SPoS (Sustainable Proof of Stake), the world’s first ESG compliance-based reward distribution system emerges as a groundbreaking governance-based system that powers the 5ireChain ecosystem. This article delves into the election process, reward calculation, and the role of Sustainability score and Reliability score in SPoS, providing insights into how this innovative approach fosters decentralization, robust security, and positive contributions toward the United Nations 2030 Agenda for Sustainable Development.
The Election Process: Nominators and Validators
SPoS employs NPoS in the election process. The selected Validators and their respective Nominators are rewarded for contributing to the security of the 5ireChain network. In addition to this, they are highly incentivized for their Sustainability and Reliability scores. The active set of Validators is determined based on the overall nominated stake, considering both the Validators’ own stake and the stake of their Nominators backing them.
Nominators play a crucial role in holding Validators accountable by staking varying amounts directly to the Validators. By diversifying their nominated stake across multiple Validators, Nominators contribute to network security and create a sustainable blockchain ecosystem.
Reward Calculation and Distribution:
The rewards in SPoS are calculated using the base rewards along with the Sustainability score derived from the ESG (Environmental, Social, and Governance) scores, which reflect the commitment of validators to the 17 United Nations Sustainable Development Goals and the Reliability score. The base rewards are determined similarly to industry standards, with points allocated for producing canonical blocks and referencing non-canonical blocks.
However, an important distinction is that Validators with higher Sustainability and Reliability Scores receive preferential treatment regarding rewards. This ensures that the other actors in the network are empowered to follow the Validators who adhere to the protocol and demonstrate positive behavior while discouraging behavioral misconduct.
The base era points are awarded in the following manner:
- 20 points for each canonical block produced|
- 2 points (to the block producer) for each reference to a previously unreferenced non-canonical block,
- 1 point to the producer of each referenced non-canonical block.
Sustainability and Reliability Score are in the range of [0,100]. The total number of points accrued by a validator v in an era e is:
It must be noted, that if all the validators in an era command a poor ESG and Reliability Score, they will still get generous rewards, however as soon as there is one with a higher Sustainability and Reliability score, the rewards will be heavily favored towards that Validator.
To maintain good behavior among Validators, slashing is introduced in SPoS. When a validator commits an offense, such as a violation of the protocol or system downtime, a specific value will be subtracted from the balance of the validator, and their nominators also face a penalty. This penalty is a reduction in the nominators’ stake, serving as a deterrent against negative behavior and reinforcing the importance of responsible validator conduct.
ESG Scores and Oracle Service:
ESG scores play a significant role in SPoS. These scores are obtained from a decentralized ESG oracle service that collects data points from multiple independent ESG data providers. The data undergoes a process of extraction, transformation, and loading (ETL), followed by assigning weights based on data reliability to handle outliers. The ESG oracle provides E, S, and G scores, as well as a weighted average total score. Future developments include the incorporation of sentiment analysis to introduce bias to the equation, enhancing the overall accuracy and meaning of the ESG scores.
Sustainable Proof of Stake (SPoS) is transforming blockchain governance by aligning it with the United Nations Sustainable Development Goals. Through NPoS-based election process, reward calculation based on Sustainability and Reliabilty score, and the use of slashing to enforce good behavior. SPoS encourages a sustainable and ethical blockchain ecosystem. With ongoing research and development, SPoS aims to continually improve its ESG scoring system and further contribute to the advancement of sustainable development.
More information about 5ireChain can be found by clicking on the following links:
Testnet Explorer: https://explorer.5ire.network/