Validator rewards shortfall

General
1

Proposal

Since block time slowed following the upgrade in late September, the rate at which masternodes received block rewards has decreased. Normally, masternodes receive about 60,833 XDC per month in block rewards (an additional 22,500 XDC is deposited manually). However, roughly speaking, during the month of October, they received only about 42,000 XDC in block rewards. Following the subsequent network update, in November, they received more: about 57,000 XDC in block rewards. The shortfall in October was therefore 18,833 XDC. In November, the shortfall was 3,833 XDC. Please note: these numbers are approximate. From October through November, some nodes received a bit more XDC than this, some a bit less; but they’re largely accurate by my calculations.

To be clear, in a proof of stake blockchain, such as XDC, validators are not entitled to rewards. Nor are they guaranteed to receive them. In addition, due to extenuating circumstances, rewards will not always be generated at a fixed rate. Network hiccups and outages, which can potentially disrupt the normal flow of block rewards, are the risks node holders run when being incentivized to participate in consensus.

That said, XDC does not yet incentivize node holders in a fully automatic manner. Because rewards are still, for the time being, distributed in large part manually, I propose that XinFin make validators whole. Specifically, every masternode holder should receive 18,833 XDC to make up for the shortfall in October, and another 3,833 XDC to make up for the shortfall in November. Going forward, they should receive a 3,833 XDC every month, in addition to the 22,500 they already receive, until the block time issue is resolved. The rationale for this is that failure to deliver on the expected rewards, when the rewards are not yet fully automated, may cause validators’ morale and commitment to suffer. There is no cost to the network itself in doing this, moreover, because the XDC that will be added to the circulating supply would have been added anyway, if the block time issue had not arisen.

5 Likes
2

To help with formally documenting the problem, I can confirm that my two masternodes were both short approximately 23K XDC on both of them during the period of Oct 1 thru Nov 8. I see that my records are also in alignment with the post above on the shortfall.

I do anticipate some small variances each month and consider that normal. I do not in any way expect perfection with the exact same amount or even down to the 0.66 decimals because this is not like a bank CD or savings account. We are operating hundreds of decentralized servers that must communicate together to validate blocks and are also dependent upon fluctuations in internet performance and transactions.

However, the October 2024 shortfall was very significant.

I work in IT and fully understand that there are always some unexpected issues and risks at go-live with large complex projects. I congratulate the technical team and leadership for their prioritization and quick response to address the most critical issues by releasing the v2.3.0 MN upgrade. I am also pleased to see how most MN owners responded quickly to install the upgrades and support XinFin’s blockchain foundation.