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MELD Staking

Context: Process as of Oct 2023

MELD dynamic staking - Goals and processes

TLDR;

  • All staking is linked to a node validating the MELD network.
  • Nodes total staked amount can be between 100k and 20M MELD tokens.
  • Rewards are calculated in epochs of 5 days. Only the liquidity staked during the full length of the epoch will get rewarded.
  • All staking positions get represented by NFTs.
  • Staking positions can be liquid or locked in different modular tiers, therefore increasing the weight of rewards distributed to them
  • Users need to delegate stake to a node operator to generate rewards.
  • Nodes will have the capacity to set a delegator fee when they register their node. This cannot be changed later.
  • Users can change the node they delegate to at any time.
  • Nodes can be slashed if they misbehave or go offline. Users that delegate to that node will also get slashed.

General description of the process

The MELD network is an avalanche subnet that is validated by multiple nodes. Anyone can run a node but there are multiple requirements. The main ones are:
  • Be an avalanche validator (needs 2000 AVAX staked on the node)
  • Maintain a high uptime on the node
  • Fluent communication with the MELD team for updates of the network and software
  • Stake of 100k MELD tokens, up to a maximum of 20M
Running a node improves the security of the network and allows for robust applications to be developed on the MELD network. As reward, MELD splits the revenue generated by the protocol with the network operators. The reward structure is divided on 3 main timelines:
  • 6% from treasury of all the MELD staked for the first 12 months of the network (network was created on May 2023)
  • 2% from treasury of all MELD staked + protocol revenue share (6 months)
  • protocol revenue share (forever)
All users can create staking positions and delegate to a node that has capacity to hold their stake in the limits. When creating a staking position, an NFT is minted to the user to represent the position. This NFT can be transferred and sold, and a user can create as many as they want.
When a position is created, it needs to be delegated to a node before starting to accumulate rewards. It’s important that users do their own research on what node to delegate to, since there is a risk of the node being slashed and their stake lost in the process.
Rewards get distributed on an epoch based system. Each epoch is 5 days. Only liquidity staked during a full epoch will generate rewards. The owner of the NFT is able to claim their rewards at any given time, without having to wait for their locking period to end. Rewards get calculated on a position by position basis, adjusting depending on the weight of the locking tier.
Most of the parameters that describe the system (like min/max stake) are configurable and we reserve the right to change them in the future subject to agreements and potential DAO votes.

Operating a node

Anyone can request to run a node. In order to do so, the process is as follows:
  • You setup your validator node on the AVAX network
  • You stake the 2000 AVAX needed to be an active validator in the AVAX network
  • You setup the node to track the MELD subnet (our partnered providers will do this for you if you run a node on their infra)
  • You create the request to run a node on the MELD network. We will verify all the information and make sure the node is operational.
    1. 1.
      At this stage, you will need to create the initial stake deposit of at least 100k MELD. It will get returned to you if you are rejected.
    2. 2.
      Your node will be identified by the AVAX node, and you will be able to setup delegation fee.
  • If you are accepted, you will start participating in rewards distribution on the first complete epoch that your node is part of. People will be able to delegate to your node at this point.
  • Every epoch, you will be able to claim rewards. The fee generated by your delegators will also accumulate for you to claim
When you decide to stop validating the network, you will need to indicate this to the protocol. You will be able to get your stake back (if locking period allows you to do so) and will prevent you and your delegators to get slashed when the node goes down.

RISKS OF OPERATING A NODE

You are responsible of the maintenance of the node. If your node has a lot of downtime or is detected as an attacker to the network, you will get slashed (and all the people delegating to you).
Slashed positions lose their stake, but can still claim the rewards generated in the past.
⚠️ We recommend node operators to not lock their base 100k tokens in prolonged periods of time, otherwise they will not be able to leave the system and stop operating the node. If the node stops operating while the node is active in the system, it will get slashed and both operator and delegators will lose their stake

RESERVING A NODE FOR LENDING AND BORROWING APY BOOST

MELD will run a node to ensure that we have the full capacity (20M, potentially changed to more) for the Lending and Borrowing APY boost. This will allow the unused liquidity in the Lending and Borrowing protocol to get staked into this system without being limited due to external users saturating the pool. In order to keep this node “clean”, this node will be whitelisted so that no external delegators can stake it. The whitelist will be maintained by the MELD admin role.

