Staking on Curio Parachain
Curio Parachain uses Nominated Proof-of-Stake (NPoS) as its mechanism for selecting the validator set. It is designed with the roles of validators and nominators, to maximize chain security. Actors who are interested in maintaining the network can run a validator node. At genesis, Curio Parachain will have a limited amount of slots available for these validators (8 slots), but this number will grow over time to over one thousand.
The system encourages CGT holders to participate as nominators. Nominators may back up to 8 validators as trusted validator candidates.
Validators assume the role of producing new blocks, validating parachain blocks, and guaranteeing finality. Nominators can choose to back select validators with their stake.
The staking system pays out rewards essentially equally to all validators regardless of stake. Having more stake on a validator does not influence the amount of block rewards it receives. However, there is a probabilistic component to reward calculation, so rewards may not be exactly equal for all validators in a given era.
Distribution of the rewards are pro-rata to all stakers after the validator payment is deducted. In this way, the network incents the nomination of lower-staked validators to create an equally-staked validator set.
In staking, you can be either a nominator or a validator. As a nominator, you can nominate one or more (up to 8) validator candidates that you trust to help you earn rewards in CGT. A validator node is required to be responsive 24/7, perform its expected duties in a timely manner, and avoid any slashable behavior.
Any potential validators can indicate their intention to be a validator candidate. Their candidacies are made public to all nominators, and a nominator in turn submits a list of any number of candidates that it supports. In the next epoch (lasting 10 minutes), a certain number of validators having the most CGT backing get elected and become active. There are no particular requirements for a CGT holder to become a nominator, though we expect each nominator to carefully track the performance and reputation of validators. We also recommend becoming a nominator with a stake of more than 5,000 CGT (for validators - from 25,000 CGT), which is economically feasible.
Once the nomination period ends, the NPoS election mechanism takes the nominators and their associated votes as input, and outputs a set of validators of the required size, that maximizes the stake backing of any validator, and that makes the stakes backing validators as evenly distributed as possible. The objectives of this election mechanism are to maximize the security of the network, and achieve fair representation of the nominators.
To explain how rewards are paid to validators and nominators, we need to consider validator pools, where a validator pool consists of an elected validator together with the nominators backing it. For each validator pool, we keep a list of nominators with the associated stakes.
The general rule for rewards across validator pools is that two validator pools get paid essentially the same amount of CGT for equal work, i.e. they are NOT paid proportional to the stakes in each pool. There is a probabilistic component to staking rewards in the form of era points and tips but these should average out over time. Within a validator pool, a (configurable) percentage of the reward goes to pay the validator's commission fees and the remainder is paid pro-rata (i.e. proportional to stake) to the nominators and validator.
We highlight two features of this payment scheme. The first is that since validator pools are paid the same regardless of stake level, pools with less stake will generally pay more to nominators per-CGT than pools with more stake. We thus give nominators an economic incentive to gradually shift their preferences to lower staked validators that gain a sufficient amount of reputation. The reason for this is that we want the stake across validator pools to be as evenly distributed as possible, to avoid a concentration of power among a few validators.
The minimum stake that is necessary to be elected as an active validator is dynamic and can change over time. It depends not only on how much stake is being put behind each validator, but also the size of the active set and how many validators are waiting in the pool.
We recommend becoming a nominator with a minimum stake 5,000 CGT and validator - 25,000 CGT.
There are two different accounts for managing your funds: Stash and Controller.
This account holds funds bonded for staking, but delegates some functions to a Controller. As a result, you may actively participate with a Stash key kept in a cold wallet, meaning it stays offline all the time.
This account acts on behalf of the Stash account, signalling decisions about nominating and validating. It set preferences like payout account and commission. If you are a validator, it also sets your session keys. It only needs enough funds to pay transaction fees.
This hierarchy of different key types is needed so that validator operators and nominators can defend themselves much better than in single-key systems. Typically, you lose security whenever you use the same key for multiple roles.
Since validator slots will be limited, most of those who wish to stake their CGT and contribute economic security to the network will be nominators. Validators do most of the heavy lifting of maintaining network security. Nominators, on the other hand, do not need to do anything once they have bonded their CGT. The experience of the nominator is similar to "set it and forget it," while the validator will be doing active service for the network by performing the critical operations. For this reason, the validator has certain privileges regarding the payout of the staking mechanism and will be able to declare its own allocation before the share is divided to nominators.
While the experience of a nominator is similar to "set it and forget it", in reality there are many reasons to keep an eye on one's validators and keep optimizing the nominations for best returns and reduced risk.
