This is the third of a series of articles aimed at unpacking the contents of KIRA Improvement Proposals 71-87. The first set of these articles will cover Group 1 of these KIPs, detailing the economic incentive structure for staked consensus nodes on KIRA.

This article covers the Staking Module. The Staking Module defines the primary incentive structure for consensus nodes participating in block production. By rewarding honest, active nodes, and punishing dishonest nodes, the Staking Module ensures long-term maintenance of network operations on KIRA.

Overview

To ensure that validators (consensus nodes) perform their network responsibilities, KIRA implements an incentive framework where validators must stake economic assets to vouch for their honesty: honest validators are rewarded for running their nodes and dishonest validators are punished via slashing of their staked assets.

Rewards Distribution

Two main types of rewards exist: block rewards (from KEX inflation) and fee rewards (from execution fees).

Consensus staking on KIRA allows for any governance-whitelisted collateral to be staked. Global KEX issuance is defined as a network property, with a default rate of 18% per year. Block rewards are awarded to stakers based on their portion of the global value staked across all validators, with the reward weights for each asset being defined by the Token Rates Registrar.

All KIRA staked assets are automatically issued 1:1 liquid (re)staking derivatives. These derivatives are redeemable at any point after the staker’s unstaking period has elapsed (set to 1 month by default) following their request to unstake, and automatically track the value of their underlying collateral. This ensures full liquidity for the derivatives without any dependency on third-party protocols.

Fee rewards are distributed equally amongst all active consensus nodes, agnostic of their staked value. This ensures that staked value does not become centralized within a smaller subset of nodes. 50% of the fee rewards are given to node operators with the other 50% being given to their delegators.

Slashing

In KIRA there is only one slashing condition: double-signing (producing multiple blocks at the same height). However, there circumstances under which slashing should not occur even if double-signing takes place, for example if the misbehavior of the validator is not intentional and can't impact the network operations. Slashing actions are only allowed to take place, if and only if multiple validators double-sign at the same time or within the same time window. Slashing is governance-assisted, meaning that the amount that should be slashed must be determined by governance and evaluated on case-by-case basis to prevent cases where software bugs could result in loss of the delegator assets.

For more specific details on the governance process for slashing proposals, refer to KIP 75.

How This Benefits KIRA Participants

Staking incentives are essential to bootstrapping and sustaining long-term maintenance of network operations on KIRA. These economic rewards ensure that consensus nodes remain active and behave in line with KIRA Code of Conduct.

Stay tuned for the next set of articles, this time on KIRA governance.

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