Dear all, after posting the remuneration proposal for new node providers with Gen2 Hardware in December, we have received some valuable suggestions for further improvement of the remuneration model. The feedback was both from the community in this forum thread as well as from existing and potential future node providers. Main suggestions for the remuneration proposal were:
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How can smaller entities/node providers be incentivized to join as a node provider?
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How can we differentiate between incentivizing node providers in different regions, for different numbers of nodes?
Based on these suggestions, we have spent the last weeks working out an updated remuneration model for Gen2, which for clarity we will call V2 remuneration and is described here. The V2 remuneration model on a high level covers the following:
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Higher rewards for the first nodes of a new NP in order to attract more NPs in an effort to improve ownership decentralization.
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More refined rewards for nodes in new geographies, like South America, Africa, Asia and Australia, to stimulate further geographical decentralization.
With this updated remuneration model, it is much more interesting for potential new Node Providers to join with a small number of nodes. But it remains interesting for Node Providers who want to set up a larger number of nodes in a new country or region, to join as well. The node reward model is parametrized by:
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Geography multiplier: This multiplier will be lower, namely 2, for regions with many nodes (e.g. Europe and North America), and higher, namely 3, for regions where there are currently limited nodes present (such as Africa and South America)
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Reduction coefficient (r): The node reward of the n-th node of a Node Provider is multiplied by r ^ (n-1). The reduction coefficient r is dependent on the geography of the Node Provider. As a result, the first nodes of a Node Provider gets attractive rewards but it is increasingly less attractive to add additional nodes.
The detailed formulas and reward amounts can be found on the internet computer wiki.
Note that the V2 remuneration proposal only applies for a limited period of time in which the team is working on a more elaborate and automated remuneration solution in the NNS, the V3 remuneration. This future remuneration will be based on a reduction coefficient formula that applies a combination of NP, Country, Data Center and city. In addition, the future remuneration model will include penalties in case nodes should be unavailable.
Please continue to share any additional thoughts and suggestions on this remuneration model in this Forum thread.
I will update in this thread as well once the corresponding NNS proposal is live for voting.