Proposed Gen-1 Remuneration Model

From Internet Computer Wiki
Revision as of 19:06, 21 December 2023 by Katie.peters (talk | contribs) (Added link to approved target topology)
Jump to: navigation, search

Interim remuneration proposal: rewards for Gen-1 node machines after 48 months

With the approval of the IC target topology, a target of 750 node machines in the IC network is defined for the next half year/year. This target is defined keeping in mind that several of the Gen-1 node provider agreements will expire in the next two years.

Although the IC target topology requires less node machines than the current number of node machines (750 node machines vs approximately 1300 node machines), the IC network still requires an extensive number of Gen-1 node machines for operating purposes.

The long term objective is to have remuneration “based on useful work” for all node machines, which means node rewards are paid out based on the actual contribution to the IC, e.g. the number of blocks created, the size of the blocks created, how many times the node machine has been a block master, in which subnet the node machine is running, etc; regardless of the type of node machine and when the node machine was bought. Since implementing this new approach to remuneration requires extensive discussion within the community as well as time to design and develop, an interim approach is required for the remuneration of Gen-1 node machines for which the node provider agreements will expire.

Despite the introduction of Gen-2 node machines, the Gen-1 node machines are still very relevant for the IC network for several reasons:

  • They provide for the necessary decentralization of the IC network.
  • Not all subnets require SEV-SNP functionality (the additional security functionality introduced with Gen-2 node machines).
  • Since the initial capital investments for the Gen-1 node machines have been amortized, Gen-1 node machines are economically very attractive to operate.
  • They provide for a “buffer” to scale up the IC network should use of the network start to increase sharply.


On the other hand, Gen-1 node machines in the IC network have several constraints:

  • They cannot be deployed in every IC subnet since some subnets require node machines with SEV-SNP support.
  • As described in the forum posts on node diversification (see node diversification part 1 2, node diversification part 2) Gen-1 node machines are less decentralized and more concentrated at fewer node providers than Gen 2 node machines.
  • There are too many Gen-1 node machines to fit the IC target topology.


Taking into account both the benefits and constraints of Gen-2 node machines, the following interim remuneration scheme for Gen-1 node machines after 48 months is proposed:

  • Rewards are optimized for 28 node machines - if all Gen-1 node provider agreements have reached 48 months, it can be calculated that with a maximum of 28 nodes per Gen-1 Node provider, sufficient node machines remain in the IC network to meet the target topology of 750 node machines. However, it will still be possible for a Node Provider to continue to operate up to 42 node machines (similar as for Gen-2 Node Providers, and described in node diversification part 2), for example in anticipation of growth of the IC network and increase in ICP token price.
  • Rewards for Gen-1 node machines are lower than at launch - rewards for Gen-1 node machines are lower than the rewards set at launch because of several reasons: not all Gen-1 node machines add to decentralization, Gen-1 node machines cannot be deployed in every subnet, and the initial investment costs for buying the node machines have been amortized by the node provider.
  • Rewards apply for a period of 12 months - the interim remuneration proposal applies for a period of 12 months, after which the scheme will be reevaluated based on feedback and input from the community.
  • Rewards for Gen-1 node machines follow a similar formula as the rewards scheme for Gen-2 node machines - node rewards will follow the same formula as remuneration for Gen-2 node machines, which is Initial reward for first node machine x Multiplier x Reduction Coefficient.


The Gen-1 node machine rewards are set at the values specified in the below table.  To summarize the remuneration scheme, for a geography g, let

mult(g) be the geography multiplier

value(g) be the base value for a Gen-1 node in XDR

r(np, g) be the reduction coefficient

Then the monthly reward for the n-th node of a Node Provider (np) in geography g are defined as follows:

reward(g, n) = value(g) * mult(g) * r(np, g) ^ (n-1)

With a multiplier of 2.5 on the base value of the node, and a reduction coefficient of 0.97, this optimum of 28 node machines as described above can be achieved. The following table shows the geography-dependent values and the monthly reward for the first node onboarded. A few previously-separated geographic areas have been combined:

Geography Gen-2 value per node before multiplier for comparison Reduced value for non- SEV-SMP nodes Multiplier Monthly reward for 1st node Reduction coefficient r
US - California 771 496 2.5 1247.5 0.97
US - other 647 465 2.5 1162.5 0.97
Canada 771 496 2.5 1247.5 0.97
Europe 771 496 2.5 1247.5 0.97
Japan and Singapore 844 568 2.5 1420 0.97

The above formula and table can be used to calculate the accumulated profit for each additional node. When calculating the accumulated profit for Gen-1 node machines in the United States, the below graph results, which shows the total profit for all machines up to the n-th node machine. It shows that when 28 nodes (2 racks of node machines) are kept on the IC network, almost maximum profit is achieved (30 to 31 node machines being the optimal). For the detailed calculation of the total profit for each additional node machine, please refer to the appendix.

Similar graphs will apply for the other regions as well. Graph1 n-th node.jpg Appendix - calculation of Accumulated profit (example, US node)

n-th node Base value per node Reward for n-th node Profit Profit %-age Accumulated base value Accumulated Rewards Accumulated profit Accumulated profit %-age
1 465 1163 698 60% 465 1163 698 60%
2 465 1128 663 59% 930 2290 1360 59%
3 465 1094 629 57% 1,395 3384 1989 59%
4 465 1061 596 56% 1,860 4445 2585 58%
5 465 1029 564 55% 2,325 5474 3149 58%
6 465 998 533 53% 2,790 6472 3682 57%
7 465 968 503 52% 3,255 7441 4186 56%
8 465 939 474 50% 3,720 8380 4660 56%
9 465 911 446 49% 4,185 9291 5106 55%
10 465 884 419 47% 4,650 10175 5525 54%
11 465 857 392 46% 5,115 11032 5917 54%
12 465 832 367 44% 5,580 11864 6284 53%
13 465 807 342 42% 6,045 12670 6625 52%
14 465 782 317 41% 6,510 13453 6943 52%
15 465 759 294 39% 6,975 14212 7237 51%
16 465 736 271 37% 7,440 14948 7508 50%
17 465 714 249 35% 7,905 15662 7757 50%
18 465 693 228 33% 8,370 16354 7984 49%
19 465 672 207 31% 8,835 17026 8191 48%
20 465 652 187 29% 9,300 17678 8378 47%
21 465 632 167 26% 9,765 18310 8545 47%
22 465 613 148 24% 10,230 18923 8693 46%
23 465 595 130 22% 10,695 19518 8823 45%
24 465 577 112 19% 11,160 20095 8935 44%
25 465 560 95 17% 11,625 20655 9030 44%
26 465 543 78 14% 12,090 21198 9108 43%
27 465 527 62 12% 12,555 21724 9169 42%
28 465 511 46 9% 13,020 22235 9215 41%
29 465 495 30 6% 13,485 22730 9245 41%
30 465 481 16 3% 13,950 23211 9261 40%
31 465 466 1 0% 14,415 23677 9262 39%
32 465 452 -13 -3% 14,880 24129 9249 38%
33 465 439 -26 -6% 15,345 24568 9223 38%
34 465 425 -40 -9% 15,810 24993 9183 37%
35 465 413 -52 -13% 16,275 25406 9131 36%