Information for potential Fetch.ai validators

Feb 15, 2021

Updates on Validator Roles, Rewards, Hardware and Technical are included.

Please be aware that all details are subject to refinement and change.

Mainnet V2 will launch as planned in just a few weeks time, as outlined in our roadmap blog released earlier in January. We are now delighted to announce that we are onboarding validators.

Validators play a crucial role on our mainnet for operating the blockchain and by ensuring the system runs efficiently, securely and with good governance. This blog will walk you through the technology, the anticipated economic model, and the requirements for signing up as one.

Introduction

Fetch.ai is building technology to power the machine-to-machine economy. This includes novel blockchain and a generic framework for building off-chain protocols using techniques from multi-agent systems. This agent framework can be used for oracles, interchain transfers, state channels and many other applications and is tightly integrated with the Fetch ledger. Fetch.ai’s ERC-20 token (FET) was launched in February 2019 and has a market cap of approximately $172 million. FET tokens are traded at several major exchanges including Binance, Bitfinex, HitBTC, KuCoin, MXC, and Uniswap.

The Fetch.ai v2.0 ledger is built using the Cosmos-SDK and inherits many of its features from the Cosmos ecosystem. Fetch.ai is collaborating with other Cosmos projects, and in particular the team behind the Cosmwasm virtual machine. We will launch our v2.0 main-net at the end of Q1 2021 and intend to have full interoperability between our native token and the ERC-20 token via Peggy-based interchain bridge.

The Fetch.ai consensus mechanism is based on the Cosmos Tendermint implementation, but has several differences and improvements over Cosmos’ implementation of Proof-of-Stake and their Tendermint consensus protocol. These are:

  • Decentralized Random Beacon (DRB) for selecting block-producing nodes. This increases the protocol’s resistance to distributed denial of service (DDoS) attacks and provides a source of strong pseudorandomness for smart contract applications.
  • Compact multi-signatures for reducing storage costs and speeding up the synchronization of nodes that join the network.
  • slot Proof-of-Stake consensus (sPoS) that reduces the computational burden of consensus and protects validators from operating nodes at a loss.

Other features that are planned for the launch of the Fetch.ai mainnet are:

  • An aggregated signature scheme that builds on sPoS consensus and multi-signatures to further increase the speed with which agents and other light clients can synchronize with the chain.
  • Minimal Agency Consensus scheme that is compatible with Tendermint but that uses a Directed Acyclic Graph (DAG) to remove the control that individual validators have over which transactions are recorded by the chain. This provides censorship resistance and reduces the potential for transaction front-running.

Validators will produce blocks on the Fetch.ai mainnet, in exchange for rewards, but also experience a number of other benefits

  • Greater say in the future direction of the protocol through their role in governance.
  • Reputation as a valued member of the community.
  • Faster submission of transactions and direct access to the network operation.
  • Access to more and faster information on the current state of the network.
  • Access to other business models (as they emerge, including oracles or hosted agent applications).

Similarly to most other blockchains, the Fetch.ai ledger provides revenue to validators in the form of block rewards and transaction fees.

Smaller holders of FET tokens are able to delegate their stake to validators in exchange for a share of the rewards, as determined by the validator.

Block rewards (FET): Rewards are provided for every block that is produced by a validator. The inflation rate is set at an annual rate of 3% during the first three years of the networks’ operation.

Transaction Fees: All transactions that are submitted to the chain are charged a transaction fee denominated in FET. This is payable for simple transfers, smart contract deployments, contract calls, governance and any other type of transaction. The usage of state and computational resources involves a fee proportional to the amount of resource

The source code for the Fetch.ai ledger can be found on Github, which also contains installation instructions. These involve installing Golang, a C++ compiler and several other C++ cryptographic libraries.

The main consequence of the technical differences between the Fetch ledger and Tendermint chains is that the entry of validators to the consensus leads to generation of a new shared private key that is used for generating the DRB values. The messages for this distributed key generation (DKG) phase are stored on-chain during normal operation of the ledger and are given higher priority than other transaction types.

The hardware resources for running a validator node largely depend on the network load. As a recommended configuration we suggest the following:

  • 2 x CPU, either Intel or AMD, with the SSE4.1 and SSE4.2 flags (use lscpu to verify)
  • 4 GB RAM
  • 500 GB SSD
  • 100 Mbit/s always-on internet connection
  • Linux OS (Ubuntu 18.04 or 20.04 recommended) / MacOS

Up-time is incredibly important for being a validator. It is expected that validators will have appropriate redundancies for compute, power, connectivity etc. The stake of FET tokens held by the validator will be penalised, or “slashed”, if blocks are not produced. While the blockchain itself is highly replicated it is also expected that validators will perform local storage backups in order to minimise validator down time.

  • Interested parties who wish to become validators should have taken part in the Incentivised Test-net and should know about our Testnet.
  • When all the equipment and software is installed, the validator must understand the voting process that will be required to maintain the Fetch.ai Network.
  • The installation requires Golang along with a C++ Compiler and Make, which are required for installing the cryptographic libraries.
  • The source code for the Fetch ledger can be found on Github along with documentation at docs.fetch.ai, which also contains installation instructions.

More details can be found here — https://docs.fetch.ai/ledger_v2/validators/setup/

The estimated core economic breakdown is as follows:

  • Blocks per year = 6,311,520
  • 3% of total FET supply minted as rewards to validators for producing and validating blocks.
  • Distribution of approximately 30 million FET during the first year of operation which translates to around $6 million USD at a FET price of $0.20.
  • Transaction fees are another source of revenue for validators but these depend on the demand from the network, which cannot be predicted at this stage.

The chart below shows validator’s approximate minimal revenue in dollars at a FET price of $0.20 USD.

The rows represent the commission that the validators charge to people for delegating their stake, which is typically between 1 and 20% for most projects with stake delegation. 8% is typical for most professional validators. Exchanges typically charge more, while enthusiasts charge less (1–2%). The commission rate strongly influences the amount of stake delegations that a validator receives.

The columns represent the fraction of the stake that is delegated to the validator. For example, if a total of 100 million FET is staked in the network then a validator needs to have delegations totalling 1 million FET to control 1% of the total. If the total amount of staked tokens doubled, the validator’s revenue would be halved.

The chart shows that, to be profitable, a validator with average costs of $250 per month o(r $3000 per year) must control more than 1% of the stake in the network and have a commission rate greater than 5%.

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Validator’s approximate minimal revenue in dollars

Based on the assumptions above, the following profit rates could be expected by a validator with an 8% commission rate, and average running costs of $3000 per year.

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  • Community members who are enthusiastic about the Fetch.ai protocol.
  • Those wishing to take part directly in governance or network operations.
  • Professional staking operations.
  • Blockchain founders and developers.
  • Complete the application form to become a Fetch.ai Validator before February 28th
  • Please note this is a call out for experienced technologists to become node validators who have sufficient technical skills to troubleshoot efficiently by updating and maintaining the node. Fetch.ai needs to ensure there are high standards in the node operations.
  • Please also note a significant number of FET tokens are required to be deposited to be eligible for running a validator node, either from your own holding, or delegated via other holders. Only the top validators will be selected to produce blocks. The more stake a validator controls, the higher the chances of being consistently chosen to be a validator.
  • Please join us on Discord where we will be sharing regular updates on the validator program.

After reviewing all applications, Fetch.ai will select a number of validators who will be inducted, and take part in the Fetch.ai v2.0 mainnet genesis event.