Layer-2 network Node Sale proposal

Fuse Network
1

Dear Fuse Community,

We would like to discuss and get your feedback on our vision of the Node Sale, which will be one of the key steps of transitioning from the exiting L1 network to a new L2 network.

About Fuse Ember
Fuse Network is embarking on a significant update to enhance ecosystem scalability and efficiency in the rapidly evolving blockchain landscape. Last December, we communicated our goal to revamp our network architecture by moving to a modular architecture based on zkEVM. The Fuse team has been implementing the plan to enable scaling and privacy for business payments on Fuse, and this strategic shift involves transitioning our core network to a Fuse Ember - zero-knowledge powered L2 on Polygon CDK.

The migration will occur in stages, including the deployment of ZK rollups, integrating L1 and L2 communications, and transitioning to ZK Validium. This move will significantly improve transaction throughput, reduce costs, and offer advanced privacy features through Zero-Knowledge Proofs.

One of the key elements of the new network will be Data Availability nodes and a Data Availability Committee formed by node operators.

Why are we doing the Node Sale?
Nodes are key to Fuse Ember’s data availability. With a Data Availability Committee (DAC) node system, Fuse Ember solves the big problems in the blockchain space. These nodes store transaction data securely and make it available while complying with different jurisdictions which is guarantee to keep the network running smoothly.

During the Node Sale we are going to achieve 2 main goals:

  1. Prepare a pool of community members willing to participate in guaranteeing the network functionality when it will be launched.
  2. Fundraising for ecosystem development, innovate, fund projects and make strategic partnerships.

Why participate in the Node Sale?
In the realm of blockchain technology, data availability is a critical component that ensures the integrity, security, and trustworthiness of the network. It refers to the guarantee that all the necessary data required to validate transactions and reconstruct the state of the blockchain is readily accessible to all participants in the network.

In the Fuse Ember network, data availability (DA) will be guaranteed by node operators and delegators, and in return they will be rewarded.

  1. Reward for node operators.
    By offering rewards, Fuse Ember incentivizes more individuals and entities to run Ember nodes and participate in the network’s functioning when the Fuse Ember network is launched. Exactly like validators on the Fuse L1 network now.
    Only NFT license owners are eligible to run a node.
  2. Node delegation reward.
    The license owner does not have to run a node to get a reward. Node sale participants can delegate their NFTs to any existing node operator helps distribute the network’s responsibilities and rewards among a wider group of stakeholders, promoting decentralization.
  3. NFT license as an asset.
    Since the NFT License is transferable, it can always be sold on a second market.
  4. License owners will be entitled to possible airdrops.

Why run a Node?
Fuse Ember noder operators can earn real yields through trading fees and verifying transaction data. This process is what defines the state of the chain. Node operators can also tap into other revenue streams, so there are direct financial incentives to be active and contribute to the network.

To encourage community members to run and maintain active nodes, we offer different incentives to node operators:

  1. Earn native tokens.
    15% of the max token supply will be allocated to node license owners over the first 24-36 months after Fuse Ember mainnet launches. Rewards will be distributed every month.
  2. Earn delegation fee.
    Delegators pay 10% of their rewards to node operators.
    The maximum number of nodes in the network will likely be limited.
  3. Earn by participating in maintaining the functionality of the Fuse Ember network.
    A portion of the network fees will be distributed among node operators.

How to buy a license?
To run the Node Sale there will be created a sale page on fuse.io.

  1. The participant connects the wallet to the sale page, selects the desired number of nodes to buy and sends the required amount in FUSE, WETH, USDC or USDT.
  2. If a participant pays with FUSE token on the Fuse network, they receive a 15% discount.
  3. In return, a buyer receives an NFT, which is a node license.
  4. Licenses for sale are divided into 9 tiers, each tier has its own number of licenses and price. The higher the tier, the higher the price of the license.

