The Keep team plans to incentive participation in the first 24 months for mass adoption by subsidizing the rewards. There will be 2 earnings for node operators during stakedrop — stakedrop incentives and system earnings. Stakedrop incentives end after 24 months (started at Sept 14th, 2020) and normal system earnings continue from there on. I try to cover some key details around stakedrop incentives for first 24 months.
I would suggest you to read first about stakedrop in my other article here — https://medium.com/@chdru/keep-network-stakedrop-3e63355a18ec
In this article, I dive deeper around how stakedrop rewards work.
20% (200 Million) of total available (1B) KEEP will be distributed as part of stakedrop rewards during a period of 24 months. It peaks at month 5 with 20+ millions KEEP rewards and then slowly goes down as shown below.
Note: These rewards are for both Random Beacon and ECDSA nodes. Of the total 200 million KEEP, 10% (20 million) KEEP is for Random Beacon and 90% (180 million) are for ECDSA nodes.
Important Points to note –
- You get rewards ONLY if your node aka member aka operator is selected as a signer and more number of times your node is selected as a signer to back the deposits, the more the rewards. Other way to look at it, if your node is not part of any signer groups, you get no rewards.
- There are minimum number of deposits that must be opened in an interval/month for all the monthly rewards (from above chart) to be allocated. If the number of deposits opened in the interval is less than the minimum, then only a subset of the rewards are allocated for that month, and the rest are set aside for future intervals. The minimum is not set yet but expected to be done in the next couple of weeks.
- The rewards are based on number of deposits you are backing or in other words, number of keeps you are part of and not amount of ETH bonded. So lot size doesn’t matter.
- Rewards are assigned by deposit/keep and not by node. Each deposit is backed by 3 nodes and the rewards are split between 3 nodes. Example — if each keep gets rewarded with 500 KEEP at end of the month, each node would get 166.66 (500/3) KEEP as reward.
- When your node backs a deposit, your node/keep you are part of becomes eligible for rewards but cannot claim until the deposit is closed/redeemed. The reward contract will hold the rewards for your node until the deposit is closed. After the deposit is closed, you can claim the rewards.
Let’s say there are 2 nodes — Node 1 has 100k KEEP and 15 ETH and Node 2 also has 100k KEEP and 15 ETH backing different 1 TBTC deposit lot size. Node 1’s deposit is closed/redeemed after a month, ETH become free and backs a new deposit(s) again i.e. become part of other keeps. While the Node 2’s deposit never gets redeemed until 6 month term. Node 1 will earn more rewards because it backed more number of deposits compared to Node 2.
Node Selection as Signer for backing a deposit –
Node is selected based on the below parameters
- Randomness Protocol Magic
- Pool — KEEP+ETH or ETH only.
- Amount of KEEP staked.
- ETH available for bonding.
Randomness Protocol Magic —
Probably this plays as a single biggest influencer of how many times your node will become as a signer. This is Protocol Magic and you would need to read whitepaper to understand this in detailed way. The below 3 parameters will come into play only during selection and/or after you node have ‘won’ the protocol magic.
As explained in the other article — there are 2 pools during stakedrop.
- KEEP + ETH pool
- ETH only pool.
Here is the likely percentage of deposit’s backed between the 2 pool nodes during the 24 month stakedrop period.
First 6 months during stakedrop — KEEP+ETH pool has the edge and is chosen 60% of the time and ETH only pool is chosen 40% of the time.
Following 12 months (Month 7–18) — The number of times ETH only pool chosen will drop slowly from 40% to 0% at monthly intervals. Each month it drops ~3.33% (40% / 12 months) i.e. end of month 7 — ETH only pool will be 36.67% likely to be chosen whereas KEEP + ETH pool will be 63.33% likely to be chosen, end of month 8 — ETH only pool will be 33.34% likely to be chosen whereas KEEP + ETH pool will be 66.66% likely to be chosen and so on till ETH only pool hits 0% whereas KEEP+ETH will be at 100% at the end of month 18. (see above chart).
Following 6 months (Month 19–24) — 100% of deposits are backed by only KEEP + ETH pool nodes. No more ETH only pool.
These two pools back deposits independently i.e. for a deposit, there are either all 3 ETH only nodes backing the deposit or all 3 KEEP + ETH only nodes backing a deposit. They are not mixed to back a single deposit.
Note: Month 1 started at Sept 14 and goes till Oct 14 (interval 1), Month 2 starts Oct 15 and goes till Nov 14th (interval 2) and so on.
KEEP staked —
For KEEP+ETH pool — The more the number of KEEP staked, the more likely your node would be selected as a signer i.e. amount of KEEP staked is directly proportional to the number of times you are chosen as a signer. Eg — if Node A has 500k KEEP staked and Node B has 100k KEEP staked, Node A has higher chance (5x times) of being selected as a signer compared to Node B (1x times).
ETH available for bonding —
ETH available for bonding is the total ETH you have added to the node minus the bonded ETH for deposits you are already backing. If you are not backing any deposits, ETH available for bonding is the total ETH you have added.
This is an important parameter in ETH only pool similar to KEEP staked in KEEP+ETH pool. For KEEP+ETH pool — though ETH availble comes into play after the node is selected but also an important parameter to decide if your node backs a deposit or not.
When creating a new keep for backing a deposit, three members/nodes are chosen in 3 distinct drawings and the group members will not be the same. Each member needs atleast 50% of ETH in BTC value to be eligible to back a deposit. Three members bond their ETH when deposit is opened with 50% each to make a total of 150% (50%+50%+50%) collateral. Example — Assuming BTC at 10k$ and ETH at 350$, each node will need ~14.3 ETH to back 1 TBTC, and 71.5 ETH to back 5 TBTC and so on — you get the idea.
If member chosen as signer has enough ETH (50% in value), the member will back the deposit. If your member/node chosen as a signer does not have enough ETH to back the deposit, new member is drawn again.
Exceptional Cases —
If a deposit is liquidated — It has to be a successful close for the node to be eligible for stakedrop rewards. If you catch it in courtesy call your node qualifies for rewards. If it goes to forced liquidation, the keep does not qualify for rewards.