Delegating to a node

As a user, in order to get rewards for your staked MELD, it needs to be delegated to an active node. Different nodes will have different delegation fees, and nodes can be slashed for misbehaviour so make sure you do some research on who is operating the node before committing to a delegation.
Users can create as many staking positions as they want, there is no limit to the total amount of positions created. Each position will be managed independently for rewards, locks and delegators.
Every epoch, when rewards are distributed, each one of the positions will get their corresponding rewards assigned. You can claim the staking rewards at any point in time.
If the node you are delegating to stops being active, you are able to:
  1. 1.
    Change delegator to a new one. Only when your liquidity is delegated during a complete epoch it will generate rewards.
  2. 2.
    Withdraw your stake and rewards, if your locking position allows for that.
<aside> ℹ️ We are aware of the risks of delegating to a node, and therefore we are not limiting the amount of times you can change delegation and there is no time constrain while doing this action.
</aside>

Rewards calculation. Locked vs liquid stake

When creating a staking positions, you can decide to create a liquid staking or a time locked staking. Time locked positions get extra weight for rewards calculation. The initial set of locked staking we will be opening are:
LOCK PERIOD
EPOCHS*
WEIGHTING FOR REWARDS
MINIMUM DEPOSIT
LIQUID
-
100
0
6 MONTHS
36
120
0
1 YEAR
72
175
0
5 YEARS
360
350
0
Rewards are weighted with these ratios to provide more rewards for tiers that need a bigger commitment from the user. This distribution system makes it very complex to calculate real world reward distributions, since the calculation is not only affected by your position but also by the rest of the ecosystem.
For example, taking into account the 6% rewards distributed for the first months, under the following hypothetical scenarios:
LOCK PERIOD
AMOUNT STAKED
WEIGHTED AMOUNT
REWARDS
APR
LIQUID
45M
45M
2.15M
4.79%
6 MONTHS
45M
54M
2.58M
5.75%
1 YEAR
5M
8.75M
0.42M
8.38%
5 YEARS
5M
17.5M
0.84M
16.77%
But if everyone decided to go for the same lock period, everyone will get the same APR, independently of the tier everyone had selected.
LOCK PERIOD
AMOUNT STAKED
WEIGHTED AMOUNT
REWARDS
APR
LIQUID
0
0
0
-
6 MONTHS
0
0
0
-
1 YEAR
100M
175M
6M
6%
5 YEARS
0
0
0
-

SLASHING

It is imperative to establish a clear and comprehensive understanding of the slashing mechanism within our staking protocol. This document serves to expand on the concept of slashing, its implications, and specific scenarios that lead to warnings, culminating in slashing after a threshold is crossed.
Key points:
  • 3 Warnings will trigger a slash
  • Warnings will expire after 12 months
  • Slashing is always the full amount for the operator
  • Delegator slashing can be conditional depending on the pool situation.
    • THE FOLLOWING NUMBERS ARE TENTATIVE AND MIGHT CHANGE BEFORE THE FINAL RELEASE
    • 100% slash for delegators if the pool has less than 1M MELD pledge
    • 50% slash for delegators if the pool has between 1M and 1.5M MELD pledge
    • 25% slash for delegators if the pool has between 1.5M and 2M MELD pledge
    • 0% slash for delegators if the pool has more than 2M MELD pledge

Notifications

The system will include the capacity for users to be notified of new warnings and slashes in the network. The notification system will be evolving over time to include a wide range of options for all users.
First version of notifications:
  • X (Twitter) account @MeldStaking for updates about nodes.
    • Users interested in these updates, can turn on notifications for new posts
Notifications channels on the product development roadmap:
  • Email
  • Telegram
  • Discord
  • Capacity to subscribe only to a certain node, rather than the full system
All notifications and warnings will be publicly visible on the public node operators dashboard

⚠️ Warning types

Downtime

Criteria:
  • Node uptime falls below the required threshold
    • 24h of continuous downtime
    • less than 98% uptime, computer over rolling 18 epochs (90 days / 3 months) (43h, 30 mins total downtime)
Rationale:
  • Consistent uptime is crucial for network stability and performance.

Non-compliance with Software Updates

Criteria:
  • Failed to update node software within the official timeframe
    • Avalanche standard procedure for general node updates
    • Specific updates for the node notified by the meld team at least 1 week in advance.
Rationale:
  • Keeping node software up-to-date is vital for network security and functionality.

Neglecting communication protocols

Criteria:
  • Consistent failure to communicate or respond to mandatory checks by the MELD team.
  • Maximum time to respond for operators will be:
    • 3 days: Time-sensitive operations.
    • 7 days: normal operations
Rationale:
  • Effective communication is key for collaborative network maintenance.

Inappropriate pool information

Criteria:
  • Inclusion of inappropriate, offensive, sensitive, or copyrighted material in the pool name, description, or images.
Rationale:
  • Maintaining a professional and respectful network environment. Ensuring compliance with legal standards and community guidelines.

AVAX validation stopped / resumed

Criteria:
  • Re-validate the AVAX network and track the MELD network within 3 days of the end of validation on the Avalanche network.
  • MELD team then has another 3 days to include the node back in the multisig
Rationale:
  • To facilitate UX for operators and delegators, a node that has completed AVAX validation will not be finished on the MELD staking system, but the node needs to be re-added as a validator based on the above criteria
<aside> ♻️ Same warning type will have a 24h cooldown before being able to be triggered again, while different types of warnings can be stacked at the same time.
</aside>

⚠️ Direct Slashing

Direct slashing is an extreme measure that will be executed on the following scenarios, after careful investigation and consideration by the MELD team:

Misreporting or Tampering with Data

Criteria:
  • Deliberate misreporting or manipulation of data by the node.
Rationale:
  • Integrity and accuracy of data are foundational for network operations and user trust.

Network Attacks

Criteria:
  • Participation in any form of attacks against the network (e.g., Sybil attack, Eclipse attack).
Rationale:
  • Protecting the network from malicious attacks is paramount for its security.
<aside> 📄 MELD reserves the right to modify these policies at any time to ensure the safety of the network, notifying all users and operators about the rationale behind the changes with enough notice (7 days)
</aside>

FAQ

General Process FAQ

  1. 1.
    What is MELD staking?
    • MELD staking is a system where users can stake MELD tokens to earn rewards by delegating their stake to node validators on the MELD network.
  2. 2.
    Why are staking positions represented by NFTs?
    • Using NFTs allows for a unique representation of each staking position, enabling them to be easily transferred, sold, or traded like other assets.
  3. 3.
    What is an epoch in the MELD staking system?
    • An epoch is a 5-day period during which rewards are calculated based on the MELD tokens staked.
  4. 4.
    Can I stake and unstake my MELD tokens anytime?
    • Yes, you can create a liquid staking position that allows flexibility, but remember, only tokens staked during the full length of an epoch will receive rewards.
  5. 5.
    What's the difference between liquid and locked staking?
    • Liquid staking allows you to stake and unstake anytime, while locked staking requires you to commit your tokens for a set period in exchange for higher rewards.
  6. 6.
    How do I delegate my stake to a node?
    • Once you create a staking position, you'll need to select an active node to delegate to. The process will be provided in the platform's interface.
  7. 7.
    How are rewards distributed?
    • Rewards are calculated every epoch and are based on the amount and duration of your staked tokens.
  8. 8.
    What is a node slashing?
    • Slashing occurs when a node misbehaves or is offline frequently. It results in a penalty where all of the staked MELD tokens of the node and its delegators are confiscated.
  9. 9.
    What is the minimum amount of MELD tokens I can stake?
    • There's no minimum amount for delegating to a node; however, nodes have a minimum staking requirement of 100k MELD tokens.
  10. 10.
    How can I become a node operator?
    • Anyone can request to run a node by setting up a validator on the AVAX network, staking the required AVAX and MELD tokens, and following the steps provided in the main document.
  11. 11.
    How do I track my staking rewards?
    • You can monitor your staking rewards through the platform's user interface, where detailed insights about your staked amount, reward rates, and accumulated rewards are displayed.
  12. 12.
    Can I sell or transfer my staking position?
    • Yes, since staking positions are represented by NFTs, you can transfer or sell them just like other NFT assets.
  13. 13.
    Why would I choose locked staking over liquid staking?
    • Locked staking offers a higher weight for rewards, translating to potentially greater returns in exchange for a longer commitment of your tokens.
  14. 14.
    What's the advantage of delegating to a node rather than running my own?
    • Delegating requires less technical knowledge and resources compared to running a node. While node operators manage the complexities, delegators can earn rewards with less hassle.
  15. 15.
    Is there a cap on how much MELD I can stake?
    • For individual staking positions, there's no specified cap. However, each node has a total staked amount capacity ranging between 100k and 20M MELD tokens.
  16. 16.
    Can I delegate to a node from outside the MELD platform?
    • Yes, all staking is done on smart contracts and we have a open and composable approach. You can interact directly with the smart contract or third parties might create specific UIs for this.
  17. 17.
    How do I claim my rewards?
    • You can claim your rewards directly through the MELD platform interface where you staked your tokens.
  18. 18.
    Why might a node be rejected from the MELD network?
    • Reasons can include not meeting the staking requirement, technical deficiencies, or not complying with the communication standards with the MELD team.
  19. 19.
    Can I increase my stake in an existing staking position?
    • You can create a new staking position at all times, but previously created positions can’t be modified

Slashing FAQ

  1. 1.
    What is Slashing in the MELD Network?
    • Slashing is a penalty imposed on node operators for misconduct or failing to meet network standards, leading to the forfeiture of a portion or all of their staked tokens.
  2. 2.
    How Many Warnings Trigger a Slash?
    • Three warnings against a node operator will trigger a slashing event.
  3. 3.
    Can Warnings Be Removed Over Time?
    • Yes, warnings expire after 12 months of the issuing
  4. 4.
    What Happens When a Node Operator Is Slashed?
    • The node operator loses the full amount of their staked MELD tokens as a penalty. Delegators lose their stake according to the rules and status of the node.
  5. 5.
    Are Delegators Affected by Slashing?
    • Yes, delegators can face conditional slashing depending on the pool's pledge amount. Pools with less than 2M MELD pledge face a 100% slash, while those with more are not slashed.
  6. 6.
    How Are Node Operators and Users Notified of Warnings and Slashes?
    • Notifications are sent via a dedicated Twitter account, and future updates may include email, Telegram, Discord, and the ability to subscribe to specific node updates.
  7. 7.
    What Constitutes a Downtime Warning?
    • A downtime warning is issued if a node has 3 hours of continuous downtime or less than 98% uptime over a rolling 30-day period.
  8. 8.
    What Happens If a Node Fails to Update Software on Time?
    • Failure to update software within the specified timeframe will result in a non-compliance warning.
  9. 9.
    What Are the Communication Protocols Node Operators Must Adhere To?
    • Node Operators must respond to time-sensitive operations within 3 days and to normal operations within 7 days to avoid a warning for neglecting communication protocols.
  10. 10.
    Is Inappropriate Content in Pool Information Penalised?
    • Yes, including offensive or copyrighted material in the pool name, description, or images will lead to a warning.
  11. 11.
    What Should a Node Operator Do After AVAX Validation Ends?
    • They must re-validate the AVAX network and track the MELD network within 3 days, followed by a 3-day period for MELD team re-activation.
  12. 12.
    Can Multiple Warnings of the Same Type Be Issued Consecutively?
    • The same type of warning has a 24-hour cooldown period before it can be issued again.
  13. 13.
    What Leads to Direct Slashing Without Warnings?
    • Direct slashing occurs in cases of data misreporting, tampering, or participation in network attacks.
  14. 14.
    How Can Node Operators Avoid Warnings and Slashes?
    • By maintaining high uptime, promptly updating software, adhering to communication protocols, and avoiding any misconduct.
  15. 15.
    Will Policy Changes Be Communicated in Advance?
    • Yes, all users and operators will be notified 7 days in advance of any policy changes.
  16. 16.
    What Should an Operator Do If They Disagree With a Warning?
    • They should contact the MELD team immediately to discuss and resolve the issue.
  17. 17.
    Is There an Appeal Process for Slashing Decisions?
    • The current document does not specify an appeal process; however, operators can contact the MELD team for any discrepancies.
  18. 18.
    How Does the MELD Network Ensure Fair Slashing Decisions?
    • The MELD team reviews each case thoroughly and ensures that all decisions are based on clear and fair criteria.
  19. 19.
    Can Slashed Tokens Be Recovered?
    • Once slashed, tokens are forfeited and cannot be recovered.
  20. 20.
    Where Can I Find More Information About Node Operation and Slashing?
    • Detailed information can be found on the MELD network's official website and the public node operators' dashboard.