Pricing Structure

  • Maximum Supply - 50,000 nodes
  • Initial Node Price - from $100 to $500
    • Starting from Tier 2 the price increase every 100 nodes sold.
    • Tier 2 - price increase step is $5
    • Tier 3 - price increase step is $10
    • Tier 3 - price increase step is $20, etc.

During Tier 1 the price increase rule will be ignored, the price for 10,000 nodes will be locked at $100 to $500.

Tiers pricing table if starting price is $500:

Tier nodes starting price price increase ending price average price average price with 15% discount
1 10000 $500 $0 $500 $500 $425
2 5000 $500 5$/100 sale $745 $623 $529
3 5000 $755 10$/100 sale $1,245 $1,000 $850
4 5000 $1,265 20$/100 sale $2,245 $1,755 $1,492
5 5000 $2,285 40$/100 sale $4,245 $3,265 $2,775
6 5000 $4,325 80$/100 sale $8,245 $6,285 $5,342
7 5000 $8,405 160$/100 sale $16,245 $12,325 $10,476
8 5000 $16,565 320$/100 sale $32,245 $24,405 $20,744
9 5000 $32,885 640$/100 sale $64,245 $48,565 $41,280

What do license delegators get?

  1. Earn native tokens.
    Like node operators, delegators are eligible to receive a reward from a pool of 15% of the maximum token supply for the first 24-36 months after the Fuse Ember mainnet launch.
  2. Participate in maintaining the functionality of the Fuse Ember network.
    A portion of the network fees will be distributed among node delegators.

License Owner Airdrops
License owners may be eligible for periodic airdrops of Fuse and other ecosystem tokens. This endeavor is designed to continually bring value to Fuse Ember’s early supporters. Many projects are anticipated to launch on Fuse, further enhancing the benefits for license owners.

2 Likes
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Question about this , the node sale .
Will current node operators get first crack at this before the public is allowed in?
NGL it kinda feels like a slap in the face to current operators…
As we have been operating through turbulent markets where profitability is sometimes questionable at best…
I do like this plan to migrate from L1 to L2.
Would just hate to think that after all this time :wink: validating and pushing updates and migration from OE to NM that we wouldn’t get the opportunity to be the first in on thid new system.
Hope this doesn’t sound to b*tchy. :wink:

2 Likes
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Also there is a lot of terminology in this post that I do not nessicaraly understand.
Are there some resources that I can go read up on so I can get more current with this proposal
Please :pleading_face: :pray:

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I have to agree with Pengu here. I can’t give an honest opinion on something I can’t wrap my head around.
This is basically how i summed everything up.

Fuse Network will become Fuse Ember - zero-knowledge powered L2 on Polygon CDK
Fuse Ember will have Data Availability nodes instead of current validators

  • node NFT needed to be an operator
  • ANY node NFT holder can delegate to ANY node operator and still collect rewards.

Fuse Ember node operators can earn yields

  1. earn native tokens - 15% of max total supply (50-60m?) over the first 24-35 months. monthly distribution
  2. delegation fees - node NFT delegators pay 10% commission.
  3. portion of network fees

now come the questions… by my understanding staking how we know it now will be no more. you don’t delegate fuse anymore you delegate node NFTs to earn rewards. A single node NFTs STARTING price is $500 where are these prices coming from? How is this creating more decentralization when a small percentage of the people can even afford it?

Edit:

The maximum number of nodes in the network will likely be limited.

will all current validators get a slot in this limited list?
maybe even a node NFT for validators 1 year and older?

  1. Node delegation reward.
    The license owner does not have to run a node to get a reward. Node sale participants can delegate their NFTs to any existing node operator helps distribute the network’s responsibilities and rewards among a wider group of stakeholders, promoting decentralization.

How does this distribute the network’s responsibilities among a wider group of stakeholders when it is still the single node operator that is running the node. It’s still a single persons responsibility :sweat_smile: also there is a missing word between operator and helps

edit 2:

are hardware requirements already known?

