Energy Web Community Staking Pool Snapshots explained
Zug, Switzerland — 29 April 2022 — The Energy Web Token powered, proof-of-stake based Energy Web Consortia Relay Chain (EW-CRC) is designed to greatly enhance the cybersecurity of every Energy Web solution and identity connected to it. But this is only possible if the Energy Web community has access to a robust, secure staking mechanism on EW-CRC. This is the primary reason an initial staking pool was launched in December 2021: to demonstrate how using decentralized identifiers and verifiable credentials can support staking on a public blockchain.
In March 2022, a second staking pool was launched to test another important concept: figuring out a way to measure average EWT staked over time by individual users. To do so, we use “snapshots” — random checks of Energy Web Token (EWT) balances staked by each user. Snapshots enable our community to understand exactly how consistent the economic security provided by EWT staking is. Testing this concept could not be more important: the upcoming EW-CRC will use a proof-of-stake system to secure dozens of enterprise-grade solutions from around the world and protect the integrity of every digital identity connected to them. Using snapshots to incentivize consistent, long-term staking is a powerful way to increase the security of the EW-CRC; the second staking pool is the proving ground for the concept. A stable electricity grid needs committed stakeholders.
The token economic model behind EWT snapshots is simple. For future EWT staking pools and block rewards distributed by the EW-CRC protocol, reward amounts will primarily be a function of two factors: how many tokens have been staked, and for how long. This means more tokens, staked consistently for longer periods of time, equals greater rewards. Incenting consistent staking will maximize the economic security of the EW-CRC and by extension every solution and identity connected to it.
The remainder of this post describes how snapshots will influence EWT stakers in the second pool, in new staking pools on the Energy Web Chain, and when staking on the EW-CRC. Specifically, this post describes how snapshots will be used to calculate 1) additional variable awards for the second pool stakers and 2) an EWT staking multiplier for CRC staking
Additional Variable Awards
EWT staked in the second pool currently earns a fixed annual percentage yield (APY). In the future, on EW-CRC, rewards for Validators and Patrons who stake EWT will be variable. This is because the flow of awards is a result of real-world adoption of Energy Web solutions, not an inflationary token model (for more information, please see our high-level description of the design of the EW-CRC). Snapshots on the second staking pool will enable us to test variable APY rewards in anticipation of the EW-CRC.
The second staking pool is currently ~70% full. This means that not all EWT inside the staking pool contract will be distributed. The remaining unallocated EWT awards dating back to the launch of the second pool will be redistributed to second pool stakers using a variable APY. As described above, the objective is to reward and incentivize identities that have consistently staked EWT for longer periods of time. The amount of variable APY awards per staked EWT account will be determined by the average stake of an account as measured by the snapshots. The more tokens held by an account consistently throughout the duration of the second staking pool, the more variable APY will be awarded. The six snapshots to be taken throughout the life of the second staking pool are the trusted, verifiable measurements for how many and how consistently EWT are staked.
The variable APY is impossible to predict, but at a high level, the design incentivizes users to maintain fully staked EWT wallets throughout the duration of the staking pool. An example is useful to demonstrate what variable APY could be. Let’s assume in this example there will be 200,000 EWT available for redistribution via variable APY in the second staking pool and there are 2,500 wallets staking.
- If only 10% of wallets have a single snapshot and 90% have no snapshots at all and stake on average 1 EWT, they will earn an APY of 106,666% (800 EWT profit on a 1 EWT stake over 9 months)
- If all wallets have the same number of snapshots and maximum average stake (3,000 EWT), they will each earn an APY of 3.56%
- In this example, depending on the behavior of the users, individual additional variable APY would be somewhere between 3.56% and 106,666%
Please note that variable APY is on top of the fixed APY of 10.36% paid out in the second staking pool. Also, note this is an example calculation, so the numbers will differ. Experimenting with the mechanism with a guaranteed staking APY and an additional variable APY will give us great insights into how we can deploy effective token-economics to increase the security of a decentralized Energy System based on real cash flows.
EWT Staking Multiplier
The second incentive for the Energy Web community is to stake more EWT consistently and for longer periods of time, snapshots are also planned to be used to calculate an EWT staking multiplier. This multiplier can then be applied to future staking pools on the Energy Web Chain and on EW-CRC.
The EWT staking multiplier works very similarly to the variable APY calculation above: we want to reward those that have staked for longer periods of time. When we bootstrap, the new CRC stakers will benefit from having as many snapshots as possible. The reward logic is this: if a user locks up EWT for a maximum term (for example, 3 years on EW-CRC) and has the maximum number (6) of snapshots from the second staking pool, they receive the highest EWT staking multiplier. A lower lockup period or a lower number of snapshots will result in a lower multiplier.
After the lockup ends, there will be restrictions on withdrawing the reward (cooldown period) to prevent all users from withdrawing rewards at once.
We encourage everyone to follow official Energy Web communications channels for more updates on staking and ways to participate in the launch of the EW-CRC.
About Energy Web
Energy Web is a global, member-driven non-profit accelerating the low-carbon, customer-centric energy transition by unleashing the potential of open-source, digital technologies. Our Energy Web Decentralized Operating System (EW-DOS) enables any energy asset, owned by any customer, to participate in any energy market. The Energy Web Chain — the world’s first enterprise-grade, public blockchain tailored to the energy sector — anchors the EW-DOS tech stack. The Energy Web ecosystem comprises leading utilities, grid operators, renewable energy developers, corporate energy buyers, IoT / telecom leaders, and others.