Technical In-depth Questions

  1. 1.
    How is the weight for rewards calculated for locked staking positions?
    • Rewards for locked staking are calculated based on tiers with different weightings. For instance, a 1-year lock provides a weight of 175 compared to 100 for liquid staking.
  2. 2.
    What happens if I end a time-locked staking prematurely?
    • There is no option to do this. Time locked staking needs to finish before un-staking. You can leverage the functionalities of NFT based staking to easily transfer and trade your stake in the secondary market.
  3. 3.
    How does node slashing affect my staked tokens?
    • If you've delegated to a node that gets slashed, all of your staked tokens will also be confiscated as a penalty.
  4. 4.
    What are the technical requirements to set up a node?
    • You need to be an avalanche validator, maintain a high uptime, and communicate fluently with the MELD team for software and network updates. If you have specific questions, feel free to reach out on any of our communication channels
  5. 5.
    How is the total reward for each epoch determined?
    • The reward structure depends on the timeline. Initially, it's 6% of the MELD treasury of all staked tokens for the first 12 months, followed by other models.
  6. 6.
    Can I delegate my stake to multiple nodes?
    • Each staking position (NFT) can be delegated to one node. However, you can create multiple staking positions and delegate each to a different node.
  7. 7.
    How does the protocol revenue share work after the initial periods?
    • After the specified timelines, node validators and stakers will receive a portion of the protocol's generated revenue as rewards.
  8. 8.
    What measures are in place to prevent malicious node activities?
    • The MELD network has security protocols and constant monitoring. Nodes found with irregular activities can be slashed or banned. Staking contracts are audited to minimise exposure to risks.
  9. 9.
    How are the delegation fees determined for each node?
    • Node operators set their own delegation fees when they register their node.
  10. 10.
    What happens to the rewards I don't claim immediately?
    • Unclaimed rewards accumulate and can be claimed at any time by the owner of the NFT.
  11. 11.
    How is the reward rate determined for each epoch?
    • The rate is based on the total amount of MELD tokens staked across the network, the reward structure timeline, and the weightings associated with different staking tiers. Our contracts are open sourced so you can check the calculations directly on the code.
  12. 12.
    Are there measures to ensure a fair distribution of rewards among stakers?
    • Yes, rewards are based on the amount staked, the weight of the locking tier, and the time staked. This ensures a proportional distribution of rewards among all stakers.
  13. 13.
    Is there a technical limit to the number of nodes the MELD network can support?
    • While the MELD network is scalable, we have decided that a maximum of 101 nodes can validate the network at any given time. This number might be adapted based on governance changes.
  14. 14.
    Can slashed nodes rejoin the network?
    • They will need to re-apply for node operator. However we reserve the right to reject the application.
  15. 15.
    What security measures are in place to safeguard staked tokens?
    • The MELD platform employs advanced cryptographic techniques, regular audits, and strict security protocols to protect users' assets. Our code is fully tested and open source to ensure that our user’s funds are as protected as possible
  16. 16.
    What's the mechanism behind adjusting parameters like min/max stake?
    • Most parameters can be configured by the MELD team, and changes may be subject to agreements, community input, or DAO votes.
  17. 17.
    How does the system handle network congestion or high transaction volumes?
    • The MELD network is designed for scalability and can handle high transaction volumes. It leverages avalanche subnet technology and other optimizations to ensure smooth operations.
  18. 18.
    How is the MELD network integrated with the AVAX network?
    • The MELD network operates as an avalanche subnet, requiring node operators to also be validators on the AVAX network.
  19. 19.
    How frequently can the MELD team adjust the staking system's parameters?
    • While there's no set frequency, adjustments are made considering the network's health, stability, and community feedback. Any major changes may be put to a DAO vote.
  20. 20.
    In the event of a system upgrade, how does this impact existing staking positions?
    • System upgrades are designed to be backward compatible to ensure existing staking positions and rewards remain unaffected. Users will be notified in advance of any major changes and migration guides will be distributed.

Technical gotchas

  • Delegator fee is calculated based on base staked amount, not weighted amount
    • Edge case: ISPO-like systems will only use base amount and if the position is locked, extra weight doesn’t get delegated.
  • Some user operations need a lot of info to be processed and updated and might run out of gas. We need to create independent bots to update the info in the background and not affect end users
  • Rewards can’t be distributed if there are pending positions to migrate from locked to liquid
  • Reward amount is always absolute. While the rewards are %-based, the admin needs to calculate absolute amount before distribution of rewards
Last modified 2mo ago