A tale of two networks, their validators and associated costs

A comparison of what it means and roughly costs to be a validator on the Cosmos and KEEP PoS networks

  • COSMOS > TLDR > It will cost you thousands in equipment setup, ~$2,500 a month, and $1.1m in ATOMS to be in the top 100 validators
  • KEEP Network > TLDR > It will cost you ~$250 a month, and ~$100,000 in KEEP + Ethereum (150%+ of the Minted BTC) to be in the initial set of validators (assuming you are running both the Random Beacon + t-ECDSA clients)

With fever pitch demand for farming high yielding tokenised assets and the growing decentralised financial primatives being delivered as part of DEFI season on Ethereum. The opportunity for KEEP Network and the delivery of their first application — bridging of Bitcoin (BTC) to Ethereum (ETH), their product market fit couldn’t be better timed, as capital sitting in BTC seeks to enter the game.

With capital and technical staking providers alike looking to participate in the KEEP Network, it might be useful to compare validating on KEEP v COSMOS (a more established PoS Network).

For this article we’ll focus on the cost comparisons, before we consider the rewards and business case for running a validator on each network (in a forthcoming article).

An Introduction to Cosmos + KEEP Network

  • COSMOS > A decentralized ecosystem of independent blockchains that its creator, All In Bits Inc (dba Tendermint Inc), hopes is the foundation for the next generation of internet technology. At the core of Cosmos lies the Cosmos Hub, a proof-of-stake blockchain. The network is secured by token holders and validators. The later run nodes to validate transactions, propose, verify and finalize blocks in order to maintain network consensus. Validators get rewarded for their work by earning ATOMs through block rewards and transaction fees. https://cosmos.network/
  • KEEP Network >The Keep Network is a privacy solution where “keeps” hold distributed small amounts of data, such as a private key. The Random Beacon and t-ECDSA Keeps are the core technology of the network. A key way tBTC, the first application built on the Keep Network, ensures trustlessness is by addressing counterparty risk. It uses a system of signers’ groups that allows tBTC to process transactions without a trusted middleman. https://keep.network/

Native Network Tokens

  • COSMOS (ATOM) > ATOM isn’t mined. Instead, it’s earned via a hybrid PoS algorithm. The more ATOM staked, the more likely to become a validator node to validate a transaction and earn tokens, though it is also possible to delegate your tokens and receive a portion of the rewards. https://cryptobriefing.com/what-is-cosmos-introduction-atom-token/
  • KEEP Network (KEEP) > The Keep Network’s native token is KEEP. It powers the network and undergirds all the apps that are and will be built on it. A balance of KEEP tokens is required in order for someone to become a member of the Keep Network. Members are eligible to earn rewards by performing work on the platform. This is the key incentive that drives constructive behavior, facilitates efficiency and trust, and promotes the adoption and growth of the Keep network.

Validator Roles & Responsibilities

  • COSMOS > We can look at Cosmos as having two-sided marketplace network effects, with validators providing computational resources on one side and app developers paying for these resources (either directly or by passing the costs onto their end users) on the other side. In fact, we can also see a second two-sided marketplace, with delegators as resource providers providing capital and validators as the demand-side, providing security and a safe return on that capital. So, from this perspective, Cosmos consists of two back-to-back two-sided marketplaces.But it’s also important that the validators and delegators help to build developer and user confidence in the network, by securing the infrastructure, avoiding network downtime and improving overall resiliency. https://medium.com/@davekaj/how-to-become-a-cosmos-validator-276862d5bfc7
  • KEEP Network > A keep provider is one economic entity in the Keep Network; they have a stake and must participate in a signing group as a single member. The Keep Network requires a trusted source of randomness for the process of trustless group election. Member selection for a keep is chosen at random. This trusted source of randomness takes the form of a BLS Threshold Relay, otherwise known as the Random Beacon. https://keep-network.gitbook.io/staking-documentation/keep-network-staking/keep-network-101