Slashing will happen if a validator goes offline, attacks the network, or runs modified software. They and their nominators will get slashed by losing a percentage of their bonded/staked CGT. Any slashed CGT will be added to the Treasury. The rationale for this (rather than burning or distributing them as rewards) is that slashes may then be reverted by the Council by simply paying out from the Treasury. This would be useful in situations such as a faulty runtime causing slashing or forcing validators offline through no fault of their own. In the case of legitimate slashing, it moves tokens away from malicious validators to those building the ecosystem through the normal Treasury process.
Validator pools with larger total stake backing them will get slashed more harshly than less popular ones, so we encourage nominators to shift their nominations to less popular validators to reduce the possible losses.
In rare instances, a nominator may be actively nominating several validators in a single era. In this case, the slash is proportionate to the amount staked to that specific validator. Note that you cannot control the percentage of stake you have allocated to each validator or choose who your active validator will be (except in the trivial case of nominating a single validator). Staking allocations are controlled by the Phragmén algorithm.
Once a validator gets slashed, it goes into the state as an "unapplied slash". You can check this here https://polkadot.js.org/apps/?rpc=wss%3A%2F%2Fparachain.curioinvest.com#/staking/slashes. The UI shows it per validator and then all the affected nominators along with the amounts. While unapplied, a governance proposal can be made to reverse it during 28 days period. After the grace period, the slashes are applied.
Depending on the level of offence (the validator is offline, the validator signs two or more votes in the same round on different chains), the validator may be slashed and / or chilled. The slashing amount is determined by the severity of the offense.
Chilling is the act of removing a validator from the active validator set, also disqualifying them from the set of electable candidates in the next NPoS cycle.
This may be voluntary and validator-initiated. When voluntary, chilling will keep the validator active in the current session, but will move them to the inactive set in the next. The validator will not lose their nominators.
When used as part of a punishment, being chilled carries an implied penalty of being un-nominated. It also disables the validator for the remainder of the current era and removes the offending validator from the next election.
Rewards are recorded per session/epoch (10 minutes) and calculated per era (1 hour). Rewards are calculated based on era points for active validators that have a probabilistic component. As such, your rewards may vary slightly.
In order to be paid your staking rewards, someone must claim them for each validator that you nominate. Staking rewards are kept available for 84 eras (84 hours). If nobody claims your staking rewards by this time, then you will not be able to claim them and some of your staking rewards will be lost.
Typically, a validator operator must initiate a payout transaction for its validator, which will also make payments to all nominators nominating that validator. But each one has the option to trigger the payout for all unclaimed eras, which will make payouts to the validator and all its nominators.
Validators can create a cut of the reward (a percentage of the block reward) that is not shared with the nominators. After the value gets deducted, the remaining portion is based on their staked value and split between the validator and all of the nominators who have voted for this validator. Note that validators can put up their own stake, and for this calculation, their stake acts just as if they were another nominator.
CGT is inflationary on Curio Parachain. There is no maximum number of CGT as in Bitcoin. Annual inflation is designed to be 2-10% in the first 2 years, with validator rewards being a function of amount staked and the remainder going to Treasury.
Blue line: Inflation rewards to stakers
Green line: Staker rate of return
Ideal target stake: 60%
Ideal target inflation rate: 10%
Perfect APY for stakers: 25%
Depending on the staking participation, the distribution of the inflation to validators/nominators versus the treasury will change dynamically to provide incentives to participate (or not participate) in staking. Any deviation from 60% ideal stake - positive or negative - sends the proportional balance to the Treasury and effectively reduces staking rewards.
- 2-10% annual inflation rate with 4.6% annual inflation rate at the time of parachain launch and ideal inflation rate - 10%
- 60% targeted active staking
- ideal 25% APY on users stakes with minting 200k CGT per month as staking rewards
- Tokens will be locked for about 28 days after unbonding (parachain security requirements)
- Punishment (slashing) in case of validator found to be misbehaving
Curio Parachain has 8 open slots for validators at the time of launch. This value will gradually increase as the parachain grows. An upper limit on the number of validators has not yet been defined, but should only be limited by the load on network bandwidth due to peer-to-peer messaging. The plans are to reach 1000 validators slots as planned by the Polkadot network.
- Native token: CGT
- Inflation rate up to 10%
- Ideal stake 60%
- Target stakers APY 25%. 200,000 CGT per month as staking rewards
- Target minimum stake as validator - 25,000 CGT and as nominator - 5,000 CGT
- Speed: 3 seconds per block
- Epoch: 10 mins, Era: 1 hour
- Minimum amount required to keep an account open: 1 CGT
- Fee per CGT transfer: ~0.015 CGT
Initial supply 14,000,000 CGT.
Initial CGT distribution:
- 10,000,000 CGT - reserved for Initial Parachain Offering on Kusama
- 2,000,000 CGT - reserved for one way bridge from ERC-20 CUR to parachain CGT
- 2,000,000 CGT - Curio official validators stake across 4 validators