Bootstrapping the Enigma Network Through External Motivators

[Kostas]

This topic arose out of a discussion I had with Tor on a high-level outlook on the Enigma Network from a potential Black Swan event. The discussion began with a question of mine on how to sustain the integrity of the network outside of strictly economic forces.

Although, it is evident that in a DLT economy profitability is a driving factor behind an agent’s behavior, are profitability and monetary rewards/incentives the ONLY factor influencing node behavior? Is there any other source of utility present among node runners and network peers?

This idea is especially relevant in a potential Black Swan event, wherein the present state it appears nearly all active node network deployments immediately collapse in the absence of a monetary reward, as there is no other motivating factor underpinning node-runner behavior (lacks “anti-fragility”, as forking is only a resiliency mechanism).

In the following discussion, Tor pointed out the necessity to create a robust and sustainable network by taking into consideration all factors - from economics to storytelling to contingencies. Yet, I remained skeptical that any underlying community cohesiveness from the broader Enigma community would warrant altruistic behavior on behalf of node-runners operating at a loss. As I believe that due to barriers to entry, the broader Enigma community acts as a separate entity to that of node-runners.

In response, Tor agreed with my sentiments but rather claimed a sustainable decentralized network (due to the state of tech at this stage) wouldn’t be one where everything is strictly reduced to economics drawing from such examples as Tor, BitTorrent etc. He also mentioned that greater diversity of node runners (identities, locations, motivations) could create a more sustainable network. Although he and I agreed that node-runners won’t derive utility from the vision behind Enigma to a greater extent than the economics. But, such corresponding utility is important (to even a marginal extent).

Tor brought up the example of a competing network launching with better short-term economics despite it being completely unsustainable as an “attack” of sorts. In his opinion, something has to be present beyond economics to help strengthen the network in such a circumstance. Therefore, he and I have brought up a couple questions we’d be interested to see other community members thoughts on:

1. How do you weigh the long-term sustainability/viability of a network vs its short-term incentives for participation?
2. How could the Enigma network attempt to align node-runner incentives in an unprofitable or volatile environment?
3. What other factors outside of monetary incentives could node-runners derive value or meaning from? I.e Individuals running a Tor exit node despite being pestered by authorities with letters etc. out of a passion for privacy

[Zed]

1. Obviously it needs to be balanced, but at the start of the network having great short term incentives will cause more rapid growth. Stronger long term incentives may attract more serious node runners who are less likely to bail on the project at a small challenge or problem.

2. See bellow, but basically if there is a killer app that nodes want to support, or better yet use themselves, they will work to protect it.

3. People run Tor exit nodes to support serious privacy use cases on Tor. If Enigma is running some serious privacy dApps that could not function what-so-ever without the Enigma network and people are supportive of those dApps it’s a great incentive to continue to run nodes. The dApps should be real apps that have easily relatable use cases, not some PhD student’s proof of concept. People run Tor nodes for moral reasons so if a dApp is built that people feel proud to support, they will run nodes without economic incentive.

[can]

I really like the points @Zed touches on regarding killer dApps with ethical motivation behind.

I want to weigh in a bit on the economics side. In the long run, as the network matures, you expect the TX fees paid by users to increase and compensate for network rewards that diminish over time. I just check the last 5 blocks on Bitcoin to see that the reality is far from what I suggested in the last sentence: the total fees in a block range between 0.3 - 0.7 BTC which is almost negligible compared to 12.5BTC block reward.

While this is the case in Bitcoin, the reward system and eligibility in Enigma and Bitcoin are very different. In other words, the fixed investment that needs to go into mining bitcoin will be significantly different than staking in Enigma network. So node runners will never be at a loss because they are not investing in equipment that is only used for one purpose and is worthless without network rewards.

In my mind the way a node runner should think is reward of holding ENG (long term potential of the project, network rewards, network fees) vs. opportunity cost of holding ENG vs. another token that can provide a similar cash flow

[Cardiff]

One thing that would motivate me from jumping ship to another token due to better short-term incentives is risk assessment. If some new token offers 10 percent ROI for the first year, but has no partners, I would be wary. If Enigma has first mover advantage, and more dapps are likely to build on it as its longevity grows, I will feel safer parking my money in Enigma. I would look for the stability and growth potential of a more resilient and mature protocol.

[Brendan]

@can brings up a solid point about future expectations for the value of the underlying asset. That said, wouldn’t the person in that scenario just run the opposing node which has a higher ROI and exchange the token to accumulate more ENG than he would have been rewarded if he were running an Enigma node?

I just had a thought that doesn’t entirely fit the scenario but kind of relates to what @Cardiff just stated:

I would feel better about contributing and running a node in a project that I believe has greater stability and potential in the long term regardless of short term economics. What if some sort of “loyalty” or “reputation” score/metric was given to nodes/node runners. Could something like this be worked into the randomization that chooses which nodes run computations as a way to incentivize nodes to run in the short term based on unfavorable economic situations with the promise of future economic gain in the form of greater probability of being chosen for computations? I’m just thinking out loud here.

