Token explainer series — Part 2

In the second part of the SSV token explainer we'll have a look at how operators use SSV.


SSV Token Explainer Series — Part 2

Token explainer series — Part 2

Over the coming weeks, we will try to create some clarity around the ssv.network tokenomics design and give you all the tools you need to prep for participating in the Decentralized Staking Economy.

Our goal is to better explain the relationship between the Network’s stakeholders and the role SSV plays in aligning incentives between stakers and Staking Services.

In case you missed out on our previous release, please make sure you check out Part 1 or the explainer series for a more general outline of the network’s tokenomics.

In this post we will cover everything relating to Operator tokenomics. Operators are earning SSV tokens for running nodes and generating ETH rewards for stakers. Let’s dive in!

What/who are Operators?

Token explainer series — Part 2
ssv.network Operators

Operators are people, companies and communities that run a node in the ssv.network. The node is a dedicated piece of software which allows an Operator to participate in management and operation of validator-key-shares.

In simple terms, when using the ssv.network protocol, a staker splits her keys to a ‘key-shares’. The key-shares are then distributed to 4 or more Operators in the network. The Operators will then work under consensus (iBFT) to secure the Ethereum protocol and earn rewards for stakers.

At present, there are over 3,000 registered Operators in the ssv.network(INSANE!), and that number is constantly growing. The currently active Operators vary between large staking service companies (Allnodes, Stakewise, RockX etc.) through at home DIY Operators.

Operator pricing dynamics

Operators can determine their own SSV denominated price. We covered this point in Part 1 of the explainer series; ssv.network is an open, free market for staking services. Prices and performance are completely transparent and everyone competes with one another for attracting more stakers(ETH).

Operators can change their price at any point in time. There might be a situation where and operator is trying to be more competitive and adjust their price lower. Or, SSV price fluctuations require the operator to adjust their price in order according to market conditions.

In order to protect stakers from sudden changes in their Operator costs, a fee change has a few built-in limitations:

  • Raising prices — will be limited to an X% increase over the current price per change request. The ‘X’ value will be determined by the DAO. The idea is to make sure that stakers are protected from sudden hikes in pricing. In case an Operator is constantly raising prices, stakers will have ample time to replace the overprices operator with a more cost effective alternative
  • Lowering prices — “free-for-all”, Operators can go all the way to 0.000000000000001 SSV. There are no limitations on lowering costs

Operator fee change cycle

Operator fee change has a time lag from the point in which a change was broadcasted to the network and until the actual change can be executed. This of it as a large retail chain announcing that prices will go up as of next week so their customers have time to react accordingly and not get an unpleasant surprise at checkout.

Fee change cycle, steps an limitations:

  1. Change broadcast — an operator is broadcasting the new fee to the network.
  2. Waiting period — after the new fee was broadcasted, the Operator will be required to wait for X amount of days before being able to execute it. This will allow stakers enough time to react in case they need to adjust their SSV balance or wish to change an Operator.
  3. Execution period — after the ‘waiting period’ is over, the operator will have Y amount of days to execute the change. If no execution took place the fee will remain as it was. This is aimed to prevent a situation in which the Operator requested a change and implements it long after the waiting period is over.
  4. Single request limitation — an Operator can make one change broadcast per cicle. If they wish to change their fee again, the Operator will need to wait until the current cycle is over and only then submit a new request.
Token explainer series — Part 2
Fee change cycle

Operators Vs. Verified Operators

Token explainer series — Part 2
Left: Operator icon, Right: Verified Operator icon

Anyone can become an Operator in the network. Only a selected few will become ‘Verified Operators’. VOs are a curated list of Operators which are usually run by POS professionals and can be generally perceived as a safer option for stakers. See DAO vote.

Anyone can submit a proposal to become a VO, however, the credentials you need to present to the DAO are harder to come by. The DAO will eventually determine who is eligible to become a VO by a Snapshot vote.

Having 3,000 nodes to choose from is great for decentralization but can also create unnecessary overhead for protocol users. A curated list of Operators which will be publically marked as ‘Verified’ and constantly monitored by the community will enable users a more streamlined node selection process.

Conclusions

Operators are one of the main pillars of the ssv.network. The more stakers(ETH) an Operator is able to attract the higher their potential revenue from running a node in the network. Operators will be subject to extreme transparency; anyone will be able to see how well they are performing, the tech they are running and their service cost.

ssv.network will be unique in the way service providers are competing for network effect. Today, most services are measured mostly by the amount of ETH at stake. The more ETH is staked with your service, the higher your chances of attracting more ETH. When it comes to ssv.network, there are more variables at play; network participants will be able to have more granularity when choosing you as an Operator.

This will pave the way for lowering staking costs for stakers, providing smaller “long-tail” staking services a real chance to compete for stakers’ attention and potentially even promote client diversity.