The latest whitepaper details the incentive scheme for blockchains powered by Horizen Zendoo sidechain protocol.
We are thrilled to announce the Latus Incentive Scheme whitepaper, which details the reward scheme of the Latus-enabled sidechain first introduced in the Zendoo whitepaper – A zk-SNARK Verifiable Crosschain Transfer Protocol Enabling Decoupled and Decentralized Sidechain. This reward scheme is an essential element for a fully decentralized system and allows the creation of a balanced mechanism of reward distribution. The scheme also promotes stable system operation and honest participation. The ideas described in the paper can be adopted by other SNARK-based blockchains to incentivize proof creation.
What is the Latus Incentive Scheme?
In our previous paper, we introduced Zendoo – a universal construction for Bitcoin-like blockchain systems that allows the creation of sidechains (complete blockchains parallel to mainchain) of different types and communication with them without knowing their internal structure.
Latus is a specific construction that can be built on top of Zendoo and leverage zk-SNARK techniques to create fully decentralized and verifiable sidechains. In Latus, we had to find a balanced mechanism to incentivize a decentralized system of participants to create proofs due to the need to prove the history of the blockchain using SNARKs. The Incentive Scheme for the Latus sidechain construction facilitates sustainable maintenance and further promotes decentralization purely through transaction fees instead of newly minted coins. In this paper, we identify the main participants involved in sidechain operation and construct a reward-sharing scheme that maximizes the overall efficiency of the system and keeps different parties in equilibrium.
“True decentralization is mandatory for real-world blockchain applications, and it has always been an essential target of our research and design effort. A robust and fair incentive scheme is a founding element of true decentralization, where all participants must be rewarded for their work, and honest behaviors incentivized” added Alberto Garoffolo, Engineering Director. “Latus is an innovative sidechain construction that leverages SNARKs to achieve maximum security in a completely decentralized fashion. We specifically designed the incentive scheme to be able to reward all the actors involved in the process, including the SNARK-provers, without relying on newly minted coins.”
What makes Latus Incentive Scheme different
Unlike a typical cryptocurrency blockchain, the Latus-enabled sidechain does not have to rely on a sidechain-created coinbase as a source of reward, but on the sidechain transaction fees. Another important difference is that the incentive scheme must regulate the reward mechanism for the creation of the SNARK proofs in addition to block-forging. This mechanism is designed to have proving fees converge to the lowest possible values, by making the provers compete together in a marketplace.
“The Latus Incentive Scheme enables anybody to build dapps on Horizen’s ecosystem and incentivize all participants in a fully customizable way and maintain the integrity of the ecosystem,” said Rob Viglione, co-founder of Horizen. “The customizability of a system ensures that anybody can build and get rewarded regardless of their intended use case. The Latus Incentive Scheme is a significant step towards our vision of creating a more fair and inclusive ecosystem.”
This scheme enables the possibility to achieve full decentralization in any sidechain system that does not possess its own native assets – as happens in Latus – targeting maximum efficiency and equilibrium between different entities. We view our work as a first step in constructing a robust incentive scheme for a sidechain system that would not possess its own native asset and, thus, cannot reward maintainers with newly minted coins as it is done in most of the existing blockchain systems.