[Cardiff]

I like the idea of a reputation score.

Or you could treat them like CDs. Maybe if a node runner commits to a larger lock-up period of their ENG, they would receive slightly greater chances at computations. For example: a worker who commits to a 4 month lock up gets a base chance of running a computation. A worker who commits to a 12 month lock up period gets a 5% greater chance of running a computation. This also may encourage people with large amounts of ENG to run multiple nodes in order to structure liquidity like a CD ladder.

[can]

@Cardiff @Brendan, both reputation / loyalty score (could be based on how long the address has been holding) and a lock-up commitment can be inputs to the worker selection algorithm. Currently we are thinking a selection probability based purely on staking amount. That said these are great points to consider

[Carter-Woetzel]

Long term sustainability of a network has to be the #1 concern of a network - period. The first piece that has to be examined is what is considered a successful network? Is it based off of the number of users, volume of token transfers, number of smart contracts used? The answer ultimately lies in the fact that decentralized networks ultimate goal is to serve the community and the public in a manner that only a decentralized network can.

To be fair, a network only runs as long as people are incentized to support the network, whatever that incentive will be. There is 0 way around this in a decentralized network, because it is run by a decentralized network of people. Human beings are selfish, and unless they gain some inherent satisfaction from the network whether that be monetary, humanitarian, idealism, etc. they will not support a network. Unfortunately, economics encompass the full range of actions, every action has some sort of motivation behind it. Essentially, I believe what you are looking for is a non-monetary incentive for people to support the network.

1. The key here is that developers looking to create products/solutions go to where
   a) They can best/easily solve the problem
   b) Where the maximum number of people can use the product

2. Users go to networks where
   a) There are products they want to use
   b) Ease of using the network
   c) Ease of accessing/buying/using the currency of the platform

A Copycat network with an inferior incentive system will not attract long term quality developers, and by extension therefore WILL NOT ATTRACT USERS. This is fundamental, because users go where products and systems they can use are available and/or in creation. IMPORTANTLY, if there are no transactions on the copy cat network, there is no monetary incentives for people who are running nodes to jump ship.

Why will long term quality secret smart contract developers not be attracted? Because unlike node runners and active nodes, they have a completely different set of incentives. Their sole incentive is to long term use/financial viability of their time investment into creating a product. Developers incentives are intensely attached to the stability of the decentralized platform they are developing on, unless they have been given a set of monetary incentives stronger that this inherent incentive.

The greatest defense again a competing network copycat with stronger short term economic incentives is having an excellent relationship with developers on the Enigma Network.

(as well as developers interested in creating products in the field of privacy as it relates to blockchain)

This means steady communication from the start when a threat of a copy cat appears. Do not underestimate how unbelievably powerful communication with developers is. If no developers move to create on a copy cat network, there are no products. If there are no products, there are no users. That is by definition a dead decentralized network, and not a threat.

In addition, on average developers are not unknown anonymous entities. Worse case scenario some level of monetary incentive can be given to known actors within the Enigma Network not to create on the copycat.

[Cryptojoe]

@can I like The idea of rewarding nodes based on a reputation/reliability score. This reputation/reliability score is only known by the protocol and will increase the chances that computations will be run on nodes with higher score. If a node falters or takes nefarious action, that node goes to a score of 0. In the long run, this incentivizes people to run nodes as ethically and as long as possible because the more reliable they are, the more they are compensated. This also takes away the need for staking, or at least significantly lowers it. The opportunity cost for being nefarious becomes higher the longer someone has been running nodes. This also allows the network to be more decentralized because it doesn’t require a stake or lowers significantly the amount needed to be staked.

[Zed]

Enigma doesn’t have to explicitly be the network with the best financial compensation to attract and maintain node runners. It will likely be some combination of fair compensation, stability, and long term potential that will be attractive.

Based on everything in this thread, I feel the focus should be to bring as many computations onto the network as rapidly as possible. Rewarding longer term node runners and engineering competitive compensation compared to other networks helps, but at it’s core, building out a useful network that devs want to build on, that people want to utilize the services of, is what is most essential. To this extent, if the Enigma network is able to perform as described in the documentation, that is both the TEE and MPC solutions, then the rest is up to marketing and attracting dev teams who will build in-demand applications on the network.

If the underlying tech is in demand by dev teams, and those teams build apps which are in demand by users, the demand for computations on the network should organically provide the economic incentive needed to attract node runners. The focus should be on increasing demand and use of decentralized private computations on the network rather than satisfying node runner’s hopes and dreams, because the demand to use the network will naturally increase the compensation.