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That’s great and absolutely reasonable idea to open a pre-sale for existing validators only. We will discuss it internally with the team.

6

Do you mean terminology related to data availability?
You can read about it here: https://ethereum.org/en/developers/docs/data-availability/

You can also read about Validium, since our nodes will be Validium nodes.

If something is still not clear, then feel free to specify.

7

Thanks for that questions!
Everything you wrote before the questions is correct. The only thing that is not quite correct is the words “Fuse Network will become Fuse Ember”. Fuse Ember is a fork like Ethereum London. That is, at the moment of launching Fuse Ember L2, Fuse Network L1 will not disappear.

  1. Staking.
    Your understanding is wrong. The NFT sale has nothing to do with staking on the Fuse Ember network. Through the node sale, we want to give a bootstrap to the launch of the new network.
    In the new L2 network, it will be possible to stake the FUSE token. Moreover, the staking options will become wider, since it will be possible to stake other tokens, such as USDC, USDT, WETH, etc., and Real World Asset.
    The more detailed new staking specification will be published either today or tomorrow on the separate topic. I’ll let you know here too.

  2. NFT price.
    The initial price for a node is defined by the team. By selling nodes we also fundraise for ecosystem development, funding initiatives and making strategic partnerships.

  3. Decentralization.
    The decentralization of the L2 network will most likely be lower than in the L1 network now, at least because the sequencer is centralized. But this is what the ZK rollup technology is at the moment. Surely in the future this will be improved.

  4. Will all current validators get a slot in this limited list?
    I’m sure yes, we have something like 60 validators now.

  5. Maybe even a node NFT for validators 1 year and older?
    We will consider organizing a closed pre-sale only for current validators.

  6. NFT delegation to node operators.
    In the new network, just like now, there will be a voting mechanism for changes in the network, and only node operators will have the right to vote. We are still working on the specification, but for now the vision is that by delegating a license, its owner delegates and increases the voting power of the node operator. If the delegator doesn’t agree with how his operator voted, then for the next vote he can redelegate his license to another node operator.

7) Hardware requirements.

  • 32G RAM, 4 cores, 128G Disk with high IOPS
  • Storage: as the network is super young the current disk requirements are quite low, but they will increase over time.
  • Also note that this requirement is true if the DBs run on the same machine, but it’s recommended to run Postgres on dedicated infra.
1 Like
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Thanks for giving the community the chance to chime in on this.

Unfortunately I’m not a believer in that this proposal is the right choice for Fuse.

The Fuse token is the biggest asset Fuse has to achieve growth. As the perceived value of the ecosystem grows, the investment opportunities the Fuse team will have rise greatly, because the token value will give them capital to make partnerships or to improve the attractiveness of the Fuse ecosystem.

At this point in time, the perceived value of the ecosystem is at a history low. Compared to other L1s or other projects in the same space as Fuse, the marketcap is in my opinion, extremely low and Fuse is extremely undervalued.

To create more value, we need two things:

  • Utility for the Fuse token;
  • Perception of investors/ the community, that there is opportunity for growth.

I (among many others in the Fuse community) think that one of the reasons we saw recent downturn in the Fuse price, were the airdrops. With the knowledge of the amount of tokens coming into circulation within a short timeframe, investors sold their tokens to buy back after the airdrop OR chose not to invest until after the airdrop. This is what I mean with a low perceived value. Because the expectation of a price drop in the near future, the perception of value for the whole ecosystem took a downturn.

Fortunately the airdrops are over, but it is a good opportunity to learn for the future. This means that Fuse should focus on:

  • the perceived value of the Fuse token;
  • the utility of the Fuse token.

To me perceived value is the logic behind price of a token and why that logic will make it likely to expect a rise in price. Good examples on this are the airdrop (“dump incoming”) or a CEX listing (“pump incoming”), but on a larger scale it is adoption of teams who are building on Fuse. It is important to use this logic for growth. If the team can SELL that logic to make others see why growth is incoming AND the result will be growth incoming, then the logic will prove itself.

