0Chain Token Reward Protocol: An Inside Look
Over the coming weeks, we will be releasing a series of articles highlighting different protocols and topics within the 0Chain ecosystem. For the first release, we will be taking a look inside the 0Chain Token Reward Protocol, as requested by our Telegram community.
What is it?
The Token Reward Protocol is the underlying system of how different entities — user, miner, sharder, blobber — of the 0Chain ecosystem earn 0Chain’s native token ZCN. 0Chain’s blockchain network, which was built from scratch, implements a token-locking reward model which mints new tokens when tokens are locked and/or staked on the network.
Locking Tokens
A ZCN token holder may lock their ZCN tokens to generate new tokens by the network, and these are known as the interest tokens. The interest-generated tokens are available immediately for the holder to be used for any services. When the tokens are locked, a time-based pool is created by the smart contract and they are unspendable for a period of time. New tokens are minted at a fixed interest rate (anticipated to be around 7% at the launch of mainnet, find out more here) and immediately sent to the token holder.
One example where the interest tokens are useful is to pay blobbers for storage services. When tokens are locked, interest-generated tokens are immediately available for the token holder to create a storage allocation.
Staking Tokens
Service providers are required to stake tokens as part of their service guarantee. These staked tokens, like locking tokens, generate interest for the service provider. However, a portion of the staked tokens could be seized if the terms of service are not met when issued a random challenge by the blockchain. Thus, honest service providers earn interest on their staked tokens as well as reward tokens for providing services.
As part of the stake pool, any user can stake tokens to a miner, sharder, and blobber, depending on the terms set up by the service provider such as min/max stake and number of delegates allowed for their pool.
Roles
0Chain’s network consists of entities that fulfill a variety of roles and thus, are rewarded in different ways.
- Blobbers: provide services to 0Chain clients via storage of data, writing and reading data in exchange for tokens. Each of these services is rewarded with a separate mechanism. A price (in terms of tokens/gb) is established per read and write of data, known as the write rate and read rate, respectively. Blobbers are paid immediately for reading data. For writes, they must successfully respond to challenges, issued by the blockchain, and their challenge response verified by validators, before being rewarded. There is also a component of challenge completion time (CCT) which is used to differentiate blobber services, and so datacenter blobbers with good infrastructure and bandwidth are likely to deliver better CCT than others. It is important to note that Blobbers are paid interest for their stake by the network, but the reward tokens are directly from the clients. And if Blobbers get slashed for not passing challenges, then a portion of their stake tokens go back to the client. Validators receive a portion of Blobber fees regardless of whether blobbers pass challenges.
- Miners and Sharders: A miner is rewarded for each generated block by the network at the rate of 0.7 token per block, and they also receive fees for all transactions in the block. A portion of the total rewards and fees go to the sharders that have stored the previous block. Since only one block gets finalized at any time, only one miner gets paid, along with the sharders of the previous finalized block.
