How much will Incognito Node earn?
First, a short recap
As you may already know, we have successfully upgraded from Schnorr signature to BLS signature. This means we have scaled capacity up from 16 nodes per shard to 64 nodes per shard. Perfect timing too, because more and more validators have signed up to help build the chain. After a few stress tests, we are happy to say we are steadily on-boarding waiting validators, and sending out testnet PRV for them to stake with.
The mainnet is still scheduled to go live end October. Also exciting news — Node the hardware device will also launch this October. It’s a plug & play alternative to running a virtual node, and we think many people will find it helpful — and hopefully delightful!
Finally, an educated guesstimate of…
How much your node will earn per month
One of the most frequently asked questions over the past few weeks has been how much a node will earn per month. As much as we want to give you an exact number, this would be fairly hollow, as at this point figures are based on a number of variables. Having said that, estimating a realistic ballpark is perfectly doable, so here goes:
First, if no one cares about privacy, then your node probably won’t be profitable. If people do, then the network, your node, and your tokens will be worth something. So, operating on the first assumption — that people care about privacy (a.k.a. something we won’t have in our new economy if we don’t act now) — here’s our attempt to unravel that ‘something’.
Validators (node operators) can earn multiple cryptocurrencies, depending on how the network is used. As a thank you for successfully validating a new block, validators earn block rewards that comprise of transaction fees in the transacted currency (say BTC, ETH, BNB, etc.), as well as newly generated PRV, Incognito’s native coin.
Breakdown of potential PRV earnings
PRV is mined/forged at a fixed rate. 11M PRV will be mined in the first year. This number will decrease by 12.5% per year until we reach the total supply of 100M. In the first year, 11M PRV will be distributed evenly across 12 months, so 946,728 PRV (11,360,736 PRV/ 12 mo) will be mined each month.
This 946,728 PRV for the month will be distributed to validators, proportional to the number of nodes active per day. Assuming there are 994 validators in the first month running 1 node each, they will earn an average of 178.58 PRV in a funded staking scenario, and 714.33 PRV in a regular staking scenario. For more on funded vs. regular staking, please scroll down to the last section on staking mechanisms.
If the price of PRV is $0.20, a node will earn $35.72 in the first month with funded staking, and $142.87 with regular staking.
Total PRV mined in the first year: 11,360,736 : A
PRV mined each month: 946,728 = A/12 = B
Total number of nodes in the first month: 994
Price of PRV: $0.20
PRV earned per node (funded staking): 178.58 = B/994 * 25% = C
$ earned per validator (funded staking): 35.72$ = C*$0.20
PRV earned per node (regular staking): 714.33 = B/994 * 75% = C
$ earned per validator (regular staking): 142.87 $ = C*$0.20
PRV rewards will decrease as the number of validators increase (another good reason to get in early), but this should balance out as increased activity typically runs in parallel with a corresponding price increase.
Breakdown of other currency earnings
As a validator, you’ll earn fees paid by anyone who makes a private transaction. If someone sends ETH privately, transaction fees paid in ETH will go to the validator. Incognito currently supports BTC, ETH, BEP2 and ERC20 transactions (more currencies pending).
Following are our earning projections of other currencies, and the assumptions that underpin them.
First, let’s assume that on the 6th month, 1% of current BTC and ETH transaction volumes will be made in Incognito mode, and that users will pay the average transaction fee suggested by the wallet.
Let’s also assume that at this point in time, there are 1600 Incognito Chain validators (32 shards with 50 validators per shard).
With 1 beacon chain and 32 shards, transaction fees (Y) will be distributed thus:
Beacon earnings: 2/(number of shards + 2) * Y
Earning per shard: 1/(number of shards + 2) * Y = X
Foundation earnings: 25%* X
Earning per shard validator (regular staking): X*75% /(number of validators/shard) = Z
Earning per shard validator (funded staking): Z*25%
Under these conservative assumptions, for regular staking, we estimate BTC and ETH node earnings will equal $57.89 per month. Including PRV earnings of $88.71 per month (under the same assumption that there are 1600 validators and we are in the 6th month), users can expect to earn a total $146.60 per month (not including earnings in other potential currencies).
For funded staking, we estimate BTC and ETH node earnings will equal $6.42 per month. Including PRV earnings of $22.18 per month, users can expect to earn a total of $28.60 per month (not including earnings in other currencies).
This final section will explain the difference between the two staking mechanisms — regular and funded staking.
Staking mechanisms
The role of an Incognito validator is two-fold. The validator is simultaneously the Funder and the Worker. The Funder stakes 1750 PRV into a node. The Worker validates private transactions on behalf of the Funder.
Typically, the Funder and the Worker split their earnings. The split ratio is often agreed upon and settled off-chain.
There are two different staking mechanisms at play here: regular staking and funded staking.
Regular staking
With regular staking, the Funder and the Worker are the same person. The Funder simply stakes 1750 PRV and carries out the work herself. In this case, the Funder doesn’t have to split her earnings with anyone else.
Funded staking
With funded staking, the Funder and the Worker are two different parties.
For the Node device, the default setup is as follows:
- The Funder is currently The New Internet LLC (the core team). In the future, the Funder could be any user on the network interested in funding Nodes and sharing profit.
- The Worker is the Node device. Virtual Nodes can also choose to be funded and just be Workers.
- The initial revenue share ratio is 75/25. The New Internet LLC keeps 75%, and the Node owner keeps 25%. This revenue share ratio is subject to change at any time by The New Internet LLC.
With this setup, Node owners do not need to own PRV to begin mining. They just need to plug in their Node (or run their virtual node). The New Internet LLC handles the staking. We believe this is the best setup for non-crypto or less technical users.
Over time, Node owners will accumulate PRV and become more familiar with crypto. At any time, Node owners can cancel funded staking with The New Internet LLC, start regular staking with their own PRV, and reap 100% of the rewards.
