The future of decentralized networks hinges on one critical factor: economic alignment among all participants. In the case of EOS, a high-performance blockchain platform built on Delegated Proof-of-Stake (DPoS), this alignment is not just ideal—it's essential for long-term sustainability and growth. Block.one, a key participant in the EOS ecosystem, has collaborated with Prysm Group—a leading blockchain economics consultancy—to develop a comprehensive proposal that reimagines how staking, voting, and rewards function within the network.
This Stake-Based Voting and Rewards Mechanism aims to strengthen the economic incentives that bind token-holders, block producers, and the broader community together. By aligning rewards more closely with participation and performance, the model fosters a healthier, more resilient ecosystem poised for sustained growth in 2025 and beyond.
Enhancing Token-Holder Incentives Through Staking Rewards
Currently, EOS block producers—both elected and standby—are rewarded daily with newly issued tokens at an annual inflation rate of 1%. While this system sustains network operations, it overlooks a crucial group: the voters.
Voters stake their EOS tokens to support block producer candidates, contributing directly to network security through DPoS consensus. Yet, despite incurring opportunity costs such as reduced liquidity and active engagement, they receive no direct compensation from the protocol. This imbalance weakens economic alignment and reduces long-term holder motivation.
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Introducing a Staking Pool System
To correct this misalignment, the proposal introduces a staking pool system that rewards token-holders who actively vote or proxy their vote to a registered proxy—provided they support at least 21 block producer candidates.
This requirement ensures broad decentralization while recognizing voters as vital stakeholders in network security. Their contribution is no longer passive; it becomes a value-generating activity.
Prysm Group has outlined potential configuration parameters:
- Annual system inflation: Ranges from 1.2% to 3.8%, inclusive of block producer rewards.
- Block producer share: Minimum of 32% of total inflation (equivalent to 1.2% of total supply annually), distributed among both active and standby producers.
- Staker share: Up to 68% of inflation rewards allocated directly to participating token-holders.
Withdrawal flexibility: Two options under consideration:
- Weekly withdrawals with up to 67% of staked funds released per cycle.
- Daily withdrawals without per-transaction limits, promoting greater liquidity.
These parameters are not fixed. They serve as starting points for community discussion and on-chain governance decisions.
Reforming Block Producer Compensation
Block producer rewards in EOS currently follow a tiered structure where the top 21 producers earn an exclusive 25% of block rewards (bpay), in addition to their proportional share of voting rewards (vpay). While this acknowledges the operational demands of block production, it creates a steep reward cliff between rank #21 and #22.
Despite minimal differences in infrastructure quality or vote totals—often less than 0.5%—the income gap can reach 40%. This concentration discourages competition and leads to vote centralization, undermining decentralization goals.
In practice:
- The top 21 block producers receive approximately 56% of votes among rewarded candidates.
- They capture 72% of daily reward distributions.
- A sharp drop—up to 30%—in rewards occurs between ranks #22 and #26 due to lost bpay eligibility.
Proposed Changes for Fairer Distribution
To promote equitable compensation and reduce artificial disparities, the proposal recommends:
- Eliminate bpay rewards entirely.
- Distribute all block producer compensation through vpay, which scales proportionally with received votes.
This shift removes the artificial pay cliff and ties earnings directly to community trust and performance. It also encourages continuous engagement from standby producers, knowing their efforts remain financially viable even when not actively producing blocks.
Additionally:
- All votes must include exactly 21 block producer candidates to prevent vote fragmentation and ensure robust network coverage.
- Schedule ordering should transition from alphabetical to declared geographic location, reducing latency during handoffs and minimizing missed blocks.
Performance Accountability via Inflation Penalties
One of the most innovative aspects of the proposal is the introduction of performance-based inflation penalties.
If a block producer fails to produce a block during their scheduled time, the total inflation rate—and thus all rewards—is temporarily reduced. This affects:
- All active block producers
- Standby producers
- Participating stakers receiving vpay
By making underperformance a shared cost, the mechanism creates strong incentives for:
- Voters to quickly replace underperforming nodes
- Fellow producers to assist in troubleshooting
- The network as a whole to self-correct efficiently
This collective accountability reinforces cooperation over competition and enhances overall network reliability.
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Driving Broader Economic Participation
Beyond immediate technical improvements, this model unlocks new possibilities for community-driven economic activity. For example:
- Token-holders may form staking pools to collectively fund public goods like developer grants or infrastructure upgrades.
- Proxies could emerge as trusted curators, offering voting strategies in exchange for shared rewards.
- Decentralized autonomous organizations (DAOs) might use staking proceeds to finance ecosystem development.
Such dynamics deepen engagement and transform passive holders into active contributors—fueling organic growth.
Core Keywords Integration
This proposal centers around several key concepts critical to EOS’s evolution:
- Stake-based voting
- EOS staking rewards
- DPoS economic alignment
- Block producer incentives
- Network inflation model
- Token-holder participation
- Decentralized governance
- Voting reward mechanism
These terms reflect both user search intent and the foundational elements of sustainable blockchain economics.
Frequently Asked Questions (FAQ)
Q: How does stake-based voting differ from current EOS voting?
A: Currently, voting secures the network but doesn’t directly reward participants. Under this proposal, token-holders who vote for 21 producers or use a proxy earn staking rewards, creating direct economic alignment.
Q: Will eliminating bpay reduce block producer motivation?
A: No—by shifting all rewards to vpay, compensation remains tied to voter support. This promotes merit-based earnings rather than rank-based privileges, encouraging consistent performance across all active and standby producers.
Q: How are inflation penalties enforced technically?
A: The protocol automatically adjusts the daily issuance rate downward if missed blocks are detected. Rewards for all participants—including stakers—are recalculated based on actual network performance.
Q: Can I withdraw my staked EOS anytime?
A: Withdrawal rules depend on community consensus. Options include daily withdrawals with no limits or weekly cycles allowing up to 67% release per week. Flexibility aims to balance liquidity needs with network stability.
Q: Is this change mandatory?
A: No. This is a proposal open for community discussion and testing. Final implementation requires broad consensus via on-chain governance.
Q: Where can I test or review the code?
A: The reference implementation is available in the EOSIO system contract repository. Community feedback and bug reports are encouraged through official channels.
The Stake-Based Voting and Rewards Mechanism represents a pivotal step toward a more inclusive, performance-driven EOS economy. By rewarding participation, flattening artificial reward gaps, and enforcing accountability, it strengthens the foundation for scalable growth.
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