Understanding transaction costs on the Sylo Network

A closer look at the savings you’ll make on CENNZnet

Recently, we announced that the Sylo Network is moving chains from Ethereum to CENNZnet.

So to help you understand why we’re so excited about this migration, consider the following story that articulates the structure of transaction costs on the Sylo Network. It’s a story that goes a little something like this…

Running a node on the Sylo Network involves making a variety of on-chain transactions:

1. Liz decides to run a node, stakes some SYLO, and pays a gas cost for the staking transaction.
2. Barry decides to delegate some stake to Liz’s Node, and pays a gas cost for the staking transaction.
3. A new Epoch starts, and Liz registers their node to participate in the Epoch. To do this, Liz pays a gas cost for the registration transaction.
4. Liz’s node performs Incentivised Relay, and after some time the Node receives a winning ticket to claim. Moving that money out of escrow and into Liz’s possession in an on-chain transaction, with an associated gas cost.
5. Later, Liz decides to withdraw some of their earnings from their Node into their wallet, again with an associated gas cost.

All of these costs are much higher on Ethereum, making it more expensive for Liz to run a node on Ethereum than on CENNZnet — and that money has to come from somewhere.

In financial terms, these transaction fees are frictional costs — every SYLO of transaction costs paid by a Node is a SYLO that is not rewarding the participants in the network, which reduces the overall efficiency of the network.

The details:

Let’s illustrate this concretely. Consider the phase 3 incentivised Sylo Network but up and running on ETH, with nodes being paid to perform relay (and paying ETH gas costs).

Now imagine that those ETH gas costs were to disappear — how would node operators react?

• If the costs were removed/lowered, then each node and delegated staker on the network would make more money than before — the same amount of income from the same amount of stake, but with fewer overheads to pay.
• This would make staking to a node (and running a node) more profitable than before — each unit of staked SYLO would earn more income.

Removing friction costs as much as possible is crucial to the success of the project. In order for the Sylo Network to be a meaningful competitor to centralised services, it needs to achieve a level of reliability and scale that enables the Network to stand toe to toe with the big guys. This is one more reason we’ve decided to move to CENNZ — to enable the network to grow to its full potential, without ETH’s prohibitively high gas fees getting in the way.

The second big problem with Ethereum’s high gas fees is that they are regressive — they disproportionately affect nodes with smaller amounts of stake. This is a barrier to the decentralisation of the network, because it effectively sets a minimum amount of capital that is required to profitably participate in the network.

All of these impacts can be explored in more detail using the calculator tool https://calculator.sylo.io/

This calculator lets you plug in facts about your node and the network (e.g the amount of work being done, your node’s stake, and the amount of stake in the network overall), and see how that situation would play out on both Ethereum and CENNZnet.

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Got questions about the Sylo Network?

Reach out to our team on Twitter, we’d love to hear from you.