Community discussion: while creating incentives for pNetwork nodes, what fee model should pNetwork apply on cross-chain operations?
The pNetwork is the increasingly decentralised layer powering and governing the cross-chain pTokens solution as well as other features (example: pNetwork Portals). As part of the project’s progressive decentralisation roadmap, a growing number of components are being introduced to the system.
Node operators are a critical component for the pNetwork - they are responsible for securing cross-chain operations and increasing the overall security of the protocol (check out the state of the network at nodes.p.network).
For the ecosystem to experience healthy growth, it is essential to align incentives for all participants. Introducing a fee on cross-chain operations processed via pNetwork creates an incentive for entities to spin up a pNetwork node and support the network. From the opposite point of view, a network of nodes contributes to a more stable and higher quality service, making pNetwork more attractive for new users.
The PNT token represents a key element of the system as it aligns incentives for all participants. In fact, PNT is leveraged internally by the pNetwork system to enable operations for both node operators and DAO members. The flywheel effect is triggered by the need for node operators and DAO members to hold and stake PNT tokens in order for them to perform their respective roles.
Prospective node operators need to stake a minimum amount of PNT tokens (currently set at 200,000 PNT), which is then used to show their commitment and serves as a bond.
When operating a pNetwork node, node operators are eligible for DAO voting rewards (currently set at 42% APY, rewards distributed at the end of every epoch). However, a long-term incentive is needed for the node operation to be sustainable since DAO voting rewards are planned to stop at the end of the second year.
This is a proposal to introduce an additional incentive for node operators to reflect their key role within the ecosystem.
This proposal is about a fee structure that goes in the direction of incentivising the incoming traffic, therefore setting asymmetric fees on peg-in and peg-out operations. Further fees are added when leveraging additional features such as pNetwork Portals, enabling a variety of more advanced use-cases.
Below, a breakdown of the proposed fee structure:
The proposal sees a 0% fee for peg-in operations and a 0.25% fee for peg-out operations. Further fees are added when leveraging additional features - specifically, the proposal sees an additional 0.05% fee when transferring metadata across blockchains (i.e. this additional fee would be applied when using pNetwork Portals. An example could be the wrapping and un-wrapping of NFTs across chains), with a minimum fee. Should other features be incorporated within the pNetwork system in the future, similar logic would apply.
Example: smart contract interaction (metadata required in both directions) between Eos and Ethereum with attached a cross-chain transfer of $1,000,000 which goes one way and back.
The payment for the fees happens in terms of the asset users transfer cross-chain. As an example, while processing the tokenisation of Bitcoin on Ethereum, a peg-in fee would be collected by the system in BTC and distributed to pNetwork nodes.
Below, a chart showcasing the US Dollar countervalue of fees distributed to pNetwork nodes based on the cross-chain transaction volumes processed.
This post serves as the starting point for community discussions. Once a consensus on the above proposal or an iteration of it is reached on this board, a formal proposal will be opened on the pNetwork DAO for PNT holders and DAO stakers to vote on it.
A minimum of 7 days will be given for the discussion to happen, yet the discussion may remain open for a longer period of time if deemed necessary. The main goal of this post is to gather feedback and to gauge community interest on the proposed fee structure or on an iteration of it. The DAO vote will last 3 days as usual - just once the DAO proposal is accepted, it will enter into effect.