CTSI Reserve Mining — How it Works
Updated on December 25, 2020. Due to a system design review conducted earlier in this quarter, the Cartesi team decided to implement delegation in early 2021. Until then, CTSI holders willing to stake can run their own nodes or use one of our partners offering custodial staking. For more information, refer to the timeline published in this article.
This quarter, Cartesi will release its mainnet Proof of Stake system. As discussed later in this article, this will include many of the crucial ingredients that will make Cartesi such a unique scalability solution for decentralized applications.
First and most importantly, our Proof of Stake system will be the first moment in which people will be able to gain Cartesi Tokens in exchange for running our network nodes. This shift is extremely important, as it will bootstrap the adoption of our staking system and guarantee that a growing percentage of tokens are staked into the network. Such participation is vital to the security of our infrastructure.
In the Token Rewards section below, one can find a detailed breakdown of how many tokens will be available in each staking batch and how this will later transition into our automatic macro-economy system.
Selection of Block Producers
The first important component of our Proof of Stake on Mainnet is the ability to randomly select block producers, which will be vital for the release of the Cartesi Side Chain. This selection of block producers utilizes a very efficient mechanism that reduces fees and race conditions on the underlying blockchain.
Once a user stakes their tokens on the Ethereum chain, they will have to wait for a maturation period of one day before they are able to work and receive the corresponding rewards.
In order to participate in our PoS v0, users will be required to continuously run a node. When properly executing Cartesi’s reference software for PoS, users will participate in a lottery to select the block producers. Each user will be selected at random with probabilities that are proportional to the number of tokens they have staked.
Once selected, the users will receive a block reward that will be extracted from the mine. In the section Token Rewards below we give a detailed breakdown of how many tokens will be made available in this initial phase of our PoS system.
Any failure of the node’s availability or connectivity can result in the user losing the corresponding reward. However, this first design of our Proof of Stake system does not include slashing. Therefore there is no risk for the user to lose their staked tokens due to such failures.
The requirement that each user run their own nodes and keep them online for long periods of time could be an inconvenience for some participants of the PoS system. This is why by the end of the year we will partner with custodial staking service providers. That should provide convenience to users until staking delegation is enabled in 2021.
According to our publicized token distribution, 25% of the total supply of CTSI has been set aside for the mine reserve. These tokens will help bootstrap the staking participation rate until the fees paid by the network users become large enough to sustain an appropriate staking rate.
Initially, these 25% of mine tokens will not be made available in its entirety. In the first version of our protocol, only 5% of the total CTSI supply will be turned into mine rewards. As we progress further with our roadmap, more and more of these tokens will be made available through different batches that will be individually announced to the community.
After a few tests, the Cartesi Foundation will release its initial batch of 5% tokens to be distributed in block rewards. The value of each reward will stay constant for a period of six months, then it will decay exponentially over time. More precisely, the distribution of token rewards will follow a truncated exponential decay, as pictured below:
This initial plateau will last for a period of approximately six months and will correspond to half of the tokens to be distributed during the batch. This constant release of rewards will last until the second phase of our staking system is released, effectively guaranteeing the stability of the releases over time.
It is impossible to give an estimate of the rewards to workers engaged in our Proof of Stake Prototype. The reason for this is that the rewards will be split (probabilistically) among the stakers and therefore we can only give an estimate if we know in advance how much all participants are going to stake.
Supposing that a proportion P of the tokens have been staked, we can calculate the return over the amount staked (R) using the following formula:
R = 5% / P
so that for example if only 50% of the tokens are staked in our PoS, each participant will earn on average 10% of return per year during the plateau (of approximately six months).
When we release our staking user interface, we will be able to measure the value of R and provide a real-time updated estimate of R.
As outlined in our second transparency report, in a fully transparent manner, we have re-locked all 25% of the mining reserve into a new contract we’ve designed that allows for transparent withdrawals at certain time intervals. For full details, please read the “Mining Reserve Unlock” section in our second transparency report: