Governance, and it’s execution in the decentralized era, has shaped the entire blockchain industry since the beginning of Satoshi Nakamoto’s vision. There have been many experiments in governance throughout the years; and with them, many challenges, and many successes. Now, after years of trial and error, some governance mechanisms have come out on top of balancing decentralization, security, and scalability hurdles — and Everest’s governance model is one of them.
In this article, we will explore two key themes, after our exploration of Everest Network Ltd and the Everest Foundation in our last article. We will first discover how proof of stake governance through validators of the blockchain for EverChain works, why one would want to become a validator, and we will also explore the governance of identity to ensure user’s are the only ones allowed access to their identity.
Governance for Blockchain — EverChain
EverChain is a proof of stake (PoS) blockchain, and therefore governance is carried out by two key groups, validators and delegators. Validators are full-node operators. In total, there will be 100 potential validator nodes at any given time, each of which is required to stake at least 400,000 ID tokens to maintain their status as a validator. However, only 21 active signers will be used, at random, during a given time.
Every seven days, active validators — those who participate in consensus — are chosen from all validator candidates. Up to 100 validators are selected from all validator candidates which meet the criteria based on the amount of the ID they have staked. The amount of staked ID is the combination of the Validator’s pledge stake (400,000), plus their delegates’ additional pledges, as well as the pro-rata percentage of the Validator Pool. Therefore, if a Validator can attract sufficient delegation from the ID community, they are not required to commit all 400,000 ID tokens from their own funds.
To ensure decentralization of the ecosystem, other ID tokenholders may delegate their stake, in other words the number of tokens they hold, to a validator in return for staking rewards.
Staking ID is independent of consensus, and the 100 node Validators will share in the reward on a pro-rata basis based on staked value. In other words, the more delegation a Validator attracts, the more rewards it will receive. Therefore, as in other PoS blockchains, it behoves Validators to act responsibly. In this case, acting ‘responsibly’ includes the fair distribution of staking rewards to delegates, maintaining their node’s uptime, and ensuring that the EverChain network is adequately supported.
Validators also play other critical roles within the EverChain network. The governance of minimum pricing, rewards for validators and burn percentage will be determined by validators, and by extension delegators, thus representing the wishes of all ID holders. The ability to determine critical elements of the POS-based network ensures that it is sufficiently decentralized so that no single participant, including EF, controls it. Instead, the Validators must collectively reach a majority vote on the aforementioned elements of the network. These votes could, for example, determine minimum fee pricing charged by the network — making decisions at the protocol-level as opposed to transaction issuers arbitrarily setting fees to their own agenda and destabilizing the network.
To qualify as a Validator, each node must commit to staking the aforementioned number of tokens for a minimum of 12 weeks, with a four week un-bonding period — during which time a Validator’s stake remains locked and the Validator will continue to receive rewards for their service.
Validators also play a part in, and benefit from, identity creation. When creating identities and wallets, as well as transactions on the network, all fees must be paid in the ID token. These transactions carry fees, a portion of which will be paid directly to node Validators, and part of which will be burned — benefitting both Validators and regular token holders. The percentages paid to Validators and the percentages burned will be determined by EverChain’s governance system after the initial vote of ID holders. No validator will be able to vote more than 10% of the network power, and validators are prohibited from colluding.
The actual emission of rewards to active Validators, and the minimum pricing for identity verification activities as discussed above, are determined on a quarterly basis through a community governance voting round. In this way, rewards are first set by validators — and by extension their delegates.
How can Validators Influence Tokenomics?
We will explore tokenomics of the ID token and the CRDT stablecoin in our next article, but it’s relevant to say a few words on tokenomics here, in the context of governance.
It’s often asked in the Everest community how it will grow to be a high-volume ecosystem with a relatively low fixed supply of 800 million ID tokens, and a deflationary tokenomic model. This, in part, is where validators play a crucial role in the token economy of Everest.
Validators may vote and decide on the burning rate of ID tokens, in a similar mechanism to token burn mechanics in Avalanche’s network. To ensure the burn rate doesn’t exceed expectations and affect network stability, Validators can decide on the burn rate of tokens.
In this way, our model looks somewhat similar to the token governance model adopted by the payment platform TerraLuna, albeit with an added layer of regulatory approval to ensure that Everest’s governance environment remains inclusive of institutional users and governments worldwide.
Who can become a validator?
Anyone with sufficient ID can become a Validator, as the technical complexity has largely been removed. That is, the infrastructure will automatically spin up a node on a user’s behalf with the appropriate EverID + EverWallet verified, and ID tokens “vaulted” for a given time period. While the power consumption in a PoS system is orders of magnitude lower than proof of work systems, there is still a need to keep node uptime close to 100% and the maintenance of a pool requires some technical skills, which is why that complexity was abstracted.
Processing transactions is mostly CPU bound, and as a minimum, Validators will run CPU optimized servers with direct facing internet connection (public IP, no NAT), an 8 core CPU, at least 16GB of RAM, and 500 GB SSD storage.
It is expected that institutions will run a full node and become validators on the Everest network, especially those who are building on EverChain, who could attract sufficient delegates and contribute to the health of the EverChain blockchain.
Governance for Identity — Datagram + IDChain
As we previously covered in our last article, user identities are stored in a “datagram”, a DAG in distributed storage, and the IDChain points to elements in that storage. The system was designed so that users’ identity data is encrypted, distributed, and only the user/owner can access the identity data. No single entity or organization, even the Everest Foundation, can gain access to a user’s identity store. The IDChain is a simple EVM-compatible POA chain, and users have control over, for example, deleting pointers from the IDChain to their identity, and rightly fulfill their “right to be forgotten”. It is effectively a POA in which no one has the authority.
Inherent in this design is that the user controls their own identity, which means that over time they can be pseudonymous, and monetize or share their identity data as they see fit. Until users control their identity data store, centralized systems will control who has access, levels of privacy, how that data gets monetized, etc.
Although the distributed DAG architecture is “private by design”, with each element of a user’s identity encrypted, the Everest Foundation recognized that identity requires recourse, and needed to plan for a worst case scenario. As such, EF will appoint Key-holders drawn from internationally and regionally recognized international organizations, such as NGOs, IGOs, and philanthropic organizations. From these candidates, the Key-holder must ensure they act for the benefit of the IDChain, their principles must be aligned with the ‘Principles of Identity for Sustainable Development Goals’.
No single Key-holder will have access to user data, nor possess sufficient keys to open the network or storage alone, but the combination of multiple, unrelated keyholders can come together when required. For example, in certain events, such as a network breach, Key-holders can collectively handle such issues.
Community and User-Controlled Governance
It’s important to distinguish between Validators in EverChain and governance of identity storage, as the former validates to support and secure a transaction network (EverChain), while the latter is designed so that, barring any catastrophe, only the user has access to their identity.
In our next article in the series, we will explore the role of our tokens within the Everest ecosystem, both ID Token and the CRDT stablecoin, and examine how they form the keystone of our network.