Governance Proposal: Increasing the Max Multiplier and Confirming the Onboarding of more Block Specimen Producers
The Covalent Network proposes increasing the max delegation room for CXT holders to 40X, targeting roughly ~35% of the circulating supply staked—or approximately ~297M CXT, with 5 new Block Specimen Producers (BSP) being onboarded at 300K CXT staked each on average.
Background and Current Challenges
The Covalent Network is facing a critical challenge as the delegation room for CXT holders is filling up too quickly. This rapid saturation is driven by the increasing number of CXT holders eager to stake their tokens and earn emissions yield by securing the protocol. As more CXT holders seek to delegate, the available delegation room is nearing its limit, creating a bottleneck that could hinder further participation. The time required to onboard new Block Specimen Producers (BSPs) is not keeping pace with the growing demand, resulting in a mismatch that leaves little room for additional delegations.
There are three levers the Covalent Network can adjust economic policy: increase total operators, change the operator staking requirements, and lastly change the max multiplier.
Here is the mathematical rationale for the proposed Max Multiplier increase to 40. Currently, there are 20 operators self staking on average slightly over 300K CXT and the total staked amount with delegation is 209.1M CXT comprising 24.42% of circulating supply.
The target is ~35% of the circulating supply or a staked amount with delegation of 297.5M CXT. With 25 BSPs to achieve the target of roughly ~35% of circulating supply staked, assuming the new operators self stake on average 300K CXT each, the Max Multiplier should be increased to 40X, in order to bring the expected total staked and delegated amount to approximately 297.5M CXT.
Additionally, an adjustment of the emitted rewards to sustain a target APY of ~11% is proposed. Based on a total staked amount of 297.5M, rewards per day should be 89,657.53 CXT or ~32.5m CXT emissions a year to achieve the ~11% APY target.
Increase Max Multiplier: The Covalent Network proposes an increase in the Max Multiplier to better accommodate the growing demand for CXT delegation. As recently as May 24, 2024, the Max Multiplier was increased to 34X. However, recognizing the rapid pace of growth and the necessity for additional capacity, the new proposal recommends increasing the Max Multiplier to 40X. This increase is crucial for ensuring that the delegation room can support the expanding network without causing bottlenecks or limiting the participation of CXT holders.
Onboarding New BSPs: To further support the network's expansion and ensure robust security, the proposal includes onboarding additional Block Specimen Producers (BSPs). Currently, there are 20 BSPs active within the network. Previous to this proposal, Covalent Network onboarded 5 new BSP operators to help secure the Ethereum Wayback Machine, bringing the total to 25. Each BSP is expected to stake an average of 300K CXT, which will significantly enhance the network's capacity and security infrastructure. By increasing the number of BSPs, Covalent can better distribute the staking load and provide more opportunities for CXT holders to delegate their tokens effectively.
Voting Process
Eligibility:
All CXT token holders, including those who are staking
How to Vote:
Navigate to the Snapshot page. https://snapshot.org/#/covalenthq.eth/proposal/0xb5f8c3422b40a336d0f904d341d9978ef0387d903a167c5fc5fb656ce5d6cdf7
Connect your Ethereum wallet on the mainnet.
Follow instructions and vote by signing a meta-transaction.
Voting weight is proportional to the amount of tokens held.
Quorum:
10M CXT of voting weight
Duration:
2 days
Importance: These changes are crucial for ensuring the security and stability of the Ethereum Wayback Machine, addressing the Long-Term Data Availability problem with modular data infrastructure.
For more details on the design of the EWM, please refer to this video.
