Eden Network Launches Staker Extractable Value
UPDATE: As of 1/7/2022, the optimal staking value was increased to 100,000 EDEN by community vote
On August 5th, the core team of technical engineers launched Eden Network, quickly becoming the largest project on Ethereum for transaction ordering and offering users priority and protection with every trade.
After many requests from the community, the team launched a technical roadmap on October 21st. This roadmap outlined forward looking plans — the three pillars of Token Economy Upgrade, Enhanced Transaction Flow Security/Transparency, and Block Formation As A Service (BFAAS).
This month the engineering team released a canary update — for the first time ever on Ethereum, private transaction network users had the ability to see pending transaction details on a block explorer UI. A huge first for transaction flow transparency.
Today represents another significant milestone for the future of Eden Network. We are excited to announce that the Phase 1 of Staker Extractable Value (SEV) is now live and retroactively being applied to early stakers, backdated to October 21st.
SEV is a key progression of the Eden Network strategy for the token economy and BFAAS in order to increase an already dominant position in the private transaction market. The core SEV strategy has been built to focus on both value creation and value redistribution for Eden Network users.
The important details at a high level:
- Phase 1 of SEV rewards are now live.
- These rewards have been retroactively applied to our stakers from October 21st.
- Phase 1 focuses on the redistribution of value by allocating 3% of Eden Network emissions to stakers.
- Phase 1 rewards are weighted with a calculation based on stake amount and RPC usage.
- This is the first of multiple phases designed to reward Eden Network stakers.
What this looks like at a high level for stakers:
- Individual staker reward distribution is done by a weighting of calculation stake amount, time staked and RPC usage.
- Optimal stake for reward weighting is 1,000 EDEN — above that Eden Network applies dampening to ensure a more even distribution to users.
- Submitting trades through the Eden RPC is the biggest factor a staker can influence in order to maximise their rewards.
- Ultimately by trading normally on Ethereum Eden RPC, Eden stakers make money with priority and protection and now get paid for every trade on top of that.
Eden Network is the leading private transaction network on Ethereum. The overall goal with each phase of SEV is to extend that lead with market leading dominant iterations. So let’s jump into the details.
What is SEV?
Staker Extractable Value is a first-of-its-kind user value proposition, created and developed by Eden Network. It utilises Ethereum’s transaction architecture to reward stakers for participating in Eden Network’s ecosystem.
This is achieved by our three phase SEV strategy, focusing on value redistribution and value creation.
SEV Phase 1 — Redistribution of current emissions.
LIVE 1/11/2021 — The user clicks the button, the user makes the trade, the user creates a butterfly effect which results in the concept of MEV. The Eden Network team believes the only sustainable route forward is to reward the user on creating that value.
Any technical strategy will be inherently inefficient at extracting 100% of the theoretical value the user creates .The unique asset of the Eden Network allows it to capture that lost value with the EDEN emissions. Eden Network will redistribute some of the current emissions of the network to reflect and respect that value creation.
Phase 1 takes 3% of total network emissions from LPs and redistributes them to the Eden Network SEV reward pool.
SEV Phase 2 — Introduce TEV back into the project value creation.
In flight — A key workstream in our partnership with Kriptal focuses heavily on TEV.
SEV was developed as a complement to the original Trader Extractable Value (TEV) program, first introduced by Eden Network’s former MEV project, Archer DAO.
The core technology still exists but maintenance, optimisation and evolution of how TEV is realised is extremely resource intensive. This partnership is an important step towards optimisation and sustainable management of this technology.
SEV Phase 3 — Offer Stakers enhanced TEV based on stake.
TBA — for community discussion. Our research shows the rebate, backrunning and general TEV market is crowded with complicated value distribution and fee structures for the end user.
Eden Network believes traders on Ethereum should have the option to access 100% of the TEV they create. We plan to offer stakers the ability to access higher percentage tiers of TEV based on stake and RPC usage.
In short — why get involved in fee structures that will confuse end RPC users and cause friction between protocol communities?
Eden Network believes it should set an example as the leading RPC private transaction pool with a dominant market iteration to give users the option to get 100% of the value generated.
Eden’s Current Outlook on SEV
By incentivizing users to stake and transact through the Eden RPC with sustainable token distribution, this program creates a positive feedback loop to grow the aggregate number of RPC transactions.
When approaching SEV, we wanted to ensure that we would not put any additional downside pressure into the token economy. This approach means no additional emissions are created and value created from user transactions is added on top of the reward pool.
The end game is a triple reward structure where RPC users receive (on top of free protection) — transaction priority, backrunning profits, and a portion of token emissions for simply staking EDEN and transacting through the Eden RPC.
Why is this so important?
Eden Stakers are now not only getting priority and protection when using the Eden RPC, but also earning rewards on top of a better execution price on their trades.
