LPoS Primer

Octopus Network’s Shared Security Design

LPoS Primer — Octopus Network’s Shared Security Design by MixWeb3

LPoS, or Leased Proof-of-Stake, is a new solution for network security designed by the Octopus Network. Appchains are secured against the value of the $OCT token provided by validators and delegators.

1. Appchain validators stake their own $OCT to guarantee the security of the network.
2. Appchains and validators who stake $OCT are similar to tenants and hosts.
3. Appchains pay rent to validators using their own native tokens.

The LPoS design solves one of the toughest problems for Appchains, the Security Bootstrapping Problem. Additionally, this design avoids the formation of oligarchs on the network because, under the LPoS design, validators are not members of the Appchain community, they merely lease their security to Appchains via the Octopus Relay, similar to security guards for Appchains.

Since the launch of the Octopus Mainnet on October 8th 2021, there have been 5 successful Appchain launches that have operated flawlessly.

https://mainnet.oct.network/appchains

LPoS vs PoS

The level of security provided by the PoS design is dependent on the value of the staked asset. When a new project wants to securely launch their blockchain, there needs to be consensus on the value of their native token in order for people to stake the native token on validator nodes. Therefore, a new blockchain would need to spend at least two years and millions of dollars to bootstrap their blockchain using PoS.

Appchains using LPos on Octopus Network have four advantages compared with the PoS design:

1. Lower risk barrier for Appchain delegators
   Since there is already consensus on the value of $OCT, staking $OCT on Appchains carries lower risk than staking the new blockchain’s native tokens.
2. Launch Appchains faster
   Appchains no longer need to recruit their own validators and delegators.
3. Avoid diluting the value of Appchain native tokens
   To run PoS, projects usually need to issue around 10% of their native tokens to validators. This dilutes the value of the native token and puts sell pressure on the tokens in secondary markets. Octopus Network’s LPoS only requires Appchains to issue 2% of their native tokens as rewards for validators.
4. Avoid control by oligarchs
   With a PoS design, new issuance of tokens will be distributed to stakers, which eventually forms powerful oligarchs. These powerful groups might even vote to increase rewards, which will benefit themselves and increase the cost of security. LPoS solves the problem of stakers controlling the Appchain. Appchain stakers are “outsourced security guards,” they are not interested in the governance of the Appchain.

Appchains that utilize LPoS use the native token as the governance token. The governance decisions will always be aligned with the appchain’s community, independent of Octopus Network. For example, the Appchain community could vote to decrease staking rewards to reduce expenses for the Appchain.

Octopus Network’s LPoS vs Polkadot Parachain Slots

A parachain on the Polkadot Network that wins a slot during the Parachain auction connects with a relay chain. The relay chain provides the security for the parachain, therefore granting the same level of security to the parachain. The cost of a Polkadot slot is very high, ranging from tens of millions of dollars during a bull market to millions of dollars during a bear market. Additionally, there are only 100 slots and auction winners can only use their slot for 2 years.

Octopus Network’s LPoS consensus has 3 advantages compared with Polkadot’s slot auction model:

1. No limit on the number of Appchains, no need for auctions
   Octopus Relay is deployed on the NEAR Protocol, which uses sharding to scale its processing capabilities to almost no limits. Although there is no limit on the number of Appchains on Octopus Network, there is a minimum criteria for Appchain candidates. Octopus Network will provide full support to each Appchain project approved by the community.
2. Low booting cost
   New Appchains often have few users and assets on-chain, therefore do not need the highest level of security. By selecting the appropriate level of security, the Appchain could minimize the cost of security, paid with their native tokens.
3. Adjustable security levels
   Appchains could adjust the level of security based on their needs. In general, Appchains could select a relatively low level of security in the beginning to save on costs, and increase the level of security as the network economy and assets on-chain scales. The Appchain community could collectively decide on the level of security required via on-chain governance, by adjusting the block rewards paid to validators. The higher the reward, the higher level of security.

While LPoS will not grant Appchains the same level of security as Polkadot’s parachains, which are secured by billions of dollars of assets, most Appchains do not require that level of security.

Octopus Network’s LPoS vs. Cosmos ICS

The Cosmos ICS (Interchain Security) is another multi-chain network shared security solution. It rents ATOM validator groups to provide security to blockchains within its ecosystem.

To find out more about ICS: https://github.com/cosmos/ibc/tree/main/spec/app/ics-028-cross-chain-validation

Expected launch date is January 2023.

Overall, ICS and LPoS have a lot in common. However, since ICS has not launched yet, we will do a full comparison after its launch.

中文版： LPoS 租用权益证明｜解析章鱼网络共享安全设计
Joint creation of @MixWeb3 and Woori

Originally published at https://mirror.xyz.