First, we are very excited to update the community that we have not identified any issue during the Phase Zero of State Guardian Network (SGN) mainnet, and we are now on the verge of transitioning into Phase One where staking rewards will start to distribute on November 30th.

Community Feedback

We would also like to thank many community members’ valuable feedback on the launch plan. Among all the feedback we received, one topic is consistently mentioned by various community members and future validator partners: the staking reward schedule during the transition period from the initial Phase Zero to the final Phase Four should not be a constant value that is the same as the final stage of Phase Four, but rather, should be a gradually ramping-up process. 

Since this transition is a relatively short period of time, we did not put a lot of analysis on this transient transition period. However, we do now recognize that our community cares about this transition process and we would like to respond to our community properly. We summarize several key reasonings below.

Reduce the degree of centralization

The first reason is about reducing the chance of early centralization. In the early Phases, we are still in the process of onboarding external validators. It is entirely possible that some of our users are already using familiar validating/staking services like Cobo Wallet, Binance, Staked.us, Staked.fish and more. Therefore, making an immediate transition to a more “manual” process might be challenging for many of our users and community members who want to safeguard the network. Some community members raised such concern that if we transit to Phase One with a full reward schedule, large staking holders can take up a larger percentage of the reward more easily than smaller and individual participants who gradually join the network. We recognize our community’s intention to make sure Celer’s State Guardian Network is secured with as much decentralization as possible. Therefore, we believe a gradual ramp-up of the reward schedule makes sense to address this concern. 

Incentive alignment of reward and responsibility

The second reason is about creating a consistent and self-enforcing alignment between rewards and responsibility. As we transition through multiple phases of the SGN launch, the delegators are taking on more responsibilities. For example, in Phase One and Two, there is no chance of getting slashed, but when we reach Phase Four, delegators need to carefully choose their validators and run the risk of slashing due to validator errors or downtime. If we launch Phase One with a full block reward schedule, we run the risk of actually discouraging the level of participation as we transit through the different Phases. However, if the reward schedule can be on a constant rise as SGN transit through phases, it actually creates a positive feedback effect to attract more staking power and therefore ensure a better secured State Guardian Network. 

Community governance should have the last say

The third reason is that as we transit to later phases, partner and community validators will be able to join the governance process.. There might be more findings as we launch the staking program in the wild: is the block reward too low? Is the block reward too high? Is there any other way the reward should be distributed to boost the network effect of the layer-2 scaling network? Our community would like to see governance start to take active roles in the protocol parameter changes and decisions. 

Update on SGN Block Reward during Transition 

Even though we don’t expect the Phase One to Phase Four transition period to be a very long period, we do recognize our community’s voice and preference to have a gradual ramp-up reward schedule during such phased transitions. Therefore, we make the following changes to the reward schedule as shown below. As SGN progresses each phase, the block reward doubles until it reaches the Phase-Four level.  

We would like to highlight that this new schedule does not change the previously proposed reward schedule when SGN reaches Phase Four, but only adds a gradual ramp-up before that happens. 
Finally, SGN Phase One transition is going to happen on time. If you encounter any issues during your delegation process, we are here to help! Feel free to post your question on our Discord channel and we will respond ASAP!