Exponential Rebates are live on The Graph Network!

Hello Indexers!

There’s an exciting proposal that just went into effect: GIP-0051.

In case you missed the discussion around this GIP, here’s what you need to know:

What’s GIP-0051?

The implementation of GIP-0051 overhauls how The Graph Network rewards Indexers for serving queries. Rather than using the Cobb-Douglas mechanism, the proposal outlines an exponential rebate function. This update is expected to address several of the existing mechanism’s inefficiencies and limitations.

Please note that as a result of the passing of this GIP, all Indexers will need to update their indexer agent to version 0.20.19 or higher.

Why was this change proposed?

Transparency: The existing Cobb-Douglas rebate mechanism is complex and ambiguous. Indexers often find it hard to pinpoint optimal staking levels. GIP-0051 simplifies this by ensuring that an Indexer’s rebate depends only on their staking ratio, so Indexers can make optimal staking decisions for themselves.

Reduced Gaming: Indexers no longer need to anticipate or monitor other Indexers’ staking amounts, ensuring an optimal distribution of revenue.

More Revenue, Less Burn: Historically, the current model has burned over 50% of query fees. With GIP-0051 now in effect, the expected burn rate plummets to below 7%, translating to more revenue for Indexers.

How does it work?

Rebates under GIP-0051 are directly based on the ratio of an Indexer’s stake to the query fees generated by that Indexer. If an Indexer stakes more relative to the query fees they’ve generated, they’ll retrieve a higher percentage of these fees back. For a sufficiently high stake-to-query ratio, Indexers can earn almost all of the query fees they produce.

What else changes?

In the new system, rebate pools are obsolete. Exponential rebates are anticipated to reduce complexity in protocol operations, providing a more streamlined process for collecting query fees.

Additionally, this change enables Indexers to receive rebates instantly when they redeem their vouchers, eliminating the requirement for certain allocation states and additional transactions.

Moreover, GIP-0051 ensures that Indexers receive equitable treatment, even when they accrue query fees from multiple gateways.

Final thoughts

The implementation of GIP-0051 is a stride towards simplifying the indexing process, mitigating operational challenges, and offering Indexers a larger share of the rewards. As with every update, your feedback and perspectives are immensely valuable. Delve deeper into the GIP for comprehensive insights, and together, let’s enhance The Graph Network’s efficiency and profitability for all.

Feel free to read the full GIP here.

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