Long Term Staking Incentive Plan

Announcements Foundation
1

1. Introduction

POKT Network is implementing an incentive plan to reward node operators for:

  1. Staking POKT Tokens Long-Term
  2. Supporting Emerging Chains
  3. Compounding Their Rewards

This plan is to increase incentives for running nodes to attract more staked POKT from the current 46% by creating more opportunity for new chains, encouraging long term staking and compounding. The goal of these incentives is to create a healthier ecosystem moving forward.

2. Incentive Details

A. Long-Term Staking Incentives

To encourage extended staking commitments, we offer the following annual rewards, calculated on your current total staked amount at the time:

  • Year 1: 5%
  • Year 2: 10%
  • Year 3: 20%

Key Points:

  • Eligibility Period:
    • Full Incentives: Stake your POKT tokens by January 1, 2025 to receive the full benefits.
    • After January 1, 2025: You can only take advantage of the first two years of incentives.
    • After January 1, 2026: You can only take advantage of the first year’s incentives.
    • The program will end on January 1, 2028.
  • Incentive Timers for Existing POKT Stakers:
    • The snapshot for existing POKT stakers’ incentive timers begins on September 30, 2024.
  • Rolling Basis Distribution:
    • Incentives will be distributed on a rolling basis throughout the year, based on when you stake.
    • This ensures that there is no single day when everyone receives their incentives, but rather it is progressive based on when the initial stake happened.
  • Rewards Compound Annually: Each year’s rewards are calculated on your total staked amount, which includes all previous rewards and compounded amounts.
  • Separate from Node Operation Rewards: These incentives are in addition to any rewards earned from operating nodes.
  • On-Chain Data Verification: All staking activities and rewards will be tracked using full on-chain data for transparency.

B. New Chain Support Incentives

To promote support for emerging chains within the network:

  • Top 10% Node Operators Bonus:
    • If your node ranks in the top 10% of on-chain rewards for chains outside the top 5 in terms of traffic, you will receive an additional 5% annual reward, calculated on your current total staked amount.

Objective:

  • Encourage Diversity: Incentivize operators to provide high-quality service to new and less-trafficked chains.
  • Enhance Network Resilience: Supporting a wider range of chains strengthens the overall network.

C. Compounding Incentives

We encourage node operators to reinvest their rewards to maximize returns:

  • Compounding Bonus:
    • You will receive an additional 10% bonus at the end of each year, calculated on your total staked amount at that time (after adding all other rewards).

Benefits:

  • Maximize Returns: Compounding your rewards increases your total stake and the subsequent rewards you earn.
  • Accelerated Growth: Calculating rewards on the growing base significantly boosts your stake over time.
  • Network Growth: Reinvesting rewards contributes to our goal of achieving 70% network staking.

3. Simplified Reward Calculation Example

Starting with an Initial Stake of 100,000 POKT

Year 1:

  • Stake Deadline for Full Incentives: Stake by January 1, 2025.
  • Starting Stake: 100,000 POKT
  • Rewards Earned:
    • Node Operation Rewards (7%): 7,000 POKT
    • Long-Term Staking Reward (5%): 5,000 POKT
    • New Chain Support Bonus (5%): 5,000 POKT
  • Subtotal Before Compounding Bonus:
    • 100,000 + 7,000 + 5,000 + 5,000 = 117,000 POKT
  • Compounding Bonus (10% of Subtotal):
    • 10% of 117,000 = 11,700 POKT
  • End of Year 1 Total Stake:
    • 117,000 + 11,700 = 128,700 POKT

Year 2:

  • Rewards Earned:
    • Node Operation Rewards (7%): 9,009 POKT
    • Long-Term Staking Reward (10%): 12,870 POKT
    • New Chain Support Bonus (5%): 6,435 POKT
  • Subtotal Before Compounding Bonus:
    • 128,700 + 9,009 + 12,870 + 6,435 = 157,014 POKT
  • Compounding Bonus (10% of Subtotal):
    • 10% of 157,014 = 15,701 POKT
  • End of Year 2 Total Stake:
    • 157,014 + 15,701 = 172,715 POKT

Year 3:

  • Rewards Earned:
    • Node Operation Rewards (7%): 12,090 POKT
    • Long-Term Staking Reward (20%): 34,543 POKT
    • New Chain Support Bonus (5%): 8,636 POKT
  • Subtotal Before Compounding Bonus:
    • 172,715 + 12,090 + 34,543 + 8,636 = 227,984 POKT
  • Compounding Bonus (10% of Subtotal):
    • 10% of 227,984 = 22,798 POKT
  • End of Year 3 Total Stake:
    • 227,984 + 22,798 = 250,782 POKT

Conclusion and Next Steps

By fully compounding your rewards over three years:

  • Initial Stake: 100,000 POKT
  • Final Stake After 3 Years: 250,782 POKT
  • Total Rewards Earned: 150,782 POKT

Projected Total POKT Supply After 3 Years:

  • Initial Total Supply: 1.7 billion POKT
  • Assuming 70% of the total supply is staked: 1.19 billion POKT
  • Total Supply After 3 Years: Approximately 3.09 billion POKT

This represents a growth of about 81.8% in total supply over three years, highlighting the significant impact of the incentive plan on both individual stakes and the overall network.

Important Notes:

  • Program Duration and Eligibility:
    • Full Incentives Eligibility: Stake your POKT tokens by January 1, 2025 to receive the full benefits.
    • After January 1, 2025: Only the first two years of incentives are available.
    • After January 1, 2026: Only the first year’s incentives are available.
    • Program End Date: The program will end on January 1, 2028.
  • Rolling Basis Distribution:
    • Incentives are distributed on a rolling basis throughout the year, based on when you stake.
  • Existing POKT Stakers:
    • The incentive timers for existing POKT stakers begin on September 30, 2024.

Feedback Period:

We are providing a timeline of one month (until October 30, 2024) for suggestions or potential modifications to this plan. There may be aspects that have been missed, and we are open to community input to refine and enhance the plan. Our commitment is to ensure that the network is sustainable and that incentives drive the right outcomes.

Disclaimer:

Please note that these incentives may change as we learn about their effectiveness, potential abuse, or any other environmental factors. PNF reserves the right to modify the incentive structure to ensure the long-term sustainability and health of the network.

5 Likes
2

I’m cautiously optimistic on this incentive plan.

1 → 2.5 over 3 years ‘feels’ like the right incentive for both POKT holders in general and me personally to take some of the liquid POKT on exchanges/sitting in wallets and locking it up for longer term.

My understanding is that the POKT is still retrievable on the same terms as currently (21 days unlock) if one decides to sell earlier than the minimum 3 year period, giving important flexibility, although at the cost of giving up the additional rewards- something for example Binance offers in their long term staking initiatives.

Getting to ~3bn supply over 3 years seems reasonable, it’s a total supply number we’ve often used as an end result for some of the economics models.
I’d also remind people that the 3bn number is conditional on achieving the ~70% staked POKT this initiative aims to accomplish. So if fewer people take up the offer, total supply in 3 yrs will be lower. And adversely, if even more than 70% of staked POKT takes advantage of the program, we’ll have slightly higher total supply.

My only concern would be- are we creating a cliff? What happens to all the people who staked for 3 years and receive their final reward and then look to cash out?
I assume it’s somewhat staggered because of the 30th September Snapshot → December 31st, although the 30th September date may create a cliff in itself? Meaning future rewards programs may need to be designed and implemented in 3 years, or a step unlock program to prevent a rush of POKT onto the markets in 3 years.

Question- how would this effect fractional pools? Would the pool manage the additional rewards or would individuals staking with the pool have to claim?

2 Likes
3

I like the proposal overall. Thanks for putting this together. Just few quick thoughts:

For " A. Long-Term Staking Incentives", I would make it a % of then effective inflation: a more senior node would make x% more than a less senior node. That way we don’t have to revisit % numbers as the base inflation changes.

Also, preferably, I’d prefer this implemented on chain vs. manually computed annual bonuses. Every passing day that your node gets more senior, the more it makes, so you are less incentivized to unstake.

For “B. New Chain Support Incentives”, I would recommend using RTTM and simply setting higher than average rewards for the chains that we want to incentivize. Node ranking should not be important: If your node doesn’t rank high, you won’t get much traffic anyways, so incentives don’t apply to you.

For " C. Compounding Incentives", idk, this seems like a node runner’s nightmare. Calculating these will be a huge problem. Also, why do we care if it is compounded rewards or POKT i bought from an exchange. POKT is POKT. If we want people to stake, we need to make staking more attractive. Then the source doesn’t matter.

4 Likes