Original Proposal

CBR Proposal Update

The community has been full of conversations and questions for the past two weeks. This post will attempt to summarize a few main points discussed during this time. Feel free to take this opportunity to ask more questions!

Results of the Poll

There was some confusion about whether there will be an averaging of the poll results.

As stated in the "Action" section of the proposal, the winning value will be the coded value. There will be no averaging of results.

Concerns

Beyond general questions that have been answered on the poll threads, the main concerns have dealt with the possible centralization and Earned Research Reward (ERR) distribution problems that CBR will produce.

These concerns can be broken into two concepts:

• Netweight / Competing for blocks
• Actual Block Creation

The netweight concern is that the difficulty CBR will bring to the network will discourage crunchers from maintaining an online balance (because of capitulation, MRC, or increased pool use). This would centralize the blockchain's netweight into those fewer large balances kept online to compete for blocks. This would also reduce the number of nodes connected to the network.

Centralized block creation is a similar concern, but involving the actual creation of blocks. With a higher difficulty, will only those with large balances be able to stake blocks?

Tied in with both of these concerns is the question of how to get crunchers their ERR. Limiting ERR distribution to staked blocks is an issue without CBR, and will become a problem when CBR is implemented.

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Current Reality

Gridcoin currently operates by forcing (not incentivizing) crunchers, generally low to medium balance wallets, to maintain an online balance. If crunchers do not maintain an online balance, they will not stake a block. If they do not stake a block, they will not receive their ERR.

At the same time, holders of GRC who do not maintain a magnitude are given their 1.5% APR regardless of whether or not they maintain on online balance.

When taken together, these points mean that the blockchain's netweight is generally secured by crunchers. This means many nodes of small to medium balances are competing to create blocks. In general, block creation is also distributed among these many nodes.

This structure of forcing low to medium balances to secure the network while providing idle-incentive for larger balances creates a system that allows for complete centralization of block creation whenever a large balance comes online. As soon as there is a moment where block creation is "owned" by one entity, even if block creation is entirely distributed 99% of the time, the blockchain is at high risk of manipulation. This is a major factor in much of the support for CBR. We need an increased and stable netweight so high balances cannot come online and centralize block production at will. We need many high balance wallets and many low to medium balance wallets competing to stake blocks.

Additionally, while the ethics behind forcing crunchers to stake to receive their ERR while large holders receive idle rewards can be argued, the technical scaling issues cannot. We have ~960 blocks produced a day, or a maximum of 960 ERR distributions a day. This will not scale.

So far, the main solution to the ERR distribution problem appears to be Manual Reward Claims(MRC), though MRC is by no means a definite development. Other solutions may pop up.

If we assume MRC is implemented, however, centralization concerns will be heightened: If crunchers are not forced to to stake, why will they contribute their low to medium balances to network security?

Addressing the Concerns

First, let's outline a few potential developments underway that might help address these concerns:

The most recent CBR poll stated:

Do you think the Stake Weight Problem is something that should be fixed in 2018, and how?

Yes, Constant Block Reward With Continued Exploration Into More Long Term Solutions

source

One of those potential long term solutions is developing a secure DPoR protocol.

@Brod is working on beacon minting which is essentially a type of DPoR. If proven secure and implemented, beacon mint will help crunchers stake based on the balance they hold in their RSA. Beacon mint is still in the early development and testing stages, so do not expect its implementation any time soon, if at all.

https://github.com/gridcoin/Gridcoin-Research/wiki/DPoR-Payments#beacon-minting
https://github.com/gridcoin-community/Gridcoin-Tasks/issues/172

@Ravonn believes they have found a way to remove the 6 month limit to GRC held in an RSA by forwarding that GRC to a new beacon. Let's call this beacon forwarding. [source?]

If beacon minting works out, both centralization concerns will have been addressed as crunchers will be given a greater likelihood to stake based on their contributions to distributed computing tasks. Beacon minting also pairs nicely with MRC if we build MRC to serve as an alternative to ERR distributed by staking.

If beacon forwarding works out, the requirement to stake before 6 months have passed will be gone, though it will still be arguably unreasonable to ask crunchers to wait 6+ months to receive their ERR.

If neither of these improvements are implemented, the concerns behind CBR and MRC (or some other scaling and ERR distribution solution) can still be addressed.

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Netweight centralization can been condensed into the question: With increased netweight and competition, and if they do not need to stake to receive their ERR, why would someone keep a low balance wallet online?

• They will still receive rewards when they do stake. A 1,000 GRC balance staking twice a year (difficulty 18) is 2% effective APR (CBR value of 10). Use @jamescowens rule of thumb math, ETTS in days = (10000/balance)*Difficulty, to determine time to stake for balances at different difficulties.

• Using the above formula, and assuming a difficulty of 20, we can estimate that a balance of 25,000 GRC will stake every 8 days. That may be a reasonable stake time to incentivize network participation. We can safely assume that there are a significant number of participants with 25,000 GRC or more. source When put in larger context of alternatives such as DPoS, masternodes, and an insecure network, a network secured largely by balances greater than 25,000 GRC is both decentralized and secure.

• Based on activity on other PoS blockchains, it is likely that many participants will keep their GRC online regardless of balance.

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When it comes to actual block creation, the argument is:

Secure network with semi-centralized* block creation (CBR) VS. insecure network with absolutely centralized block creation when a large balance comes online (current %APR).

*The semi-centralized block creation of CBR is still likely to be more decentralized than PoW, DPoS, and masternode systems.

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In the end, CBR centralization concerns are valid, however not as dangerous as maintaining the current %APR and ERR distribution systems. Additionally, the problems CBR presents can be addressed through future developments such as beacon mint or other improvements to PoS being worked on throughout the larger blockchain community.

These problems are in no way unique to Gridcoin. They are discussed in many PoS communities.

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We look forward to further discussion on the subject.

If you find yourself with any other questions or concerns, please do not hesitate to ask!

You can vote on the CBR Proposal and Poll until June 6th.