Deep-Diving into the Bluepaper Incentives for Supernodes and Masternodes
Following the release of our Bluepaper on July 27, there has been plenty of interest in Supernodes and Masternodes.
Our Telegram group has been buzzing with questions, but most of them have centred around three key topics:
- Staking amount required for Supernodes and Masternodes
- How to register as a Supernode and Masternode
- Incentives and fees earned
This article will focus on the latter. But as a quick recap:
- The minimum staking amounts required for Supernodes and Masternodes are 100,000 PAL and 1,000,000 PAL respectively. You can find more details here in this article.
- Early bird registration for Supernodes has ended. We may decide to hold another round of registration of Supernodes in future — any announcements will be made in our Telegram group. Details on how to register as a Masternode will also only be shared at a later date.
In a nutshell, there will be three ways to earn rewards:
- Transaction fees
- PPN Incentive Pool
- Annual incentive
Transaction Fees and PPN Incentive Pool
If you have read our Bluepaper, you would be familiar with the table below.
As PolicyPal Network will not be implementing any transaction fees for the first year, this structure will only kick in from the second year onwards of our Mainnet launch, which is slated for Q4 2018.
Supernodes and Masternodes will receive the same amount of reward for processing a transaction — 40%. If a transaction fee amounts to 100 PAL, this means that both the assigned Supernode and Masternode will each receive 40 PAL — 40% of the transaction fee.
Although both parties receive the same amount, do note that Masternodes will get to process transactions at a more frequent rate, given that there are only 21 Masternodes, as compared to an indefinite amount of Supernodes.
This is also due to how each Supernode and Master is selected to process transactions. Masternodes are selected in order, whilst Supernodes are selected at random.
So, what of the remaining 20%?
The remainder of the transaction fee will automatically enter the PPN Incentive Pool. The pooled amount will be evenly distributed to all qualifying Supernodes only.
A qualifying Supernode is deemed as such if they hold the minimum staking amount of 100,000 PAL and process at least one transaction for the month.
To incentivise nodes to power the network, 20% of the token supply will be allocated to give out annual incentives. This amount will be spread over up to 10 years, as shown in the table featured below.
This annual incentive is additional on top of whatever nodes earn from transaction fees. This will be distributed monthly.
For reference, the total token supply is 1,000,000,000 (1 billion) PAL. 20% of the token supply is thus about 200 million PAL.
To qualify for the annual incentive, nodes must hold the minimum staking amount and process at least one transaction a month.
So how much annual incentive does each Supernode and Masternode receive? The answer depends on the number of nodes on the network.
- If you are a Supernode, you are allocated 1 lot, regardless of the amount staked.
- If you are a Masternode, you are allocated 10 lots, regardless of the amount staked.
This means that, even if you are a Supernode with a 200,000 PAL stake, your allocation will also be 1 lot.
The annual incentive can be calculated as follows:
Incentive pool for that year ÷ total number of lots
Annual Incentive Scenarios
Depending on the number of nodes in the network, each node can stand to receive up to 82% ROI during the first year. Here is a table depicting a few possible scenarios:
Assuming that, for the first year, the network has 1,000 Supernodes, the total number of lots can be calculated as follows:
Supernode lots (1,000 Supernodes x 1 lot each) x Masternode lots (21 Masternodes x 10 lots each) = 1,210 lots
The incentive pool for the first year will thus be:
100 million PAL ÷ 1,210 lots = 82,644 PAL per lot
From the second year onwards, transaction fees for processing transactions will kick in. Assuming the second year has a similar number of Supernodes (1,000), the calculation for what each node will receive can be calculated as such:
Incentive pool for the year ÷ total number of lots
= 50 million PAL ÷ [(1,000 Supernodes x 1 lot each + (21 Masternodes x 10 lots each)]
= 50 million PAL ÷ 1,210 lots
= 41,322 PAL per lot
This amount of 41,322 PAL is on top of any rewards earned from transaction fees.
Hopefully, this article gives would-be Supernodes and Masternodes a better idea of how the incentives and fee structure outlined in the Bluepaper works. In summary, a node can earn rewards from these three ways:
- Transaction fees
- PPN Incentive Pool
- Annual incentive
Should you have any further questions, feel free to check with our team on Telegram or any of our other social media platforms listed below.
About PolicyPal Network
PolicyPal Network is a decentralised insurance protocol that uses data to bridge the gap between consumers and insurance providers by providing a new level of accessibility within the insurance ecosystem. The company also works with insurers to provide CryptoProtect insurance coverage for digital assets and smart contracts. PolicyPal Network is a member of Singapore Fintech Association and ACCESS. PolicyPal Network’s affiliate entity, PolicyPal Singapore, has an active user base of 50,000 for its app, which helps users to manage, buy and optimise their insurance policies.
Currently, PolicyPal Network has partnerships with two insurance companies, FWD and Ergo, to explore potential use cases of our decentralised insurance protocol together. Furthermore, we have also established collaborations with blockchain projects NEM, QTUM, Sentinel Protocol, MediBloc, Digix and traceto.io to offer CryptoProtect and mainstream insurance products for the projects themselves, along with their respective communities.
Learn more about PolicyPal Network:
Telegram (Chinese): https://t.me/PolicyPalNetworkCN
Blog (English): https://medium.com/@policypalnet
Blog (Chinese): https://www.jianshu.com/u/04e398cadb84