SPARC: Staking Performance And Reward Coopetition

TL;DR

This paper introduces SPARC, a staking coopetition system that incentivizes decentralization and growth in proof-of-stake networks by rewarding smaller operators more effectively, addressing centralization risks.

Contribution

It proposes a novel nonlinear reward mapping for staking, innovative mechanisms against Sybil attacks, and gamification to enhance engagement and transparency.

Findings

Higher yields for smaller operators promote decentralization.

Reduces risk of stake centralization seen in existing protocols.

Provides a framework for secure, transparent staking incentives.

Abstract

This paper presents a novel staking coopetition design aimed at incentivizing decentralization and continuous growth of economic security within a proof-of-stake system. Staking rewards follow a nonlinear mapping relative to stake size. This affords the highest effective yields to smaller operators, fueling network growth and giving users an incentive to delegate their stake to smaller operators. This prevents the preferential accrual and centralization of stake seen in popular blockchains such as Ethereum, where popular liquid staking protocols control large fractions of the total stake thereby having outsized potential impacts on the economic security of the protocol. The proposed system addresses key challenges such as Sybil attacks and offers a comprehensive framework for future research and implementation. We introduce innovative mechanisms and gamification elements, to enhance user engagement and provide transparency in emissions.