To focus on the perceived value (expectation of growth) for the Fuse token, it is important to let growth and price action go hand in hand. The more the Fuse token rises in value, the more significant the investments by Fuse can be. Ultimately, this should lead to exponential growth; more perceived value (= higher token price) leads to more investment strength → more investment strength leads to better/ more partnerships → which in turn will lead to a higher perceived value → repeat this cycle. We have seen how this worked when Fuse went to a value of 2 dollars in 2020. Then there was a cycle of exponential growth, until that cycle got stopped prematurely because of the Ola finance hack.

The current proposal is wrong in my opinion because of the amount of Fuse tokens proposed, because the tokens are bought at a low price (basically fixing the Fuse price for the coming 3 years) and are much too large compared to the size of the Fuse holdings by the Fuse team. Therefor there will be selling pressure by early investors OR there will not be expectation of growth/ perceived value, because the selling pressure is expected.

What the team should do is think about an alternative where there is predictable logic about the perceived value of the Fuse token, where the team can PROVE that indeed that value is there (by actually realizing that growth). If the logic is there AND the results in growth match that logic, investors will pick up on that and the cycle of exponential growth will be created.

Therefor, what the proposal should have is a possibility to adjust rewards based on change in the price of the Fuse token.

My proposal would be:

  • prove the concept of the L2 with a small team of current validators, therefor still proving the concept and making a start with a price jump for the Fuse token;
  • selling to the market WHY our value is much higher than our current marketcap, WHY we can expect growth in token price AND with that create growth for the Fuse token;
  • roll out next phases of node operators and rewards programs along the way, in shorter timeframes (for example 3 or 6 months) and adjust accordingly to growth.

Why is this better:

  • the start of new incentives will be introduced AFTER a surge in price, which is already a win for both the team AND the community;
  • at that point, the perceived value will already be higher, because we are still EXPECTING more incentives and investment opportunity to come;
  • by being able to adjust the incentives, there is no risk of dumping/ too big incentives. Therefor the team can keep the exponential growth up and can keep PROVING that the logic behind the perceived value of Fuse is correct;
  • There is a reason to stay with the Fuse community to keep in touch with the new phases/ seasons for node operators;
  • And maybe MOST important for perceived value: this creates trust that the team is taking control of the price action and growth of the ecosystem and token price.

Last but not least; TRUST is why it is so important for the community to see the team is driving the Fuse token price. If the community does not see the team putting importance towards the token price (meaning: creating investment opportunity for both community AND developers), there will be no perceived value of the token.

3 Likes
9

I’m working through the details of this and comparing to other node sales.

  1. Other node sales do not have a limit to the actual amount of nodes that can run in the network. The number of Ember DA nodes are likely to be capped - this changes the dynamic and needs to be understood.

  2. Node rewards should not be the most profitable part of the ecosystem. They should be appropriate to the service provided - running a small piece of hardware. Other aspects of the ecosystem are more important in generating value - e.g. LPs.

Excessive network rewards leads to Fuse devaluation.

  1. Node licenses should have 0 utility if they are not staked to a node.

  2. Staked licenses only share in the network rewards - not ecosystem fees. Edited to include either some chain fees or a percentage of ecosystem fees so that there is some benefit to owning a license once the rewards have completed after 3 years. Airdrops can be included as well. Actual % will be dependent on whether active nodes are capped at 100. If so something like a 20/80 split of ecosystem fees between active DA nodes and staked licenses. This split of ecosystem fees could be introduced only after the Fuse rewards have completed.

  3. A staking fee can be used, perhaps 3-5% of all license income to help cover node hardware costs. Doesn’t need to be excessive.

  4. Active DA nodes receive network rewards, the staking fees and a share of the ecosystem fees proportional to the number of nodes that are staked to them.

  5. Buying a node with Fuse token gets a 15% discount. However, as rewards are given in Fuse the node sale doesn’t really benefit buyers who use Fuse. There needs to be better places to earn a Fuse APY in the ecosystem.

