Introducing Nomination Pools to the Aleph Zero Mainnet to Increase Scalability

The Aleph Zero Mainnet will undergo a significant upgrade that will influence the validating and nomination mechanisms on November 30th, 2022. Most importantly, nomination pools will be created to increase scalability. The Mainnet will be opened to community validators on December 5th, 2022. 

A few weeks back, we announced the introduction of community validators to the Mainnet on December 5th, 2022. In preparation for this change, we’ve also planned a series of upgrades that will be conducted on November 30th, 2022. We’ve prepared this blog to guide you through the breadth of changes so that everyone who wishes to validate or nominate on the Mainnet is aware of the changes and their impact on their respective role. We are confident that the changes introduced will result in a more pleasurable experience for both respective parties and will create a more scalable validation mechanism to govern the Aleph Zero Mainnet. 

Nomination Pool Update 

As the Aleph Zero network continues to grow, we can observe a steady increase in the number of nominators, which we predict to increase further once community validators join the Mainnet. Generally speaking, this is fantastic news as it shows the growth of the Aleph Zero network and that of the community. Unfortunately, there is a single drawback to the way validator elections are currently conducted— the current method does not scale indefinitely. As of writing, the election process happens in a single block which has limited capacity. In order to increase scalability and access to nominations, we are going to introduce nomination pools. This new way of staking allows multiple users to act as a single nominator. No trust is required between the users in a single pool, and no security is lost through this method. 

Pooling nominators together also has the additional benefit of allowing us to reduce the minimum amount of AZERO required by each user to begin taking part in the election process. We have been eyeing the number of 10 AZEROs to start one’s journey as a nominator.  This would ensure greater egalitarianism. The Foundation will open ten pools after the update, one for each foundation validator while allowing users to create their own pools.

Incentivizing Moving to Aleph Zero Nomination Pools 

We recommend that users move their stake from regular nominations to nomination pools to speed up the election process. Users will be rewarded for the effort through an airdrop that will compensate for the two-week unbonding period users will be submitted to. As it’s essential for smaller nominators to move towards the pools, users nominating less than 2000 AZERO who fulfill the following requirements:

• Having an account with less than 2000 bonded AZERO as of 21st of November, 2022, 23:59 CET;
• Unbonding their entire stake of  AZERO on an account holding less than 2000 AZERO after the 21st of November, 2022, 23:59 CET;
• Delegating all of their unbonded AZERO to a single nomination pool before the 18th of December 2022, 23:59 CET;

will be rewarded with roughly 2x of what they would have gained from staking rewards if they did not undergo the migration process to the nomination pool. The rewards will be distributed via airdrop on the 19th of December, 2022 – please note that, in particular, it means that to be eligible for the airdrop, you need to start unbonding your funds on the 5th of December at the latest. 

In parallel to the overall reduction of a barrier to enter the nominations system to 10AZERO, we increase the old minimal bond from 100AZERO to 2000AZERO to increase the adoption of nomination pools. 

The New Simplified Reward Distribution Mechanism

We will be introducing a new reward distribution mechanism that significantly simplifies the rules. In the old system, a nominator’s reward was influenced by two factors: the validator’s commission and the total stake of the other nominators. We necessarily left the commission part in the new system but got rid of the second factor. Hence, rewards are only correlated with the amount the nominator bonded. Here you can find a detailed guide of the reward distribution system.

Validator Guidelines

As the validators prepare to run their nodes on the Mainnet, we would like to reiterate several points to ensure a smooth transition. 

• Firstly, the vast majority of validators will not need to unbond their funds when switching from nomination to validation. Here you can find the specifics regarding edge cases. 
• Secondly, mainnet admissions are thoroughly permissionless and will not require any form of a KYC process. The only requirement is that potential validators possess 25k AZERO. 

Rewards For Testnet Validators! 

Additionally, we want to extend a sincere “thank you” to all Testnet validators who, over the past few months, have provided through their efforts invaluable information to the development team. To reward the validators for their efforts, we would like to grant them AZERO coins as a token of our appreciation. 

Aleph Zero Is Improving for the Community

The abovementioned developments are just the next step on Aleph Zero’s roadmap, a huge step for the network as we introduce community validators, a step we’ve been long waiting to implement. As we draw closer to this milestone, we’ll be implementing various smaller updates that will lay the foundation. Some of them include the following: 

• Integrating the Substrate Staking Portal;
• Modifying Aleph Node Runner to be able to connect to the Mainnet; 
• Adding a “Foundation Pools” button in the UI;

Keep in the loop on all that is happening at Aleph Zero by following our socials! We can’t wait to bring about new developments for the network’s benefit and will be sure to inform our community on each step of our journey.