What are the conditions for validators to be penalized?
The answer to this depends on the validators status with Smoothly. Immediately after a validator registers and deposits their bond, they are given the status “Awaiting Activation”. These validators begin to accrue rewards immediately, but are unable to claim their rewards from the pool until they propose a block with the Smoothly contract as the fee recipient. Please see the table below, but in summary, any validator penalized with this status will have their accrued rewards added to the pool (zeroed out). After the penalty is enforced, they being to accrue from zero.
After a successful block proposal (one with the Smoothly contract as the fee recipient), the validators status with Smoothly changes to “Active”. Active validators have the ability to claim their accrued rewards and can claim rewards at all intervals going forward. Because of their ability to claim rewards from the pool, they are now penalized on their bond. All penalties are added to the pool and distributed during the rebalance. Please see the tables below for a simple breakdown.
Validator Status = Awaiting Activation
| Penalty Type | Penalty Amount | Insurance Affected? |
|---|---|---|
| Any Missed Proposal | Zero out rewards | No |
| Block Proposal with Incorrect Fee Recipient | Zero out rewards | No |
| Voluntary Exit (without exiting pool) | Zero out rewards and removal from pool index | No |
| Relay API Recognized incorrect Fee Recipient | Excluded from rebalance | No |
*A validators status changes to active when they propose a block with the correct fee recipient. ONLY ACTIVE VALIDATORS CAN CLAIM REWARDS.
Validator Status = Active
| Penalty Type | Penalty Amount | Insurance Affected? |
|---|---|---|
| 1st Missed Proposal | None, excluded from one rebalance | No |
| 2nd (and subsequent) Missed Proposal | 0.15 ETH from Insurance and excluded from rebalance until insurance is topped up | Yes |
| Block Proposal with Incorrect Fee Recipient | 0.65 ETH from insurance and removal from pool index | Yes |
| Voluntary Exit (without exiting pool) | removal from pool index | No |
| Relay API Recognized incorrect Fee Recipient | Excluded from rebalance | No |
How does Smoothly generate revenue to operate?
This project has been self funded thus far and although it’s designed as a public good, our intention is to make this project sustainable by charging a small fee to cover the gas and server costs associated with the oracle operators. The fee to cover this looks to be between 1.5% and 2.5% of all block proposals sent to the pool, assuming we can onboard at least 300 validators. Additionally, our intent is for this to be a community ran project in the future with volunteers who align with the projects core principals.