  6. Existing validator wallets should get whitelisted to a private sale, probably with a cap on nodes per wallet.

  7. Using the Tier structure below gives much better results than the proposed model:
    Node Key Pricing & Purchasing

Modeling this structure and 3% Total Supply here:

Using 3% of the Total Supply (12.6M Fuse) distributed over 3 years seems a good compromise between giving out network rewards and not devaluing the token.

Fuse used as network rewards generate about 50% of their value - see the $1 break even price. 12.6M Fuse would get $6.5m investment for a market value of $12.6m, but it’s a reasonable investment to generate the growth.

Using greater % of Total Supply (5% and 10%) hugely devalue the token and limit the maximum price. These Fuse are effectively sold at a huge loss.

It could be argued that buyers will be looking to buy for a discount and ensure they have a fairly secure return. The 5% model offers a 50% discount on the market price, which should be fairly attractive early on. If buyers continue to only buy at 50% of market price (i.e. Fuse needs to hit $1 before someone buys at a breakeven price of $0.5) Fuse is effectively sold at 25% of its value. This may be acceptable investment for the growth and a reasonable balance of Fuse given as rewards vs token price growth.

I don’t see how anything more than 5% total supply can be of benefit.

10

If you want to play with figures take a copy and do so.

For node license stakers, the Fuse earnt would be 3-5% less than shown, therefore the break even price over 3 years would require a slightly higher Fuse price.

A benefit of the 3% structure is that there’s very little sell pressure as the tokens are distributed over 3 years and the break even price is near the market price, so there’s no benefit in selling until the price rises. However, this needs to be balanced by attractiveness of returns to investors, which could mean the 5% model is better overall.

As a reality check Hychain (https://docs.hychain.com/) from which I grabbed the tier structure - is a really well funded, well supported project with a lot a big whales and a big profile, and they still only sold 19k of their nodes. The nodes are currently locked but when free end of Sept they are expecting a big dump to blow Tier 1 price as the rewards (via token price) are not near projected.

11

From telegram:

The tiers are small in my model so node price increases are fairly rapid. With 5% of total supply if Tier 1 sells out (3186 nodes at $100) each node gets 2200 Fuse per year. I don’t think that’s excessive. They only break even after 1.5 years at current token price. There’ll not be any real sell pressure. As the token price increases then more tiers are sold. The number of nodes per tier decreases increasing the rate of node price increase, and therefore quickly matching any token price increase.

Early buyers will save as the node price is less, but as rewards are shared equally amongst all node holders (that are staked) rewards are the same whatever Tier you buy.

So the savings are on purchase price. Lower tier buyers don’t actually get more Fuse than higher tiers, they just pay less for the node license.

Of course, later buyers get less Fuse as there are more nodes to share the rewards around, and less time to claim them in (due to fixed 3yr reward period)

12

Thanks for all the detailed suggestion and feedback above! i invite more opinions to join the discussion and in the meantime we are definitly trying to address all the points hopefully we can publish a follow up soon and arrange an AMA so we can address all the questions

13

I’ve updated my node sale model. The original model nodes were too expensive at higher tiers, the updated model is more reasonable and should mean more nodes are sold overall.

The sheet isn’t private!

1 Like
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I think you should calculate the rewards over 3 years. That is the amount of tokens the license is valid for.

What I feel is difficult with this model is that when price of Fuse rises, more nodes are going to be sold and rewards for early investors will drop. This will likely dampen the interest for buying nodes, as the return on investment will be closely related to investing in the Fuse token directly. Except the downside of investing in a node will be that your rewards will come over 3 years.

15

The rewards are shown over 3 years (total Fuse rewards) :+1:

16

How many validators are there today?
Why do you expect the first tier to sell out considering the amount of today validators?
Staking fuse will continue as usual?
Whats going to happen to Fuse L1? What’s the justification for having two fuse chains?