Rewards

  • COSMOS > Validators and their delegators will earn Atoms as block provisions and tokens as transaction fees through execution of the Tendermint consensus protocol. Initially, transaction fees will be paid in Atoms but in the future, any token in the Cosmos ecosystem will be valid as fee tender if it is whitelisted by governance. Note that validators can set commission on the fees their delegators receive as additional incentive. https://hub.cosmos.network/master/validators/overview.html
  • KEEP Network > Random Beacon Rewards >If you’re running the random beacon client and staking KEEP, you’ll earn a fee in ETH per each completed transaction. The fee is based on the gas cost to run the relay plus an additional fee (exact amount per relay still under consideration, it will be in the $10–50 USD range). In addition to the transaction fee, you’ll be earning a portion of the KEEP staking subsidy (2% of total KEEP over the course of the distribution period starting June 8th, 2020) for running the beacon. https://keep-network.gitbook.io/staking-documentation/keep-network-staking/keep-and-tbtc-staking-rewards
  • KEEP Network > t-ECDSA/tBTC Rewards >If you’re running the t-ECDSA client and staking ETH, every completed transaction is a 6 month term (unless called to redeem earlier). The fees in the tBTC system start at 5 bps per Bitcoin deposit. tBTC stakers with ETH bonded will also earn a portion of the KEEP staking subsidy (18% of total KEEP over the course of the distribution period) for successfully participating in the network while staking ETH. https://keep-network.gitbook.io/staking-documentation/keep-network-staking/keep-and-tbtc-staking-rewards

Slashing

Validator Bonding Costs

  • COSMOS > At the time of this publication, has its validator set limited to 125 Active Validators. The are ranked top down in based on the number of ATOM tokens delegated by each validator. To enter the top 125 list you would require more than the current 125th seed validator ‘Topool’, currently with 14,941 ATOM tokens (~US$110,000). If you were to look at a validator in the top half of the pack (say 50th in the list ‘Delega Networks’) you would need more than 805,985 ATOM tokens (~US$5.9m) to supplant their position. https://www.mintscan.io/validators
  • KEEP Network > No limit to the number of validators that wish to participate in the Keep Network (assuming they are sufficiently collateralised). Random Beacon: 100,000 KEEP initially, ECDSA: 150%+ of the Minted BTC. Validator priority given to those with the most significant ETH/KEEP balances. 100k KEEP minimum, will decrease to 10k over a 24 month period.

Operational Architecture Requirements + Rough Costs

  • COSMOS > Sentry Nodes > The Cosmos documentation suggests that Validators architect their setup with a Sentry Node Architecture (or SNA). It’s much like fronting a Validator with a set of Load Balanced nodes with added benefits of mitigating Distributed Denial of Service (DDoS) attacks.

These could cost about USD$25 per month each to run, if you pay it up front for 3-years. Usually you’d want at least 2 if not 3 Sentry Nodes. Add things like networked drives, reporting and bandwidth, it could be close to USD$100/month for 3 Sentry Nodes.

Initial setup cost of thousands of dollars, with a monthly run rate of USD$500 to USD$5,000, depending on how complex your setup is.

  • KEEP Network > Random Beacon > The Random Beacon is a way of generating verifiable randomness that is resistant to bad actors both in the relay network and on the anchoring blockchain, assumed here to be Ethereum. It is used to determine member selection for signing groups. It is paramount that Keep nodes remain available to the Keep Network. A stable and redundant internet connection is strongly encouraged, along with a connection to a production grade self-hosted or third party Ethereum node deployment and persistent/redundant storage that will survive a VM or container rotation, and disk failure. https://docs.keep.network/run-random-beacon.html#_system_considerations

As a rough example of costs associated with a Random Beacon, a Google Cloud (n1-standard-2) or AWS (t3.medium) compute profile with persistent storage would have a monthly run rate of $30 to $60 depending on network bandwidth. If you don’t have access to a reliable Ethereum node you may have to double these costs to establish your own.

  • KEEP Network > t-ECDA Keeps > They are the underlying technology of tBTC, the first application built on the Keep Network. Implemented with secure multi-party computation (sMPC), t-ECDSA keeps make it possible for contracts to communicate cross-chain by signing transactions between chains with a number of geographically distributed threshold signers. T-ECDSA keeps secure the transactions with multiple individual key shares, held independently by multiple signers. Decentralized signing is performed with sMPC for computation on private key shares without revealing them. Responsibility for signatures is divided, requiring a threshold number of participants to create a signature using their key shares. https://github.com/keep-network/keep-ecdsa/blob/master/docs/run-keep-ecdsa.adoc#system-considerations

As a rough example of costs associated with a t-ECDA Keep, a Google Cloud (n2-highcpu-2) or AWS (c5.large) compute profile with persistent storage would have a monthly run rate of $50 to $100 depending on network bandwidth. If you don’t have access to a reliable Ethereum node you may have to double these costs to establish your own.

Interested in test driving a KEEP Network Validator?

Try these resources below to learn more…

Business & personal views are my own | Interests include the Intentionally Complex + Acutely Broken