The Elrond Bootstrapping Process

Beniamin Mincu
Dec 18, 2019 · 6 min read

Later edit (20 December 2019): we have updated the Spreadsheet link to rewards calculator v2. Changes reflect a minor correction in the formulas but the reward rate remains the same. The daily multiplier was changed to 0.5% to reflect the Smart Contract implementation. Examples have also been slightly modified to reflect how rewards are calculated. We’ve also added a disclaimer at the end.

After long months of research, coding and testing, we are excited to announce that Elrond is finally ready to start the MainNet bootstrapping process. Due to the complexity of a public blockchain architecture, the only possible scenario in which Elrond transitions from Testnet to MainNet is through a carefully executed phased bootstrapping process. Through this process we will address functionality, security, performance, and gradual decentralization in a logical order via 3 dedicated steps.

This article will briefly cover the 3 different phases of the bootstrapping process, and specifically zoom in on Phase 1.

The three phase process

Phase 1 — will deal with the security of the network, mainly viewed through the economics lens. Proof of Stake economics and security rest on aligning the incentives of all the network participants, and include a significant collateral to be locked up. The main implications of stake locking involve mitigation against Sybil attacks, lowering outstanding circulating supply, potentially increasing network value, to introduce prohibitively larger attack costs for malicious actors. Phase 1 focuses specifically on increasing the economical deterrents against network attacks by locking a sufficient amount of the circulating supply in for staking.

Phase 2 — once enough ERD is pre-staked(40%–50% of circulating supply), the final audits are done, and the Elrond network is running for 15 days without being taken down via attacks, phase 2 will begin. Phase 2 of the bootstrapping process will focus on publicly introducing core functionalities, while extending the security and robustness of the network. To protect against most adversarial node attacks, the validator infrastructure will be initially operated by a mix of trusted community members, professional infrastructure staking partners and Elrond itself. Thus phase 2 will start with a trusted validator set, enabling progressive feature activation.

Phase 3 — will focus on running a fully featured and secure network while extensively decentralizing it to the point where Elrond only operates a minimum fall-back infrastructure. The entire purpose of the phased bootstrapping process is to ensure a robust network and ecosystem, ready to stand on its own.

Phase 1: Start staking, contribute to reaching the economic security threshold, earn rewards

Kickstarting the staking process is an important milestone in the ERD token evolution. People actively contributing and supporting its inception will be able to earn a limited return on staking of up to 32% annual rewards.

Through this phase we are aiming for 50% of circulating supply or 5 Billion ERD to be committed and pre-staked. Provided the target is reached, the circulating supply will be drastically reduced, hence dramatically increasing costs of potential economic attacks and ensuring a necessary economic security threshold before genesis.

So how does the pre-staking process look?

Timeline & targets:

  • Launch of staking process: 23–29 December (pending smart contract audits)

User process:

  • An ERC20 staking smart contract address will be published on the elrond.com website, with Twitter, Telegram & Medium posts confirming the contract address and the steps involved

Terms & Conditions:

  • Only one staking transaction per Ethereum address is permitted

Competitive incentives aligning interests

The staking mechanism is designed with progressive incentives aimed at encouraging early involvement to reach security threshold, longer term staking, as well as collaboration on achieving the highest amount staked possible. The detailed mechanism looks as follows:

  • The initial reward rate will start at 17%, annualized and calculated for each day the stake is not withdrawn. This will encourage staking as early as possible.

To sum up, if someone stakes 1 Million ERD for 30 days, and the total amount staked is less than 1.25 Billion (< 25%), he will earn 16,068.49 ERD for an annualized reward rate of 19.55%. He will earn 36,328.77 ERD for an annualized reward rate of 22.10% after 60 days, and 60,780.82 ERD for an annualized reward rate of 24.65% after 90 days.

If he will stake the same amount for 30 days and the total amount staked is 5 Billion (100%), he will earn 19,093.15 ERD for an annualized reward rate of 23.23% after 30 days. After 60 days rewards will be 46,158.90 ERD for an annualized reward rate of 28.08%, and 78,895.89 ERD for an annualized reward rate of 31.997% after 90 days.

To get a detailed view on staking calculations, here is a Spreadsheet. Be sure to make a copy, and play with the numbers from the second sheet, called Variables: https://docs.google.com/spreadsheets/d/1aE0DzDU4HgA3TVWRJxvsEKlOEdn57KkBEADbx2DZaaA/edit?usp=sharing

Staking status and next steps

The staking procedure, reward rate and relevant figures are final. The staking smart contract is built accordingly, and in the process of undergoing final tests and security audits. Once the smart contract audit is done, we will go live with it.

We’ve designed the Smart Contract to have rewards enabled until delegation and staking will become live on the Elrond MainNet, or until a maximum of 400 Million ERD rewards will be reached. These rewards will be allocated from the Ecosystem rewards pool.

Please keep in mind that the economic model of the second phase will be different than the current one. The exact mechanism will be published in the Elrond Economic paper during the coming weeks.

We are pushing hard for a “before-Christmas” deadline, meaning we are just days away from going live with our phased bootstrapping process.

Let’s get the next phase started!



Disclaimer: Nothing in this article or elrond.com website is an offer to sell, or the solicitation of an offer to buy, any tokens. Elrond is publishing this post solely to receive feedback and comments from the public. Nothing in this post should be treated or read as a guarantee or promise of how Elrond’s business or the tokens will develop or of the utility or value of the tokens. This post and elrond.com website outlines current plans, which could change at its discretion, and the success of which will depend on many factors outside Elrond’s control, including market-based factors and factors within the data and cryptocurrency industries, among others. Any statements about future events are based solely on Elrond’s analysis of the issues described in this post or elrond.com website. That analysis may prove to be incorrect.

Elrond Network

A scalable value transfer protocol for the digital economy

Beniamin Mincu

Written by

CEO, Elrond Network

Elrond Network

A scalable value transfer protocol for the digital economy

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