FRC01: Exploring the Impact of Power Validators on Fuse Network's Tokenomics

Governance FRCs
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Simple Summary

Priming Fuse for mass business and consumer adoption requires that the infrastructure on top of the Fuse Network blockchain become more robust and decentralized. The Fuse Network blockchain must also change and offload most transactions to the execution layer.

A crucial function in this change is the introduction of Power Validators (PVs). The value proposition for PVs is predicated on the fee structure from which PVs stand to benefit.

This Fuse Request for Comments (FRC) introduces the new and improved payment flow of the Fuse Network and the entities that make the magic happen. Accordingly, this FRC requests feedback on the reward method of PV.

Read more about the introduction of Power Validators as a business layer on Fuse

:checkered_flag: Forum voting ends on April 29th at 16:00 (CET) [29.04.23] :checkered_flag:

Q1: Should PVs receive block rewards during Phase I?

(see section What functions and services will PVs perform)

  • Yes, I like it!
  • No, I’m not sure

0 voters

Q2: Should PVs receive rewards (not block rewards) after Phase II for their complex services?

(see section What functions and services will PVs perform)

  • Yes, I like it!
  • No, I’m not sure

0 voters

Q3: Should PVs receive an NFT representing their services and reputation?

(see section Evaluating PVs and Rewarding them)

  • Yes, I like it!
  • No, I’m not sure

0 voters

Q4: Should PVs be able to trade their representative NFTs?

(see section Evaluating PVs and Rewarding them)

  • Yes, I like it!
  • No, I’m not sure

0 voters

What functions and services will PVs perform?

PVs will perform several functions and services on the Fuse Network. These functions and services will be introduced in multiple phases.

Phase I: Relaying Service

Simply put: Relaying means bundling several gasless user operations into one transaction. Such user operations may include transaction abstractions, recurring payments, and other complex operations.

The Relay service is the inaugural service available for Power Validators to operate, and it has been instrumental in the growth of businesses on the Fuse network. This service facilitated gasless transactions for over 180,000 unique users and has been the backbone of this growth.

Permitting PVs to operate the Relay service will significantly enhance its robustness and decentralization, ultimately promoting a thriving Fuse ecosystem. In addition, PVs performing the Relay service will receive rewards through operators’ fees.

Phase II and Beyond: Identity, Indexing, Oracles, and Bridges:

In Phase 2 and beyond, we aim to decentralize most of the functionality of the Fuse Stack that does not require centralized middleware.

In addition, to relay services, PVs’ service will also include the following:

  • User Identity - Upon user verification, the user will receive a DID as a Soul Bound Token (SBT), utilized to identify them on-chain. Metadata and verifiable credentials can be associated with their DID.
  • Indexing - Indexing the Fuse Network and providing a user-friendly API for querying assets and wallets.
  • Oracles - Running oracle nodes to provide price and other data feeds necessary for payment applications.
  • Bridges - Implementation and operation of bridges between the Fuse network and other blockchain networks. The inclusion of bridges as part of the Power Validators service will further decentralize the Fuse network and promote its integration with different blockchain ecosystems.

Evaluating PVs and Rewarding them

The objective is to create a fault-tolerant system enabling high-quality service and a failover architecture. An algorithm to rate and verify the service quality per service needs to be defined. This algorithm can be used for PVs’ reputation.

We need to consider that evaluating one service is more complex than the other. For example, evaluating the Quality of Service (QoS) for the relayer service is more accessible based on on-chain data. On the other hand, the QoS of an API service has multiple parameters, such as response time failure rate.

PVs’ Service NFT: Due to the difficulty of evaluating each service, we propose rewarding each PV with an NFT representing their reputation and services. For example, a registered PV will receive a unique PV NFT. For each service the PV provides, they will be rewarded with a Service NFT (relaying NFT).

Why NFTs? This will assist Operators in choosing between different PVs and provide a transparent signal to the community.

Can PVs trade their NFTs? Yes, under several conditions. PVs wishing to discontinue their operations will be able to trade their NFTs.

Confused?

Discover the potential of Power Validators as they revolutionize the business layer on Fuse, paving the way for an enhanced and more secure ecosystem. Dive deeper into the world of Power Validators and learn how they’re reshaping the future of the Fuse Network.

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Most or all services provided by power validators should be chargeable, and I have voted positively for all the above apart from the ability to trade PV NFTs. What are the benefits of doing so, over the many downsides - cheating, spoofing, scams etc.

5 Likes
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Q2 is also ambiguous, does it mean rewards as well as block rewards, or just ‘other rewards’?

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Thanks so much for your feedback @RB_1010 !
Indeed, PV are crucial and designated to perform an array of services. This is why they should also be properly incentivized - a model which we are looking to shape with you and other members of the community.
The concerns that your raise with respect to trading NFTs are valid.
A potential justification behind making service NFTs tradeable would be to create an additional incentive by way of creating a secondary market. A PV wishing to exit or discontinue a particular service would be able to trade the relevant service NFT to another PV (who still will need to meet all other PV requirements) who wishes to offer more services, for instance. Arguably, the ability to trade upon exit (as well as other incentives for PV) may incentivize actors to become PV.
As for the concern that such trades would result in manipulation, a min/max staking periods may serve as a barrier. By imposing additional trade limitations on the identity of the trading entities (such as other prerequisite to be a white-listed PV) may also prevent scams.

Because there are different way to consider this question, we are very keen on seeing how the members of the community, such as yourself, construe the issue.

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Hi @RB_1010, this means rewards aside from the block rewards due

1 Like
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I can’t see a reason to transfer reputation if that is the purpose of the NFT. The reputation or service level is unique to the PV and that shouldn’t be transferable.

