- Anyone can stake with Band Protocol and secure the oracle using dataset tokens, which can be exchanged with BAND using Bonding Curve smart contract.
- XFN tokens (the financial dataset tokens) can be used for staking and securing price feed oracle. Future datasets will operate in a very similar way pending feedback.
- The staking incomes come from 3 sources:
a) Query fees from data consumptions
b) 5% annual dataset token inflation
c) Bonuses from ecosystem fund (25% first year)
Each dataset has its own unique dataset token, which can be bought or sold with BAND. The token represents the collective ownership of the dataset. A user who owns a dataset token has the right to participate in the data providers selection and earn a portion of fees collected from dataset queries.
Dataset token holders have two key roles they can participate in:
Data providers — responsible for curating and supplying high-quality data to smart contracts. Data providers must stake a bond for the right to earn rewards from the users of the data as an elected data provider and disincentivize malicious behavior.
Data providers are ranked by the number of tokens staked for them. High-ranked data providers are entitled to provide data to the network and earn a portion of query fees.
Stakers / Voters — general dataset token holders, not providing data to smart contracts, can stake their dataset tokens as a vote for the data providers they trust the most to perform the hard work for them. Token holders have a direct incentive to curate the best list of data providers to ensure data integrity and usages.
Query fees distributed to the data providers also flow to the participants who have staked towards those providers as they are providing additional security to the protocol. By staking for a data provider, you are eligible to receive part of the query fees, similarly to delegated proof-of-stake rewards employed by systems such as EOS and Cosmos.
1. Staking Returns from Query Fees
- Query fees — Band Protocol data query fees are fixed, unless voted upon to be changed, and are currently set at 0.002 ETH per oracle query.
- Staking revenue share — currently, query fees paid by data consumers are divided among all data providers, and then split between the data providers themselves (30%) and their stakers (70%)
We can make a simple calculation of total annualized revenue for staking on a data provider with the following:
2. Staking Returns from Bonding Curve Inflation
To stimulate a healthy token economy and help bootstrap the network from its early stages as adoption grows, all the stakers will receive a 5% annual inflation rate. This is done automatically through a smart contract, technically “shifting” the bonding curve down. This mechanism ensures economic incentive to stake the dataset tokens and secure the network rather than just passively holding tokens.
3. Staking Returns from the Ecosystem Fund
All the early stakers for financial data feed will receive bonus airdrop XFN tokens from the ecosystem fund with the below limit:
Year 1: 25% of the stake (3.16M tokens limit)
Year 2: 15% of the stake (1.89M tokens limit)
Year 3: 5% of the stake (631.6K tokens limit)
Year 4: 2.5% of the stake (315.8K tokens limit)
Essentially, Band Protocol team will distribute XFN tokens to the general stakers to ensure maximum decentralization over time, while maximizing the security at the beginning.
Total Staking Returns
The total rewards stakers received are calculated from the three portions combined:
Example staking reward calculation:
For example, if BitSwing generates moderate traffic of ℳ queries per week on Mainnet and there are a total of 7 data providers, the total query fees for financial dataset stakers on each data provider would be:
As an example, Alice stakes 20,000 XFN (5%) out of 400,000 XFN staked for a provider, Alice will receive an equivalent of 0.00052·ℳ ETH in XFN tokens per year in query fee.
Here’s a simple projection of XFN tokens Alice will accrue in the first year, assuming a fixed XFN price of 0.2 BAND/XFN and 0.0028 ETH/BAND (in practice, these two rates fluctuate).