Scalable Validator Pay: The Validator Sustainable Pay Proposal on Telos

The "Scalable Validator Pay" initiative, previously known as the Telos Network Validator Sustainable Pay Proposal, marks a pivotal advancement within the Telos community. Proposed in June 2021, it aimed to establish a sustainable pay model for network validators. Garnering positive feedback from a community vote, it has been officially implemented following the achievement of a sustained price increase in TLOS. This innovative model adjusts the payment to validators dynamically, in line with the current TLOS token price. 

For a detailed overview of the original proposal, please visit: https://kquainta.medium.com/telos-network-validator-sustainable-pay-proposal-9ea7f2db7f76.

Otherwise, below is a simplified explanation of it and its significance to Telos in 2024 and moving forward.

Key Aspects of the Proposal

Dynamic Payment Adjustment:

The proposal suggests adjusting the amount paid to network validators based on the TLOS token price. This avoids overpaying validators as the token's value changes and ensures proper stewardship of TLOS token supply.

Use of Delphioracle:

The TLOS token price is recorded by an on-chain contract called "delphioracle," which updates the price several times a minute based on data from multiple network validators. This ensures a consistent and tamper-resistant median price is used for calculations.

Logarithmic Payment Formula:

Payments are calculated using a logarithmic formula that adjusts the number of TLOS paid out based on the token's seven-day running average. The formula aims to slightly increase USD equivalent pay when the TLOS price rises and decrease it when the price falls, incentivizing validators to contribute to the network positively.

The Logarithmic Payment Formula with the pay interval is:
[# of TLOS paid] = 8.34 times [{TLOS price} to the power of -0.516]

Validator Types and Payments:

The network differentiates between active validators (those processing transactions) and standby validators (rotated into active duty approximately weekly). Standby pay is precisely half of the active validators.

Token Cap to Prevent Inflation:

A maximum cap of TLOS tokens is set to prevent unsustainable inflation, especially if the TLOS price falls below .20c.

Significance to the Telos Community

Sustainability:

This model promotes the long-term sustainability of the Telos network by ensuring that validator payments are in line with the network's economic conditions.

Encourages Network Growth:

By adjusting payments based on token price, validators are incentivized to contribute to the network's success, potentially leading to a price increase.

Prevents Overpayment and Inflation:

Dynamically adjusting payments helps avoid the risk of overpaying validators, which could lead to unnecessary inflation and devalue the TLOS token.

Technical Considerations

Understanding the Payment Formula: Validators and community members should familiarize themselves with the payment formula to understand how payment adjustments will be calculated.

Monitoring TLOS Price: Since payments are tied to the TLOS price, validators need to be aware of current and projected token prices.

Conclusion

The Scalable Validator Pay for Telos Network Validators is a meticulously crafted strategy designed to balance the economic framework of the network. It adeptly harmonizes the essential need for fair compensation of validators with the imperative of sustaining a stable and robust token economy. With the addition of EVM fees being burned monthly, Telos is on the path to being a deflationary network.