Node Provider Remuneration

Node providers receive rewards (remuneration) for operating node machines that run the IC network. The single source of truth for node provider rewards is the NNS, where changes can only be made through NNS proposals adopted by the IC community.

This page summarizes the current node provider rewards and serves to discuss proposals for future reward models. The NNS distributes rewards depending on

• the node hardware version

• geography

taking into account the fact that different hardware versions have different capex and opex that vary with the geography. The prices listed for hardware are based on quotes received from different vendors. See Node Provider Hardware for more details on validated hardware configurations. The calculations assume an amortization of capex over 4 years. Operational expenses are based on numbers shared by current node providers. The actual hardware and operational expenses may differ depending on negotiation of individual NPs with their vendors. All prices are in XDR unless explicitly stated otherwise.

Genesis Remuneration Model

The initial remuneration model included a profit margin of 150%, accounting for the fact that early NPs took on a significant risk when they decided to invest into hardware and operations prior to Genesis. In other words, the rewards distributed were 2.5 times the expected expenses. The following table provides an overview of expenses and rewards paid, broken down by geography. Hardware expenses include shipping and installation charges.

	HW	OpEx over 4 years	Total over 4 years	Incl. profit margin	Reward per month
USA	8676	8090	16766	41915	873
US - FL/GA/CA	8676	12200	20876	52190	1087
EU	8089	12781	20870	52175	1087
Asia	7882	15389	23271	58178	1212

After the first nodes were up and running, the decision was made to increase the storage capacity of all nodes to support larger subnet states. This required additional hardware and operational expenses. As it was quite difficult to get node providers to implement these changes, a profit margin of 350%, i.e. a multiplier of 4.5, was applied to these additional expenses.

The current remuneration covers only a portion of these additional expenses, so the foundation is currently covering the rest. Once the additional storage is usable by the IC, we propose to update the Genesis remuneration model to cover all expenses. The following table illustrates the maximal rewards received by NPs today. We propose to update the Genesis remuneration model accordingly.

	Initial rewards over 4 years (see above) Gen 1 HW	Upgrade expenses	Incl. profit margin	Total	Proposed reward per month
USA	41915	7008	31536	73451	1530
US - FL/GA/CA	52190	7008	31536	83726	1744
EU	52175	7008	31536	83711	1744
Asia	58178	7008	31536	89714	1869

[WIP] Gen2HW-ready Remuneration Model

This section presents a proposal for a new remuneration model that accounts for the fact that the second generation of node hardware is significantly more expensive than the first generation. It reduces the profit margin to 90%, i.e. a multiplier of 1.9, as the risk for node providers is lower since the IC is an established blockchain network. The operational expenses are increased to allow for a 10% inflation per year.

	Gen 2 HW	Ops in 4 years	Total over 4 years	Incl. profit margin	Reward per month
USA	16000	11845	27845	52905	1102
US - FL/GA/CA	16000	17862	33862	64338	1340
EU	12000	18713	30713	58354	1216
Asia	12000	22531	34531	65609	1367

Since the aim is to grow the IC network outside of existing geographies, we are preparing a remuneration proposal for South America, Africa, and Australia as well. This is work in progress.

Conversion Rates and Inflation

The above calculation is based on USD/XDR and CHF/XDR rates as per November 2022.