Reward Systems
What are they and what will Bearmint offer?
Welcome to the new Bearmint Investigation Series. As we near the public release, this extensive series will dive into the brand new ARK framework and consensus called Bearmint while breaking it down as simply as we can.
In our last episode, we went over fees in the upcoming Bearmint consensus and framework. In this episode we’ll cover network and validator rewards.
Reward Systems
There are many different reward systems, and they also vary between different consensus systems as well. Let’s cover a few systems with examples below.
Proof of Work(PoW) consensus - The PoW system requires computational power(hash rate) to validate blocks. It gets harder to validate over time though, as the amount of miners that join the network also increase the overall difficulty of validating a block. The increasing difficulty in PoW exponentially reduces a miners ability to validate as more miners dilute the system. This requires miners to keep up with technology and continue to upgrade their systems to keep up with demand and network size. This is where the network allows large groups called pools to combine their computing power together to solve calculations and validate transactions. Once a PoW block is validated(found), the pool or miner that found that block is rewarded. If a pool finds the block, then each miner in the pool shares a percentage of the total rewards based on their total contributing hash rate.
Proof of Stake(PoS) consensus - This requires locking or staking your coins and in some cases, also running a lite client node to decentralize the network. It rewards stakers per block with a percentage of network rewards based on the amount of coins being staked, also referred to as weight. This is done at the consensus level with a set number of newly created coins per validated block. The reward percentage a staker receives is based on the amount of coins staked divided by the total block rewards. As more stakers join the network, it can also affect the total percent of staking payouts. In most cases, the more coins staked, the more percentage of the total rewards the staker can receive.
Delegated Proof of Stake(DPoS) - DPoS is a hybrid of sorts. Most networks running this system only allow a certain number of validators to run the network, these validators are elected to a forging(validating) spot by holders of the networks native coin. Much like an election, each holder votes to elect their validator to secure the network. In some instances, these validators will offer to share rewards with their voters or even offer products or services to remain elected.
Of course there are more intricacies in each of these systems. There are also more systems than laid out here, but to keep things short we are only briefly covering some popular systems.
What will Bearmint offer?
Bearmint will offer multiple options for builders. You will be able to set a static reward per block or even set it to zero. By utilizing milestones, you could even set your reward system up similar to bitcoin, the choice is yours. Setting a milestone is something that will be automatically triggered or implemented in the future at a certain point. Most milestones are triggered using a certain block number. Bitcoin actually has a running milestone which reduces the rewards by half every 210,000 blocks.
Another option would be to give network transaction fees to validators and even set block rewards to zero. It is possible to combine methods as well, just be sure to weigh every option thoroughly and choose what’s best for you and your specific application.
Using milestones, any project built on ARK or Bearmint will be able to adjust rewards, fees and more with ease.
What reward system will ARK have after Bearmint?
As we all know, ARK is currently using DPoS and the reward system is set at 2 ARK per validated block. This incentive gives each validator 2 ARK for successfully validating a block and continuing to secure the network. Each validated block also rewards the validator with all network fees in the block. This is the current system, but it could be altered in the future.
When reaching out for clarification if ARK’s reward system will remain the same or be altered we received an interesting answer, “We are working on a few things but we will most likely try a variation of fees + rewards. If fees are more than block rewards set, then no rewards are minted.”
This hybrid possibility of zero new ARK minted if fees greater than the proposed validator rewards is an interesting concept and we are excited to see it in action. This raises some questions and we will need to wait for closer to testnet launch time to get these answered.
Conclusion
As we eagerly await the upcoming public testing of Bearmint, we can only speculate what the final reward system will be for ARK. We assume it will remain quite similar to the current ARK system with some slight alterations but we can only be 100% sure once public testing is live and a release candidate is scheduled. We will update this post with solid numbers and more information once it becomes available.
This is episode 6 of our extensive blog overview, with many more to come. Stay tuned for more from this series as we get closer to the Bearmint public testing release. Be sure to subscribe to our blog and follow us on social media to stay up to date, and don’t forget to jump into the conversation on the ARK Community Discord as well.
ICYMI: Here is a quick list of previous blogs to catch up on in our ongoing series.
Episode 1 - What is Bearmint
Episode 2 - Creating a Brand New Framework
Episode 3 - Not Your Keys, Not Your Coins
Episode 4 - Slashing Time
Episode 5 - Fee System
If you enjoy our content, please consider voting for our validator, more information can be found here https://strake.foundation/delegate/.