A thread for those who need more clarity on seed node staking with $ZIL that will go live very soon on #Zilliqa.
1) Seed node staking is not a full-blown PoS system. In a PoS system, staking is used to determine the validator who will propose the next block of transactions.
1) Seed node staking is not a full-blown PoS system. In a PoS system, staking is used to determine the validator who will propose the next block of transactions.
2) Unlike PoS, seed node staking in #Zilliqa is to allow certain non-consensus nodes called seed nodes (those that store transaction history) to earn rewards for their service. These seed nodes do not participate in validating transactions.
3) Staking rewards come from block mining. 5% of $ZIL mined in every block will be used to reward these nodes while the remaining 95% will be given to the miners who validate transactions. The split is intentionally skewed towards miners as they provide the much needed security.
4) Due to the limited 5% of block rewards, the total number of $ZIL that can be staked across all seed node operators had to be capped to 610 million $ZIL. This ensures a meaningful annual return of ~10% for the operators to cover their operational expenses.
5) The design is flexible enough to change the maximum staked amount from 610 million $ZIL to say 1.22 billion $ZIL (i.e., 2X). But, this would mean that the annual return will drop from ~10% to ~5% (i.e., annual yield will be halved).
6) The minimum that each staking node will have to stake is 10 mil $ZIL. This does not mean that each end user will have to stake 10mil $ZIL. It only means that the seed node operator will have to pool at least 10 mil $ZIL from end users aka delegators.
7) In Phase 0 (current), end users will have to send their funds to the seed node operator's address (making it custodial) which then deposits the pooled stake in a contract. The operator receives rewards on users' behalf and distributes the reward back to the end users.
8) In Phase 0, exchanges will most likely be the ones supporting staking as they are already accepting $ZIL from users. In Phase 1 (next), users can use non-custodial wallets such as @moonlet_wallet, @AtomicWallet.
9) In Phase 1, users can transfer their funds directly to the staking contract and in turn withdraw the rewards directly from the contract through the wallet. This will eliminate the need to transfer funds to an intermediate custodian. For more info: bit.ly/2AVPKoM
10) Seed node staking will also provide a much needed source of revenue for critical ecosystem players such as explorer, wallet providers.
