Validator Incentives
Validator incentives are structured such that operators are remunerated for their efforts in securing the network, offsetting operational costs and risk involved in staking ZETA to run a Validator. Although the proportion of distribution over time may be changed via parameter changes/protocol upgrades, the amount dedicated to rewards is fixed.
Validator types
Validators are comprised of 3 different roles: Core Validators, Observers, and TSS Signers. Fees from transactions and rewards are distributed to Validators in return for their service of processing transactions and keeping the network secure.
Note: in general, Observers and TSS Signers are technically separate but will be batched together for operators such that an operator is either running a Core Validator or an Observer-Signer Validator. Core Validator u prerequisite to being an Observer-Signer (Observer-Signers will run all 3 roles, technically). Observer-Signers receive 25% of block rewards and Core Validators receive the other 75%. At launch, it is planned such that the top 100 Core Validators on total stake will be eligible to participate in consensus. 9 validators will comprise the initial Observer-Signer set. These numbers will increase over time further the decentralization of the network.
Here we define the different functions of validators and their allocation of the validator block incentives.
Core Validators (75%)
These provide consensus for ZetaCore (ZetaChain’s base blockchain). These will support general PoS mechanics and delegation from users. Anyone will be able to run a validator to earn rewards by securing the network. Users may delegate stake to any existing operator, or run their own validator.
Observer Validators (12.5%)
These observe external chains and send relevant events to the Core Validators. Observation will eventually become less important with further verification/proof development, so the portion of rewards allocated to Observers will eventually transition more to TSS Signers via governance-based upgrades.
TSS Signer Validators (12.5%)
When ZetaChain wants to write receiving info from Core Validators transactions to different chains, it uses a network of TSS Signers to write in a decentralized manner.
Validator block rewards
The initial 10% total supply pool of validator incentives are programmed to distribute over the first 4 years after the launch of the network. Emissions are fixed based on time/block. Validators earn emissions based on this curve and their securing the network.
As this initial genesis pool tends lower, the protocol will introduce a planned 2.5% inflation through validator rewards separate from the emission curve at a certain block height. This inflation rate, at this shift, will replace the existing rate of validator emissions. Beyond this time, the inflation rate will be introduced and adjustable by the network via governance.
In addition, there is a factor of the bonded ratio and a target bonded ratio that is bounded. If the bonded ratio goes over the target, the emissions will reduce, and if the bonded ratio goes lower, the emissions will increase, helping incentivize more or less staking/bonding over time. However, the core emission curve and pool remains the same.
Unlock Period
Any stake has an unlock period of 21 days. Rewards are allocated to delegators/stakers, but to withdraw them, one must wait 21 days to receive them.
Slashing
To ensure network liveness and safety, deviation from the protocol by the validators will be penalized by slashing their bonded ZETA. This could include standard Cosmos SDK defined slash-able violations such as missed votes on blocks, conflicting votes on blocks, etc., for core validators. Besides that, for observer-signer validators, additional behaviors will be penalized by slashing the accompanying core validator staked ZETA. Such behaviors may include repeatedly failing to observe relevant external events, reporting incorrect events, failing to join the TSS keygen or keysign party, etc.