Settlus Validator

Settlus Validator Policy

Settlus is powered by CometBFT, and the network operation is relying on validators. Validators are running nodes, participate in consensus, and commit a new block to the network. And to maintain network's stability and to guarantee faster block time, Settlus is using PoSA consensus for first 4 years from beginning and gradually convert to PoS. To learn more about PoSA, read the article from BNB chain. While in PoSA phase, there's some notable policies for Settlus validators.

• 19 validators at the genesis state, and the max validator number will be 40 in PoSA phase.

  • Settlus will gradually decentralized, and will eventually convert to PoS consensus. After converted to PoS, the number will increase further.

• Except for genesis validators, all other validators are created through governance.

  • MsgCreateValidatorByGov proposal handles the validator creation process.

  • MsgCreateValidator proposal, which is original way to create validator in Cosmos-sdk, will be blocked in PoSA phase.

• Probono validators participate in the network without any reward

  • Probono validators don't receive any validation reward.

  • The required staking amount for a probono validator is withdrawn from the community pool, and If the probono validator ceases to participate in the network, their staking amount will be returned to the community pool.

• Validators can specify a parameter called MaxDelegation. If MaxDelegation is set to a non-zero value, other users will not be able to delegate more than this limit when attempting to delegate.

• Validators can voluntarily contribute to community pool, and the pool is intended to support entities who are currently using or will use the Settlus settlement system. Look Tenant page to learn about supporting plans. Base contribution ratio is 20%, and the ratio can be modified by governance.

Validators by Governance

During the PoSA phase, following genesis, additional validators can only join the network through governance approval. After the PoSA phase, the validator policy will revert to the standard PoS policy, which aligns with the current default policy of the Cosmos-SDK and CometBFT.

Probono validators

Settlus features probono validators who participate in the network and perform the same functions as other validators, but they do not receive the typical rewards for their roles. Instead, rewards designated for probono validators are automatically contributed to the community pool. Also probono validator's required SETL is derived from community pool. They will be returned to community pool if probono validator stops its role.

Settlus Validator Reward

Settlus validator rewards are divided into three categories. And each item is equally divided and distributed among the validators.

• Fixed reward per block

• Transaction Fee (in SETL)

• Transaction Fee from x/settlement module

About fixed reward

During the PoSA phase, a fixed amount of SETL is given for every block, and validators who participate in validation will receive an equal distribution of this fixed amount.

• Identical reward regardless of staking amount: Settlus distinguishes itself from the conventional Proof of Stake Authority (PoSA) model, which typically varies the reward amount based on the staking amount. In Settlus, the reward quantity is fixed in PoSA phase, and it has no relation with staked tokens. Settlus operates on the principle that more staking does not mean a greater contribution to the blockchain, particularly during the PoSA phase. In the block validation process, each validator performs identical tasks, irrespective of the number of tokens they staked. Therefore, it is more reasonable for all validators to receive identical rewards. Validator nodes only have to stake more than required minimum staking amount to be an active validator.

• ldentical reward regardless of the number of nodes: During the PoSA phase, since the number of nodes is limited, if a new node is added, the validation reward for existing nodes significantly decreases. Therefore, there's a high likelihood that the existing entities might oppose the process leading to decentralization, i.e., adding new nodes. To prevent this kind of behavior, Settlus distribution mechanism ensures the reward each node receives remains constant regardless of the number of nodes, until reaching the maximum number of nodes for the PoSA period.

As a result, each node, during the PoSA period, always receives a consistent reward regardless of the number of nodes. Below figure shows how the reward formula and mechanism work.

Settlus block reward mechanism in PoSA phase

Reward Distribution Example

Based on the policies discussed so far, let's explore through an example how Settlus validator reward changes. Please note that although the number of participating validators changes, the share each validator receives remains the same.

Case 1:

• $\textbf{19}$ validators, $40$ max validators
• Fixed reward = $3$ SETL per block, assume there's no transaction fee
• Each validator contribute 20% of their reward to community pool, and let's assume that there's no delegators so there's no commission.

  • $3*(1/40) = 0.075$ SETL will be a fixed reward for each validator in a block.

    • $19 * 3 * (1/40) = 1.425$ SETL is generated in a block.

      • $1.425 * 0.2 = 0.285$SETL will be deposited in community pool.
      • $1.425 - 0.285 = 1.14$SETL will be a net reward in a block.
      • $1.14 / 19 = 0.06$SETL will be a net reward for each validator.
  • $3 - 1.425 = 1.575$ SETL is burned in a block

Case 2:

• $\textbf{25}$ validators, $40$ max validators
• Fixed reward = $3$ SETL per block, assume there's no transaction fee
• Each validator contribute 20% of their reward to community pool, and let's assume that there's no delegators so there's no commission.

  • $3*(1/40) = 0.075$ SETL will be a fixed reward for each validator in a block.

    • $25 * 3 * (1/40) = 1.875$ SETL is generated in a block.

      • $1.875 * 0.2 = 0.375$SETL will be deposited in community pool.
      • $1.875 - 0.375 = 1.5$SETL will be a net reward in a block.
      • $1.5 / 25 = 0.06$SETL will be a net reward for each validator.
  • $3 - 1.875 = 1.125$ SETL is burned in a block