On December 9, 2024, the Aleo network announced the implementation of the ARC-42 proposal. The core objective of this upgrade is to adjust the block reward algorithm to ensure the network's inflation rate remains stable. This upgrade is seen as an important milestone in the development of the Aleo network, with far-reaching impacts not only on the technical improvements, but also on the network's ecosystem and economic model. This article will delve into the details of the ARC-0042 update and its potential implications.
Background of the ARC-42 Proposal The Aleo network currently uses the AleoBFT consensus mechanism, which cannot guarantee the complete stability of the block interval. However, the existing block reward algorithm assumes a fixed 10-second block interval, regardless of the actual interval, with rewards being distributed at a fixed rate. This setting made it almost impossible to achieve a 5% annual inflation rate. This setting led to problems: when the block interval is shortened, for example, maintained at 3 seconds throughout the year, the annual inflation rate could reach as high as 16.67%, far exceeding the target of 5%. This issue not only poses a challenge to the fairness of the reward mechanism, but also has the potential to impact the market performance of the Aleo token and the long-term sustainability of the network.
Key Updates ARC-0042 proposed and implemented a block reward algorithm that adjusts based on the actual block interval, ensuring that the annual inflation rate remains at the target level, even in the face of fluctuating network conditions.
Specifically: 1. Dynamic Reward Adjustment: The reward for each block is dynamically calculated based on the actual block interval, balancing the short-term fluctuations' impact on the long-term inflation target. 2. Precise Annual Inflation Control: Under any network conditions, the total base block reward amount will align with the expected 5% annual growth rate.
Upgrade Implementation and Reward Mechanism Adjustment According to the plan, ARC-42 was scheduled to be activated at block height 2,800,000 on December 10, 2024, 1am (UTC+8). However, the block height was reached earlier on December 9, 2024, 3pm, and the upgrade took effect earlier. This adjustment has had a profound impact on the PoS reward mechanism.
1. Significant Changes to PoS Rewards After the upgrade, the fixed PoS reward has been changed from being based on block height to being based on timestamp. The reward level exhibits the following patterns: - The annual fixed PoS reward remains at 5% of the initial total supply (1.5 billion x 5% = 75 million), and when compared to the total timestamp (86,400 seconds x 365 days = 31,536,000 seconds), the reward per second is 2.378234, and the daily reward is 205,479.4176, consistent with the post-upgrade rules. - Based on the 2.378234 per-second rate, the PoS reward is approximately 7.134702 for a 3-second block interval, and 4.756468 for a 2-second interval. - Compared to the previous PoS reward, the new reward has decreased significantly, by around 70%, which will have a profound impact on the network's long-term governance mechanism. This adjustment effectively resolves the problem of the fixed reward deviating from the planned design, restoring it to the original intent of the network.
Impact of ARC-42 on the Network Economy This upgrade has rebalanced the distribution of rewards while ensuring a stable inflation rate. The key impacts of the upgrade are as follows: 1. Inflation Rate Control: The dynamic adjustment of the reward algorithm stabilizes the annualized inflation rate at 5%, avoiding the economic imbalance problems of excessive or insufficient rewards. 2. Network Incentive Optimization: The reduction in PoS rewards will drive the long-term value growth of the token. 3. Potential Market Trends: Although the market performance may be volatile in the short term (the token price has declined to $1.59 as of now), the upgrade has laid the foundation for the long-term stability of the network economy.
Potential Impacts and Future Outlook The implementation of ARC-0042 has addressed the problem of inflation rate control at the technical level, while also optimizing the network's economic model. This update is expected to enhance the competitiveness of the Aleo network in the fields of privacy computing and blockchain, injecting more vitality into the ecosystem.
Conclusion The ARC-0042 upgrade not only marks a more stable phase for the Aleo network, but also demonstrates its high regard for the core economic mechanisms. The long-term effects of this change remain to be observed through network performance data and market reactions, but it is certain that the Aleo network has laid a more solid foundation for its future development. We look forward to witnessing Aleo's continued breakthroughs in the field of privacy computing.
Disclaimer: The above content does not constitute any investment advice. Investment requires caution, and independent thinking is crucial! Any similarities are purely coincidental!
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