The NFT/SBT idea is good, but the discussion of the definition/functions of them shouldn’t be a reason to delay implementing PVs, they can be added at any time one the PV functionality is tested and live.

Regarding Q2 PV phase 2 rewards - to be clear, the idea is that they get block rewards AND additional rewards for services (e.g. additional fiat or crypto payments for complex services - DID, ZKs etc)

3 Likes
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I agree with @RB_1010 regarding the tradability of NFTs. I believe that there is a potential incentive for validators (PVs) without allowing NFTs to be traded. This incentive comes in the form of potential future revenues that PVs can gain access to. For instance, a new service may become available exclusively to top PVs with higher reputations during the beta phase. Moreover, if operators need to choose certain PVs for specific services, they can base their selection on the reputation encoded in the NFTs. These are just examples, but I think that leaving reputation NFTs out of trading can lead to a healthier network with reduced risks of manipulation and excessive speculation.

However, I do believe that there is one legitimate reason for transferring an NFT, and that is when a PV’s private key is compromised, and they need to run a new node with a new address. In such a case, it should be reasonable to transfer the NFT to the same validator’s new node.

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Agree on the need to transfer to a new company wallet, but there would need to be some centralised control of this. Not sure if it’s technically possible.

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i agree as well on this…
first three votes i am in favor of…
but i feel very strongly about the 4th

100% i say no one this… if NFTs are to be created to show that a PV for-fills certain criteria, i feel that NFT should be unique to that PV operator and non-transferable.
say @RB_1010 is a PV operator… people and businesses come to know and respect him for his dependency ,
lets now say due to unforeseen circumstances, @RB_1010 has to step down as PV operator,
he has service NFTs that he can sell and or trade…
let’s say i buy everyone of those… now on the surface, i look like a PV without really being one.

  • we are talking about adoption of ‘normies’ into the tech-world of blockchain.

what would be stopping me from acting in a nefarious type manner with @RB_1010 sold credentials
i feel like these NFT should be SBT that should be returned from wallets and burned when PV operators, step down from such positions.

if you can create a contract that will 100% limit the sale of these NFT to other PV operators who meet the service criteria, i would be in favor of this. but this is to imply that there will always be a limited number of these NFT available, like a bond , for membership in a club, (country club, swim club).

is this possible. writing this into the contract of the NFT? that would mean that all the different PV services and requirements would need to be blockchain query-able, for said PV to be able to sell this .
this also implies that fuse network will only be issuing a specific number of theses NFT, and if @RB_1010 wants to keep his, even after stepping down, a new one can’t start.
Otherwise why wouldn’t the new PV operator just get a new one issued from fuse team, rather than buy from @RB_1010

hope this all makes sense. and thanks @RB_1010 for being my example :star_struck:

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This is a great take on the issue and exactly the type of thinking that this FRC is for! Thanks @SupportivePengu

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Regarding Q2 - yes, both.

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i apologize :wink: if i came off a bit harsh…
wasn’t really my intent… i appreciate what you guys are trying to do…
PVs do need to be incentives to start this, and maintain the settlement layer of B2B and B2P tx.
My concern is human nature, given a chance there will always be someone who will try to take advantage.

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The feedback and points that you wrote down are all valid and super important for consideration.
This FRC is precisely for that! :raised_hands: :pray:
You can probably see already that this is the most contested question of the entire FRC and results in debate. This will only make Fuse better!

1 Like
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Hi everyone, my cents on the hot topics:
block rewards - We should discuss them per service. Relayers, Bridge operators, User Identity - those service can be paid either by the operator or the user. We can add rewards to bootstrap this but we should strive to a sustainable model in the end. Me and @Ryk need to model this and bring it to the ground with some numbers for incentives, requirements and possible usage.

I also doubtful this will be ready in Q2, to integrate PVs with our current stack there’s a lot of preparation work me and @Maor need to plan and execyte.

PVs NFT - are a great tool to limit the number of PV’s (supply). We can decide that we want just 5 PV’s for the start, let’s do a staking auction and the best man win.

About the concerns - yeah reputation should not be transferable. NFTs are the right to run a PV, we consider that those should be transferable, but there should be limits on this for sure (like selling ones in a month). Anyway NFT’s are just an idea, it’s not the subsense and it’s definitely not a blocker for the feature

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i like the idea of a staking auction, to see who will be able to run a PV,
but this does not allow for smaller operators to take part,

might it not be a good idea to include a ‘wildcard’ into the mix,
(assuming said operator can meet all the other criteria)
maybe leave one of the 5 spots open for a vote amongst the validators,
those who have less staked/delegated are not necessarily less dedicated to the future of the network,
just a thought…

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What is a staking auction? Rather than staking amount wouldn’t number of delegators be a better assessment of community sentiment on a node?

What, if any, qualifiers are there for a PV operator given it will be a mission critical infra layer?

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What I meant that there’s two different approaching for choosing the PVs

  • Staking criteria - we set the minimum staking requirements to become a PV

  • Staking auction - we set the number of PVs. X validators will maximum stake amounts will become PV’s.

Both approaches in effect achieve the same goal.

1 Like
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Per epoch, as with conventional validators?

1 Like
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@leonp this question wasn’t really answered in the AMA:

In a set of 100 nodes, 10 of which are PVs who relay, will the user have to wait for a PV to mine the block to action the relay? ie, could be waiting over a minute for a relay to occur?

There’s a delay because not all nodes being PVs, therefore PV services will operate sporadically, rather than every 5second block. Unless there is some tech that bypasses the usual blockchain method and passes PV operations straight to the PV???

2 Likes