator rewards were from a very beginning paid on past work. If someone wants to work on a project, then they should ask for a grant as everyone else would.

Disclaimer: I run a validator myself, so does my employer. I’m speaking on personal behalf.

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Just a couple final comments we wanna add to this topic.

We share the opinion of @dee that this proposal can co exist with the proposal made by him and could work as an experiment, understanding that running a validation node should be profitable on its own and should not require retroactive rewards to close its numbers.

In contrast, we respectfully disagree with @martinvol’s viewpoint. We believe that the ethos of the network should embrace those who contribute to its growth by providing new infrastructure and decentralization opportunities.

Finally we believe that there are some concerns about @juanjgiraldoc being part of the review committee since in the past he was involved in helping in the creation of the ReFiCol Validator Group, and for that reason we have suggested that he refrain from being part of this committee and avoid the potential conflict of interest or at least avoid voting for us.