Validator Group Voter Reward Commission

Governance
1

Validator Group Voter Reward Commission Proposal

Dear Celo Community,

As a response to CGP 271, the community proposed CGP that eliminated validator rewards, Celo Core Co. proposes a voter reward commission mechanism that allows validator groups to receive a configurable percentage of voter CELO epoch rewards.

Under this mechanism, validator groups would be able to set a voter reward commission rate, subject to a governance-defined maximum cap. The commission would be deducted from voter rewards before distribution and allocated to the validator group.

This mechanism matches the commission mechanism used by Cosmos and other delegated Proof of Stake protocols, where validators compete on commission and uptime to determine a fair reward for their efforts.

Example

If a validator group sets a 10% voter reward commission and voters for that group earn 10,000 CELO in epoch rewards:

  • Voters receive 9,000 CELO through vote credit inflation.
  • The validator group receives 1,000 CELO released from the treasury.

The total reward distribution remains unchanged; the mechanism only changes how rewards are allocated between voters and validator groups.

Motivation

Validator groups play an important role in the Celo ecosystem through governance participation, community engagement, and ecosystem development. This proposal introduces a voter reward commission mechanism that allows validator groups to receive a configurable percentage of voter rewards, providing an additional tool for groups to sustain their operations and align incentives with delegators.

As with other validator group parameters, voters retain full discretion over where they delegate their stake and can consider commission rates when selecting a validator group.

The voter reward commission mechanism is intended to:

  • Better align incentives between validator groups and delegators.
  • Support sustainable validator group operations.
  • Create additional flexibility in how validator groups structure incentives.
  • Encourage competition among validator groups based on commission rates and the value they provide to voters.

Proposal

This proposal introduces a new validator group parameter:

  • Voter Reward Commission — a configurable percentage of voter epoch rewards allocated to the validator group.

Key characteristics include:

  • Validator groups may configure a voter reward commission rate.
  • Commission updates follow the same delayed activation pattern used for existing validator commission updates.
  • Governance may define a maximum allowable voter reward commission through a configurable cap.
  • If governance lowers the cap, previously configured rates above the new cap are automatically constrained during reward distribution.

Economics

This proposal does not increase CELO emissions, inflation, or overall reward spending.

The commission is taken from the existing voter reward allocation and redirects a portion of rewards from deferred Locked Gold claims (vote credit inflation) to immediate treasury releases for validator groups.

As a result:

  • Total rewards distributed each epoch remain unchanged.
  • The economic cost of the rewards program remains unchanged.
  • No additional CELO is emitted.

The proposal only changes how rewards are distributed between voters and validator groups.

Technical Overview

Epoch Reward Distribution

The proposal introduces a voter reward commission distribution mechanism that:

  • Deducts the configured commission from voter rewards during reward processing.
  • Releases the commission amount from the treasury to the validator group.
  • Distributes the remaining rewards to voters through vote credit inflation.
  • Emits a new VoterRewardCommissionDistributed event.

Validator Group Configuration

Validator groups gain the ability to configure:

  • A current voter reward commission rate.
  • A pending voter reward commission rate.
  • A delayed activation block for commission updates.

The queue-and-activate workflow mirrors the existing validator commission update process and reuses the existing commissionUpdateDelay parameter.

Governance Controls

The proposal introduces a new governance-controlled parameter:

maxVoterRewardCommission

A value of:

  • Fixidity 1 = no cap
  • Any other value = maximum allowable voter reward commission

The maximum commission is validated both when a commission update is activated and when rewards are distributed. This ensures governance decisions take effect immediately, including situations where governance lowers the cap after a validator group has already queued a higher commission rate.

Security and Testing

The implementation includes extensive unit, fuzz, and integration testing covering reward conservation, commission activation delays, governance cap enforcement, and edge cases. Storage changes have been designed to maintain upgrade safety.

Deployment Considerations

Following deployment, maxVoterRewardCommission will be set to Fixidity 1, which will allow validator groups to set any commission.

The accompanying governance proposal should therefore set an initial maximum voter reward commission as part of the upgrade process.

Implementation

Implementation PR: https://github.com/celo-org/celo-monorepo/pull/11694

We welcome feedback from the community and look forward to discussing this proposal.

Celo Core Co.