Add "Subject to change" for legal purposes. (#6432)
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# Cluster Economics
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**Subject to change.**
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Solana’s crypto-economic system is designed to promote a healthy, long term self-sustaining economy with participant incentives aligned to the security and decentralization of the network. The main participants in this economy are validation-clients and replication-clients. Their contributions to the network, state validation and data storage respectively, and their requisite incentive mechanisms are discussed below.
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The main channels of participant remittances are referred to as protocol-based rewards and transaction fees. Protocol-based rewards are issuances from a global, protocol-defined, inflation rate. These rewards will constitute the total reward delivered to replication and validation clients, the remaining sourced from transaction fees. In the early days of the network, it is likely that protocol-based rewards, deployed based on predefined issuance schedule, will drive the majority of participant incentives to participate in the network.
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# Attack Vectors
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**Subject to change.**
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## Colluding validation and replication clients
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A colluding validation-client, may take the strategy to mark PoReps from non-colluding replicator nodes as invalid as an attempt to maximize the rewards for the colluding replicator nodes. In this case, it isn’t feasible for the offended-against replicator nodes to petition the network for resolution as this would result in a network-wide vote on each offending PoRep and create too much overhead for the network to progress adequately. Also, this mitigation attempt would still be vulnerable to a >= 51% staked colluder.
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# Economic Sustainability
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**Subject to change.**
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Long term economic sustainability is one of the guiding principles of Solana’s economic design. While it is impossible to predict how decentralized economies will develop over time, especially economies with flexible decentralized governances, we can arrange economic components such that, under certain conditions, a sustainable economy may take shape in the long term. In the case of Solana’s network, these components take the form of token issuance \(via inflation\) and token burning’.
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The dominant remittances from the Solana mining pool are validator and replicator rewards. The disinflationary mechanism is a flat, protocol-specified and adjusted, % of each transaction fee.
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# Economic Design MVP
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**Subject to change.**
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The preceeding sections, outlined in the [Economic Design Overview](./), describe a long-term vision of a sustainable Solana economy. Of course, we don't expect the final implementation to perfectly match what has been described above. We intend to fully engage with network stakeholders throughout the implementation phases \(i.e. pre-testnet, testnet, mainnet\) to ensure the system supports, and is representative of, the various network participants' interests. The first step toward this goal, however, is outlining a some desired MVP economic features to be available for early pre-testnet and testnet participants. Below is a rough sketch outlining basic economic functionality from which a more complete and functional system can be developed.
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## MVP Economic Features
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# Replication-client Economics
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**Subject to change.**
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Replication-clients should be rewarded for providing the network with storage space. Incentivization of the set of replicators provides data security through redundancy of the historical ledger. Replication nodes are rewarded in proportion to the amount of ledger data storage provided, as proved by successfully submitting Proofs-of-Replication to the cluster.. These rewards are captured by generating and entering Proofs of Replication \(PoReps\) into the PoH stream which can be validated by Validation nodes as described above in the [Replication-validation Transaction Fees](../ed_validation_client_economics/ed_vce_replication_validation_transaction_fees.md) chapter.
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# Replication-client Reward Auto-delegation
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**Subject to change.**
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The ability for Solana network participants to earn rewards by providing storage service is a unique on-boarding path that requires little hardware overhead and minimal upfront capital. It offers an avenue for individuals with extra-storage space on their home laptops or PCs to contribute to the security of the network and become integrated into the Solana economy.
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To enhance this on-boarding ramp and facilitate further participation and investment in the Solana economy, replication-clients have the opportunity to auto-delegate their rewards to validation-clients of their choice. Much like the automatic reinvestment of stock dividends, in this scenario, a replicator-client can earn Solana tokens by providing some storage capacity to the network \(i.e. via submitting valid PoReps\), have the protocol-based rewards automatically assigned as delegation to a staked validator node of the replicator's choice and earn interest, less a fee, from the validation-client's network participation.
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# Storage-replication Rewards
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**Subject to change.**
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Replicator-clients download, encrypt and submit PoReps for ledger block sections.3 PoReps submitted to the PoH stream, and subsequently validated, function as evidence that the submitting replicator client is indeed storing the assigned ledger block sections on local hard drive space as a service to the network. Therefore, replicator clients should earn protocol rewards proportional to the amount of storage, and the number of successfully validated PoReps, that they are verifiably providing to the network.
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Additionally, replicator clients have the opportunity to capture a portion of slashed bounties \[TBD\] of dishonest validator clients. This can be accomplished by a replicator client submitting a verifiably false PoRep for which a dishonest validator client receives and signs as a valid PoRep. This reward incentive is to prevent lazy validators and minimize validator-replicator collusion attacks, more on this below.
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# Validation-client Economics
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**Subject to change.**
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Validator-clients are eligible to receive protocol-based \(i.e. inflation-based\) rewards issued via stake-based annual interest rates \(calculated per epoch\) by providing compute \(CPU+GPU\) resources to validate and vote on a given PoH state. These protocol-based rewards are determined through an algorithmic disinflationary schedule as a function of total amount of circulating tokens. The network is expected to launch with an annual inflation rate around 15%, set to decrease by 15% per year until a long-term stable rate of 1-2% is reached. These issuances are to be split and distributed to participating validators and replicators, with around 90% of the issued tokens allocated for validator rewards. Because the network will be distributing a fixed amount of inflation rewards across the stake-weighted valdiator set, any individual validator's interest rate will be a function of the amount of staked SOL in relation to the circulating SOL.
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Additionally, validator clients may earn revenue through fees via state-validation transactions and Proof-of-Replication \(PoRep\) transactions. For clarity, we separately describe the design and motivation of these revenue distriubutions for validation-clients below: state-validation protocol-based rewards, state-validation transaction fees and rent, and PoRep-validation transaction fees.
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# Replication-validation Transaction Fees
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**Subject to change.**
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As previously mentioned, validator-clients will also be responsible for validating PoReps submitted into the PoH stream by replicator-clients. In this case, validators are providing compute \(CPU/GPU\) and light storage resources to confirm that these replication proofs could only be generated by a client that is storing the referenced PoH leger block.
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While replication-clients are incentivized and rewarded through protocol-based rewards schedule \(see [Replication-client Economics](../ed_replication_client_economics/)\), validator-clients will be incentivized to include and validate PoReps in PoH through collection of transaction fees associated with the submitted PoReps and distribution of protocol rewards proportional to the validated PoReps. As will be described in detail in the Section 3.1, replication-client rewards are protocol-based and designed to reward based on a global data redundancy factor. I.e. the protocol will incentivize replication-client participation through rewards based on a target ledger redundancy \(e.g. 10x data redundancy\).
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# State-validation Protocol-based Rewards
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**Subject to change.**
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Validator-clients have two functional roles in the Solana network:
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* Validate \(vote\) the current global state of that PoH along with any Proofs-of-Replication \(see [Replication Client Economics](../ed_replication_client_economics/)\) that they are eligible to validate.
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# State-validation Transaction Fees
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**Subject to change.**
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Each transaction sent through the network, to be processed by the current leader validation-client and confirmed as a global state transaction, must contain a transaction fee. Transaction fees offer many benefits in the Solana economic design, for example they:
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* provide unit compensation to the validator network for the CPU/GPU resources necessary to process the state transaction,
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# Validation Stake Delegation
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**Subject to change.**
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Running a Solana validation-client required relatively modest upfront hardware capital investment. **Table 2** provides an example hardware configuration to support ~1M tx/s with estimated ‘off-the-shelf’ costs:
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| Component | Example | Estimated Cost |
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