[FINAL] Validators rewards - change in epoch parameters

Hello everyone,

We’ve tried to respond to the different feedback received during our last governance call. So here’s a general breakdown of a validator budget, the potential benefits of having a diverse set of validators and what has been the contribution to the ecosystem.

1. Validator budget

  • $1,000/ month in hosting costs - $12k/year
  • 1/10th FTE for a devOps to keep on top of patches, VM upgrades, security - $10k/year
  • $500/month for 10 hours night shift on-call for weekdays - $6k/year
  • $500/month for 10 hours weekend shift on-call - $6k/year
  • $5,000/year in CPA costs
  • $2,000/year in legal/compliance costs
  • Assuming a total tax rate of 30%

Remaining: $23.8k/year for the validator assuming $75k per annum
When the money goes from the legal company to the individual, there is still payroll tax to be paid. This differs widely across the different countries and can go from 15% in the US to 70% in France. This factor has been ignored in this budget.

On the validator side, there is lots of unplanned/unpaid work that goes beyond running a validator for Celo. Validators do have growing expenses and the inflation won’t stop this year. In real terms, the purchasing power has decreased by about 63.67% from 2020 to 2024.

2. Benefit of having active/engage validators

During the recent inscription outage, Celo was one of the few blockchains that didn’t come to a halt. Validators rapidly upgraded their machine specs and many of us have been running with 8 core and 64 GB ram since then. Celo was able to withstand this load whereas Arbitrum had gone offline for 70 minutes and Avalanche had come to a halt.

We’re having regular governance proposals and it helps to have a diverse set of participants on it.
-We have a validator voting problem according to TheCelo - Celo data statistics provider, well compensated validators are more likely to pay attention to governance proposals and participate in voting.
-Additionally, the 24 hours halt in July 2022, shed light on a high level of validators concentrating within Coinbase. Perhaps, 14 validators at that time were being run by them. Incentivizing independent validators increases decentralisation which could be a benefit at the consensus layer.

In Celo’s history, validators have been one of the most active stakeholders. Here are some few examples:

  • They’ve been the first to initiate the use of the Celo community fund that went through several months of initial discussions and basically set the template for others to follow.
  • Many of the initial dApps were created by validators and are still currently maintained by them: Celo vote, Celo Desktop App, Moola Market, Celo signed map, CeloExtensionWallet etc.

3. Proposal on the parameter changes of the epoch rewards
We’ve adjusted the parameter changes and won’t be touching the voting rewards.

Concrete proposal on epochrewards.sol parameter changes: Celo EpochRewards: Propsed Parameter Changes - Google Sheets

  • This should result in
    • Push validator rewards to 75k cUSD / year
    • Reduce Community Fund rewards by roughly 90%
    • Leave voting yield unchanged
    • Additionally, these parameter changes:
      • Effectively turn off the rewards multiplier logic (nails the multiplier to 1) to ensure that validator rewards do not get adjusted downwards going forward
      • Effectively turn off dynamic staking yield adjustments to keep the yield constant until the community decides to change it again via a CGP

Thank you again for all your feedback and looking forward to the next governance call on Thursday 25ft of April.