Increasing Node Operator Rewards

SubQuery Mainnet
1

I would like to start by stating our aims for the first few months of the network for Node Operators

  • An APR of somewhere between 12%-18% for Delegators
  • Node Operators are receiving more rewards than the cost to operate their data indexers/RPC projects (perhaps a 10% profit)
  • Prices of RPCs and data indexing are comparable to centralised alternatives

Although Delegators in the current Era are slightly higher than this this target (~19.225% APR for the last Era), our Node Operators are not quite there yet.

Some Node Operators are being rewarded quite a bit (the highest Node Operator APR was 86.94% last Era), but most are not. There are a number of reasons why.

1. Node Operators Indexing Uncompetitive Projects

At the moment, we are providing boost rewards differently based on the importance of each project. You can view the boost on the Explorer and in each project detail and here is a reminder on how network inflation rewards work.

For example, KILT spiritnet dictionary only has 10k SQT boost split between 13 indexers, while Nova Wallet Polkadot has 50k boost split between 7 indexers. Indexers on Nova Wallet Polkadot projects will get ~10x more network inflation rewards than the on Kilt Spiritnet project.

Please don’t waste your time on indexing uncompetitive or unprofitable projects, we are not running a charity - you get no benefit for indexing all projects. To drive this point home, we’ve even updated the default sort in the Project Explorer to sort by boost size.

2. Indexers are not allocating Stake

One key difference between Kepler and the mainnet is that now Node Operators must actively manage their staking allocation to each project deployment. Please make sure you all review Staking and Allocating SQT | SubQuery Academy (Documentation) and update your stake allocation to maximise your rewards.

Most indexers have only allocated half of your stake, meaning that you are missing out on half of your rewards. Please set a calendar reminder to update your allocated stake each week, we recommend just after the start of each era - see the guide here.

3. Improve your Node Operator Commission Rate

As we previously mentioned, delegators are earning a lot of rewards right now! (~19.225% APR for the last Era).

Node Operators set a Node Operator’s Commission Rate (NOCR) which is the percentage Node Operators earn. Therefore, a lower NOCR will be more attractive for Delegators as a larger percentage of rewards is shared between Delegators. A higher NOCR will mean more rewards go back to the Node Operator to cover your costs.

We suggest that everyone increase their NOCR till we start covering our costs. Perhaps a good place to start is 30%.

4. Focus on RPCs

As we mentioned in Discord, from early next week we’re going to start ramping up RPC services and start bringing in real world traffic through public RPC endpoint.

We strongly suggest that you start indexing the RPC endpoints that we have currently published on the mainnet. Although we will continue setting traffic through data indexers, we expect that the majority of traffic and also query service rewards will be via RPC service.

If you want to maximise your points and rewards for the next few Eras you might want to consider focusing your effort on the RPC projects that we have already published in the mainnet

5. Other actions we will do

  • We are increasing network inflation by 3x for the next few eras to increase the number of rewards into the network
  • We are 100% focussed on bringing in paid RPC plans in the coming weeks, which will kick start query fee revenue for you all
  • We are constantly working on UX improvements and education like this to guide node operators to choose high profitable projects and maximise their allocated SQT
  • Lets talk tomorrow at our office hours on this topic
1 Like
2

Worked Example

Lets take two projects A and B and you are an indexer with 500 SQT to stake

  • Project A has boost of 500k and a current total stake from other indexers of 600 SQT
  • Project B has boost of 300k and a current total stake from other indexers of 100 SQT

The proportion of the Indexer rewards you get from network inflation is proportional to your stake size across the project, so given that they reward at the same rate:

  • For pure profit but high risk, you would index only project B, since you would get (500 / (500+100)) = 83% of all boost rewards from that project B only
  • For a better mix of profit and risk, you would stake more to project A since it’s more competitive, so perhaps 400 SQT to project A for (400/ (400+600)) = 40% of boost rewards from project A and (100 / (100+100)) = 50% of boost rewards from project B

So lets imagine in this Era, there are 2,000 SQT awarded as boost rewards:

  • 500 / (500 + 300) * 2000 = 1250 SQT is rewarded across all indexers on project A
  • 300 / (500 + 300) * 2000 = 750 SQT is rewarded across all indexers on project B

So for pure profit high risk, you total rewards would be 83% * 750 = 622.5 SQT
For a better mix of profit and risk your total rewards would be 40% * 1250 + 50% * 750 = 875 SQT

The first is more profitable, because your running costs will be around half of the second one (half the number of projects to index), but all your profit lies with one project.

2 Likes