TomoChain is an innovative solution to the scalability problem with blockchain platforms. TomoChain features a 150 masternode architecture with Proof-of-Stake Voting (PoSV) consensus for a near-zero transaction fee, and instant transaction confirmations. In this post, I will dive into the economic benefits and penalties of the TomoChain PoSV architecture that work together to create a stable ecosystem that ensures best performance.
What is Proof-of-Stake Voting?
Proof-of-Stake Voting is a new consensus protocol for scalability and decentralized on-chain governance. Coin holders will vote by staking their tokens for different masternode candidates and the 150 most voted masternode candidates will be able to participate in the ecosystem. All masternode candidates are required to deposit 50K tokens. The top 150 masternodes change dynamically every epoch (900 two-second block-times), depending on the 150 most voted masternodes. Through this, voters essentially manage and govern the TomoChain ecosystem.
This Proof-of-Stake Voting is secured through the economic principles of game theory. Game theory studies how people make strategic decisions by weighing the benefits and costs of different choices in different scenarios. A game involves the interactions and decisions of two or more people where the payoff for each persons decision depends on the actions of other participants. Proof-of-Stake Voting takes advantage of the strategic decision making process that people undergo in game theory to create a Nash equilibrium — where all actors are helping to create a strong secure ecosystem. Nash equilibrium is a game theory concept where the optimal outcome of a game arises when people have no incentive to change their choice based on the choices of their opponent.
TomoChain’s PoSV system requires masternodes to lock some tokens (50k Tomo) in order to participate. This means that lazy or malicious actors can be punished more efficiently, by being taken off the ecosystem or having their tokens taken away. From a game theory perspective, this game encourages good behaviour and deters bad behaviour through a reward and penalty system, as the payoff for malicious or lazy actors are outweighed by the payoff for being a reliable actor, thus creating a Nash equilibrium where no one has incentive to become a bad actor.
Block rewards for Masternodes and Voters
The main economic incentive for running a top 150 most voted masternode, or voting for masternodes by staking tokens, will be token rewards. After mainnet launches, the block rewards are as follows:
- 1st and 2nd year: 4 million TOMO annually
- 3rd, 4th and 5th year: 2 million TOMO annually
- 6th, 7th and 8th year: 1 million TOMO annually
Applying a reward calculation formula to a specific scenario we get:
Scenario: 150 Masternodes (50K Tomo deposit per masternode), 12.5 million tokens voting, a total of 20 million token locked.
Reward achieved per epoch (900 blocks):
- By a Masternode = 0.6667 Tomo
- By a Voter with 10K Tomo staked = 0.0625 Tomo
Approximate reward achieved per week:
- By a Masternode = 224 Tomo
- By a Voter with 10K Tomo staked = 21 Tomo
Approximate reward achieved per year:
- By a Masternode = 11,680 Tomo (23.36 percent annually)
- By a Voter with 10K Tomo staked = 1095 Tomo (10.95 percent annually)
- Total reward for a Masternode = 17,155 Tomo
Lockup Times for Masternodes and Voters
Owners of masternodes that want to resign and take their tokens out will have their tokens locked for the next 30 days (1,296,000 blocks) after the resignation. This lock-up period acts as a penalty so that only strong long-term holders will want to run a masternode and thus help create a more stable ecosystem.
Tokens that are staked through voting can be withdrawn to a personal wallet and used to vote for another candidate, but the tokens will be locked for the next 48 hours (86,400 blocks) after the unvoting. They can only be withdrawn after this lockup period. This prevents voters from switching their votes too often and penalizes voters that vote for weaker masternodes that can’t maintain a top 150 status.
Elimination of Weak Masternodes
Weak masternodes will be eliminated by stakers when they withdraw their votes in order to vote for a more reliable masternode. When a weak masternode does not get involved in any block within an epoch, TomoChain’s PoSV system uses a technique called ‘slashing’ to cut out the masternode from participating in the next four epochs — thus receiving no rewards for these epochs. Actions (creating blocks, validating blocks, etc.) are generally dispatched equally between all masternodes. If a masternode is not powerful enough to complete all its assigned actions during an epoch, then the masternode will receive less rewards. For example, if a healthy masternode during an epoch does 1,000 actions and receives 1,000 tokens as a reward, a weaker masternode that is only able to complete 623 actions will only receive 623 tokens. These mechanisms will incentivize stakers that have voted for weaker masternodes to move their tokens to stronger and more reliable masternodes in order to receive better rewards for staking.
Elimination of Malicious Masternodes
Masternodes attempting to create fraudulent blocks are punished. TomoChain provides an incentive-driven mutual verification approach that aims at offering fast detection of malicious behaviour creating fraudulent blocks. All masternodes that create or verify a fraudulent block will be detected and penalized by losing ALL of their deposits to the node that detects the invalidity of the block. This system provides incentives for challengers to continuously monitor the network as the reward for finding a fraudulent block is receiving the tokens deposited by the malicious actor or actors (ie 50k Tomo).
Preventing Accumulation of Votes in Top Voted Masternodes
The rewards that go to voters per token is inversely proportional to the number of tokens staked for a specific masternode. This means that as more Tomo is staked for a specific masternode, voters will receive less rewards per Tomo staked. As an example, if the 15th most voted masternode has 2 times more Tomo staked for it than the 100th most voted masternode — then the reward for staking 10K Tomo on the 15th masternode would hypothetically be 700 Tomo per year, and the reward for 10K Tomo staked for the 100th most voted masternode would be 1,400 Tomo per year. This prevents a situation where stakers blindly stake masternodes that have the highest votes. Having stakers incentivized to seek out the best returns by moving their votes around prevents any group of masternodes from maintaining a position as a top 150 masternode purely because of their large amount of accumulated votes.
TomoChain’s PoSV system ultimately results in a more efficient system that is better able to regulate the participants. It utilizes a system of economic benefits and punishments in order to ensure that voters make decisions that not only benefit themselves, but also benefit the ecosystem. PoSV builds upon the fundamentals of game theory and strategic decision making by forcing everyone to have some skin in the game. Those who play by the rules and play the game well are rewarded, and by doing so help make the system more efficient. Those who break the rules and try to corrupt the system are more effectively punished through PoSV. In conclusion, while decisions ultimately come down to an individual’s judgment call, game theory and the understanding of human decision making allows TomoChain’s PoSV system to align participant goals with outcomes that are desirable for the ecosystem.