In the future the Eden Network team believes that Block Formation As A Service (BFAAS) will be a competitive landscape and the winners will be the entities that can build the most profitable blocks for the block producer. Continuing to build our position as the largest private transaction pool for Ethereum users in the world means that Eden Network has access to transaction ordering that other competitors will not. Ultimately, this puts Eden Network in the position of building the most profitable blocks for producers moving forward and maintaining its position in the Ethereum transaction settlement layer.
By treating traders better than any other solution on the market, we strive to make the Eden RPC the gold standard for transactions on Ethereum and future proof our position in an ETH 2.0 world.
When will the program start?
- SEV Phase 1 is already live
- To reward early staking participants, Phase 1 SEV rewards will be calculated starting from October 21st.
- Stakers can claim their initial SEV starting on Monday, November 22nd.
- We will give updates SEV Phase 2 and Phase 3 as they happen which will further add to the pool of rewards stakers will receive.
How are SEV rewards calculated?
With SEV, we have implemented a rewards structure that gives a wide distribution of returns to all program participants regardless of stake size, and especially to those that use the network most actively.
Both the quantity of staked EDEN and transaction volume on the RPC will affect SEV rewards calculation.
Reward multipliers are calculated linearly until a certain point, at which a quadratic dampener is implemented to limit the impact of economies of scale.
The idea with this is to help small and medium-sized participants retain a decent share of the SEV rewards and not be overly diluted by whales.
For example, if we used a linear formula, a staker with 10,000 EDEN staked would receive 100x more rewards than someone with 100 EDEN staked.
Similarly for RPC transaction volume, certain bot accounts would rack up volumes hundreds or thousands of multiples of other traders.
So in our SEV formula, the user receives credit for a “normalized” stake, calculated as
where S is the user’s raw stake. This formula gives the user credit for their first 1,000 EDEN staked, and then quadratically dampens the credit for the additional stake.
For example, 999 EDEN staked receives 999 credit. 2,000 EDEN staked receives 1,126 credit, and 10,000 EDEN staked receives 1,379 credit.
For a specific period of time (an epoch) the cumulative normalized stake N for each user is calculated, as well as the total cumulative normalized stake of all users S.
The user’s cumulative normalized stake is then adjusted by a transaction factor T that accounts for their RPC usage, resulting in a final effective cumulative S’ and a total cumulative effective stake S’.
If the total rewards to be distributed for an epoch is R, then the user’s share is:
Given that the stake normalization reduces the effect of simply staking a large number of tokens, the RPC usage factor T is the key way stakers can increase their SEV rewards.
To calculate this factor, for each epoch we first count the number of transactions from each staker that were sent to the Eden RPC and subsequently mined by Eden miners.
Stakers that send between zero and the median number of transactions will receive between a 1x to 2x multiplier. Stakers that send between the median number of transactions and the highest number of transactions will receive between a 2x to 4x multiplier.
The table below shows various examples of calculating the total “rewards score” based on EDEN stake and relative RPC trading activity.
The key takeaway for Stakers on the above:
- Individual staker reward distribution is done by a weighting calculation of stake amount, time staked and RPC usage.
- Optimal stake for reward weighting is 1,000 EDEN — above that Eden Network applies dampening to ensure a more even distribution to users.
- Submitting trades through Eden RPC is the biggest factor a staker can influence in order to maximise their rewards.
- Ultimately by trading normally on Ethereum Eden RPC, Eden Stakers make money with priority and protection and now get paid for every trade on top of that to do that.
So now what?
The result of all of the above is that — right now — not only do you get better trades when using Eden RPC through priority and protection, you are now actively rewarded for staking and using it on top.
In the short run: Rewarding stakers with Phase 1 SEV enables Eden Network to extend its lead in the private transaction market and improve traders’ bottom lines just by using the Eden RPC and staking.
In the medium term: Launches of additional phases will add additional rewards to stakers using and trading on Ethereum like normal.
Throughout 2021, Eden Network’s engineers have continuously been at the forefront of MEV and transaction infrastructure evolution. We successfully spearheaded the development of the first MEV protection DEX in April 2021, launched the first TEV program in May 2021, the first successful block reordering protocol in July 2021, and now the first SEV program in November 2021.
Our reward calculations have been live since the beginning of November — head on over to app.edennetwork.io/stake to stake your tokens.
Stay tuned for more
We are sure you have plenty of questions. Keep an eye out on our Discord, Twitter and Telegram — we will be revealing more information in the coming days, with the claiming UI released on Monday the 22nd of November.
In the meantime, trade with the confidence that not only are you getting priority and protection in order to get the best execution prices on Ethereum but also you are being actively paid to do it.
Oh, and one more thing — did you think SEV was the only announcement we had?
Stay tuned….
