Chapter 2: Economic Incentives

This article was first published on Wanchain - Medium
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Chapter 2: Storeman Economic Incentives & Slashing

Introduction

Wanchain 5.0’s economic incentives serve two primary purposes

First, community members are rewarded to act as Storeman nodes building bridges to provide the cross-chain functionality. Second, malicious behaviors are punished by slashing bonded stake.

CHANGES FROM PREVIOUSLY ANNOUNCED REWARDS MECHANISM:

Before digging into the details of the reward and slashing mechanism, please note that several previously announced incentives details have been changed:

  1. The Stake to Delegation ratio has been changed from 1:5 to 1:1 (This is a temporary security measure to limit total stake locked in the system during the first couple MPC cycles. By the end of the 1st or 2nd MPC cycle it will be upgraded as long as no security issues have come up.)
  2. The MPC cycle length has been changed from 3 months to 30 days
  3. The delegation fee has been modified from 5% to 10%
  4. Minimum stake for a Storeman node is 10k WAN

Rewards

The basic principle of the Storeman rewards mechanism is that Storeman operators expend resources and take risks in order to ensure the smooth and secure operation of cross-chain transactions. Delegators contribute stake to storeman nodes, and are thus also rewarded.

Overall design

  • No cross-chain service fee (temporarily subsidized by Wanchain Foundation)
  • Incentive paid to cross-chain Storeman Node operators who run nodes
  • Incentive paid to delegators who contribute stake to Storeman nodes
  • Total Storeman reward is limited with a hard cap to ensure that the high rate of return doesn’t cause too large an amount of funds to move away from Proof of Stake

The total reward of the Storeman system is defined by this formula (this is the sum of the rewards paid out to ALL storeman from all bridges combined):

r₁ = r₂ × α

r1 denotes reward rate of PoS consensus, r2 denotes reward rate of crosschain, and αdenotes ...

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