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Key highlights:
- Cronos POS Chain developers have proposed updating parameters to stabilize CRO staking yields as participation fluctuates. The goal is to maintain an attractive APR for delegators via responsive inflation.
- Proposed tweaks involve increasing maximum inflation, allowing faster increment rate changes based on ratios, and raising the target staking ratio.
- Implementation requires an on-chain governance vote by Cronos validators and delegators. The outcome could provide insights for other proof-of-stake networks.
The developers behind Cronos POS Chain, a public and decentralized blockchain network, have recently proposed making changes to key parameters that control token emissions and staking incentives, wih a goal is to stabilize and boost annual percentage rate (APR) for CRO staking amid fluctuations in staking participation on the network.
? Turning up the flow on Cronos POS chain:
— Cronos (@cronos_chain) January 16, 2024
? After the recent surge of staking ratio to >30%, a proposal aims to increase the staking ratio & fine-tune #CRO incentives, akin to adjusting a faucet on behalf of #CROFam delegators & validators.
Dive in ?? https://t.co/ptAawaUJ6N
Cronos POS Chain and CRO Staking
Cronos POS Chain, an EVM-compatible public blockchain network, has recently proposed adjusting key parameters that control token emissions and staking incentives on the platform. The primary goal is to maintain a stable and attractive annual percentage rate (APR) for staking the native CRO token amid fluctuating staking participation.
The chain operates on a Delegated Proof-of-Stake (DPoS) consensus model where CRO holders can delegate their tokens to validators who operate network nodes. In return, delegators receive staking rewards in CRO from inflation and transaction fees as an incentive for securing the network.
Over the past year, staking activity on Cronos POS has surged rapidly, with the ratio of staked CRO rising from around 30% of total supply to over 75% currently. However, this significant influx of staking participation has led to a dilution of rewards, causing APR for delegators to drop steeply from over 20% to under 10%.
The stakes are high ?
— Cronos (@cronos_chain) January 16, 2024
In the last 12 months, $CRO staking on #Cronos POS chain soared by 75% from 4.7 b to 8.2 b, exceeding the network's initial target staking ratio of 30% ?
This sets a new #CROFam benchmark for community-led growth in the world of staking! ? pic.twitter.com/sr1uw1kSgV
Why are parameter changes needed?
The current parameters of the Cronos POS Chain are designed to achieve a low and stable inflation rate of CRO, which is currently capped at 2.5% per year. However, this also means that the staking rewards are limited by the fixed supply of CRO.
As more users join the network and stake their CRO, the staking ratio (the percentage of total CRO supply that is staked) increases, which leads to a dilution of rewards for each delegator. This reduces the incentive for staking CRO and may affect the security and decentralization of the network.
To address this issue, the Cronos POS Chain developers have proposed a solution that aims to optimize the APR of CRO staking rewards , regardless of the staking ratio. The solution involves adjusting the following parameters:
- Increasing the maximum annual inflation rate from 2.5% to 3.7%, allowing more CRO to be minted each year to distribute as rewards.
- Raising the maximum annual increment of the inflation rate from 0.6% to 1.0%, enabling it to adjust faster based on changes in staking ratios.
- Changing the target staking ratio from 30% to 60% of total supply, aimed at strongly incentivizing higher staking participation to meet the new benchmark.
The proposed parameters are based on a formula that dynamically adjusts the block reward rate according to the staking ratio. The higher the staking ratio, the lower the block reward rate, and vice versa.
This way, the APR of CRO staking rewards will be more stable and attractive, regardless of the number of participants and the amount of CRO staked.
The bottom line
Stabilizing staking yields is an ongoing challenge for proof-of-stake blockchains as participation fluctuates. If effective, Cronos POS Chain's dynamic inflation approach could serve as a model for other DPoS networks looking to optimize staker incentives.
The parameter proposal has been submitted to the Cronos POS Chain governance system, where it will be voted on by the validators and delegators of the network. The voting period will last for 14 days, and the proposal will be implemented if it receives more than 50% of the votes and meets the quorum requirement of 40%.
The parameter proposal is expected to have a positive impact on the Cronos POS Chain network and the CRO token holders, if it passes the governance vote and is implemented successfully.