The Flare network is transitioning to a staking model in three phases.

With phase 1 complete, we are about to enter the second phase of Flare’s staking transition. This phase opens validator staking on Flare’s P-Chain to all network participants and merges the role of validation with the provision of decentralized data. An entity that undertakes this dual role of providing validation and data provision services is referred to as an ‘infrastructure provider’.

Staking phase 1 recap

In July 2023, Flare successfully began its transition to a proof of stake consensus model. In this initial phase, the Flare Foundation staked a fixed FLR self bond amount to validator nodes of 33 independent FTSO data providers to onboard them as the first official infrastructure providers. This initial set joined the existing 20 professional validators in creating blocks, expanding the total validator set to 53.

Flare Improvement Proposal 05

In order to implement Staking Phase 2, the Flare Foundation proposed a number of updates regarding key staking services, staking parameters, rewards distribution, and Management Group extension via Flare Improvement Proposal: FIP.05.

The proposal was subsequently accepted by the community on 8 September 2023, with 92.02% of the votes in favor. As a result, the network will move forward with a hard fork to implement these changes later in September – the precise date is to be confirmed.

Inflation changes

Currently 80% of the inflationary rewards on Flare are distributed to participants within the FTSO system (FTSO providers and community delegators). The remaining 20% is provided to the validators of the network.

The approval of FIP.05 slightly adjusts this ratio and increases the amount of validator rewards to 30%, making the new ratio 70/30. This increase helps to further reward P-Chain staking participants and offset required lockup periods.

The third prong of the infrastructure provider role is attestation provision for the State Connector. This role and any accompanying changes to the allocation of inflation will be introduced at a later date. If there are any changes to the inflation apportionment associated with the State Connector attestation role, these will be subject to a further governance vote.

Staking phase 2

Phase 2 will open validation to any current FTSO data provider on Flare, or any entity seeking to become a validator after first establishing an FTSO data service on the network and earning FTSO rewards. This is a hard requirement before an infrastructure provider is eligible to earn validation rewards.

In order to understand how staking will work, it is important to note that Flare consists of 3 chains:

• The C-chain, which is where the Ethereum Virtual Machine operates, and is the chain where the vast bulk of the community currently interact to include WFLR delegation to FTSO providers.
• The P-chain, which is where staking takes place for both Infra Providers via self-bonding and any other participant by delegating stake to validators.
• The X-chain, which is for fast simple monetary transactions and is currently unused.

Infrastructure providers will need to post a minimum self-bond of 1 million FLR tokens on the P-Chain to their validator(s) and maintain an uptime of at least 80% to remain in the validator reward pool. The minimum lock-up period of their self-bond amount will be 60 days up to a maximum of 1 year.

Infrastructure providers will take a fee for their validation service and share the remainder of their accrued validation rewards amongst other participants who delegate stake to their validator(s). The delegated stake limit per validator is 15x the self-bond amount. For example, with a self-bond of 5M FLR, the maximum stake that can be delegated is 5M x 15= 75M FLR. Even with greater self-bond amounts, the combined total of self-bond and delegated stake can not exceed 200M FLR per validator. No new stake positions on P-Chain above this max 200M FLR threshold can be added. Infrastructure providers will be permitted to run up to four (4) validator nodes attached to their single FTSO entity.

Community participants will be able to delegate FLR stake to any validator of their choosing, subject to a minimum stake delegation amount of 50,000 FLR and a minimum lockup period of two weeks for delegated staked tokens. Each infrastructure provider will set a staking fee and associated lockup period when their validator is added to the system. Stake delegators can define their own lockup period as long as it falls within that validator’s selected self-bond window. Stake delegators will need to re-delegate their stake each time a lockup ends or when their preferred validator’s self-bond expires, whichever comes first. The initial staking fee set by infrastructure providers will be fixed and cannot be changed until that validator’s own self-bonded stake parameter expires.

In summary, the community will have the option to continue to delegate to FTSO data providers on the C-Chain to earn FTSO rewards or they can choose to delegate stake to validators on P-Chain to earn validation rewards. However, it will not be possible to use the same tokens to earn rewards in both systems simultaneously during Phase 2.

Community participation in staking

The community will be able to make staking transactions on P-Chain using a user interface that is currently in development and will be available once staking is open to the public in October.

Staking rewards in Phase 2 will be calculated off-chain using an algorithm script that will be public for the community to review and verify. Validation rewards will be distributed via the validator rewards contract on C-Chain.

Eligibility for FlareDrops and governance

Participants who delegate stake to validators on P-Chain will have those amounts reflected on C-Chain through a mirroring service (smart contract) which will allow staked token amounts to continue to qualify for monthly FlareDrops and participate in governance voting matters. This will also be the case for validator self-bond amounts throughout Phase 2.

Infrastructure Provider Management Group

Formerly known as the FTSO Management Group, this network body is populated and run by infrastructure providers as a valuable added network security layer and community protection feature.

Although the network was designed to withstand a significant amount of collusion attacks, the IPMG further mitigates these risks by identifying potential data collusion or cloned algorithms, offering open/transparent discussions with all parties involved, and voting on resolutions in a decentralized manner.

The community accepted the extension of the IPMG throughout Phase 2 as part of FIP.05.

Staking phase 3

After secure communication between the P- and C-chains is available, staking rewards will be managed entirely on-chain. The goal is that funds staked on the P-chain will have the same rights as wrapped FLR on the C-chain, opening the possibility to earn FTSO rewards, FlareDrops and participate in governance.