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Adding Terra's Farewall Santa document to the repo
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Leopold Schabel
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README.md
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README.md
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# Santa
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# Farewell to Santa
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On April 23, 2019, Terra launched its independent Delegated Proof-of-Stake network, Columbus. Terra invited both trusted investors as well as independent validators including ourselves to join the Terra network and build a robust ecosystem. Today, Terra has 54 validators who stake their Luna — the second native cryptocurrency — or receive delegations from other Luna holders.
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[](https://codecov.io/gh/terra-project/santa)
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## Motivations behind Project Santa
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Santa subsidizes block rewards for Terra's Columbus mainnet. It is intended to support the security of the network until Terra transaction volume (and attendent staking returns from transaction fees) has had sufficient time to mature. Read [here](./MOTIVATION.md) for more details on the project motivation.
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As detailed in this [previous post](https://medium.com/terra-money/introducing-the-new-terra-protocol-ed4a8fbefe4c), Luna stakers are essential for the security of the network and price-stability of Terra. And to incentivize market participants to join Terra’s network by staking Luna, the protocol relies on two sources of revenue that can be used as rewards: transactions fees and seigniorage. It is important to note that, unlike most POS blockchains, Terra's network does not give out inflationary staking rewards which are often driven by issuing more tokens and leads to token holder dilution. Instead, rewards for staking Luna mostly come from transaction fees, which result from end-users using Terra to purchase everyday goods and services.
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However, during the first couple of months, we noticed that low transaction volumes coupled with conservative tax rates were halting Terra’s community growth. The rewards were simply not enough to motivate validators and potential delegators. Not only was the cost of running a node much higher than the transaction fees validators were collecting, but from the delegator’s perspective, the risk from the market and slashing penalties outweighed potential benefits. Moreover, as most staking rewards were denominated in stablecoin Terra, there was no relationship between early contribution and the growth of the network.
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## Mechanism
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Many community members agreed that Terra was at its early stage, and we must better incentivize validators and delegators until the network stabilizes. So 21 validators raised and donated 21.7 million Luna to address this issue, and [Project Santa](https://medium.com/terra-money/project-santa-community-initiative-b8ab6c4d79be) was born. Under Project Santa, a bot would distribute the donated Luna tokens as added incentive to validators and delegators. We anticipated that this would result in approximately a 10% staking yield based on the 217 million Luna tokens staked at the time. Also, since Santa gives out rewards in Luna tokens, we were able to create a connection between the early contribution and the growth of the network. As an added bonus, Santa rewards are not operated by inflation or additional token issuance that leads to dilution, but through donations from stakeholders.
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The config file looks something like the following:
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```
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key_dir: ...
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node: ...
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trigger_interval: 1
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fee_amount: 1000000uluna
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```
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## How are things going?
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Every `trigger_interval` number of blocks on Columbus, Santa sends a transaction containing `1 uluna` with `fee_amount` of fees to itself. Effectively, this scheme allows Santa to subsidize block rewards by paying fees over periodic block intervals.
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Santa obviously did its job. As staking rewards increased, staking incentives became stronger. Below is a graph that shows the big spike in staking returns since Project Santa launched.
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For example, in order to subsidize 21.6 million Luna tokens every block over 1 year, one needs to set `trigger_interval` to 1, and `fee_amount` to `21.6 million / (3.154e+7 / 6.5) * 10^6 = 4451490 uluna`.
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## Status
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Now that the network has stabilized, we need to focus on expanding the Terra ecosystem. Terra has dipped its toes into building use cases beyond payments by integrating with crypto lending and borrowing platform [Trinito](https://trinito.io/pool), where you can easily borrow or deposit Terra KRT. To encourage more community members and developers to BUIDL on Terra’s network, the recent hard fork Columbus-3 includes a Community Pool from which Luna stakers can raise a proposal to request funds and kickstart their project. We believe that our donations will have a larger impact if we fund promising projects through the Community Pool.
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An instance of Santa is currently being jointly operated and supported by several top validators in the network:
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## Farewell to Santa
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```
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A-Team
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Arrington XRP Capital
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B-Harvest
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Certus One
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ChainLayer
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Chorus One
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Dokia Capital
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Easy 2 Stake
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Figment Network
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Forbole
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Ghost
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Goliath
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Hashed
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Healings
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Marine
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Polychain Labs
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RockX
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StakeWith.Us
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Staking Fund
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Terraforming
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Wraith
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01node
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100&100 Venture Capital
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```
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So the 21 validators who voted to start Project Santa now ask you to join us in a farewell. **The Santa bot will be officially terminated on December 26, 00:00 KST**. The remaining Luna originally donated to Project Santa, which is roughly 14.7 million Luna as of today, will be **donated to the community pool to be used as new project grants**.
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To kick off the process, the Goliath, Marine, Wraith and Ghost Validators have donated 21.7 million tokens to be distributed over the course of the next year, slightly above a 10% annualized return on currently staked tokens. You can see Santa hard at work here: https://finder.terra.money/columbus-2/account/terra13u66u4knssnws7n7w0n38mzyyqak5ygp807gyl
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In the true holiday spirit, we want to celebrate Santa’s contribution and retirement by offering one last present to the community. On Christmas Day, we will 10x Luna staking rewards for 24 hours. A small parting gift from us to you!
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Some details on future operations:
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- **IMPORTANT**: Santa will operate independently of existing rewards from fees and swaps. As Terra transaction volume goes up, expected rewards may well be significantly higher than that provided by Santa.
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- Every time the number of staked tokens go up by more than 10 million tokens, the Goliath, Marine, Wraith and Ghost Validators are commiting to deposit an additional 1 million Luna to Santa to prevent reward dilution for existing stakeholders. No tokens will be withdrawn in the opposite case where the number of staked tokens go down.
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- Terra's validator community will actively monitor the network's reward dynamics and continue supporting Santa in the unlikely case that staking returns continue to lag behind the industry average. The Goliath, Marine, Wraith and Ghost Validators will commit up to 100 million Luna tokens for this purpose, which, at current parameters, sufficient to keep Santa running for the next five years.
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- Members of the community looking to support the network are either encouraged to either donate tokens to the [currently active Santa address](https://finder.terra.money/columbus-2/account/terra13u66u4knssnws7n7w0n38mzyyqak5ygp807gyl) or start their own instances of Santa.
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## What should we expect?
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## Build & Install
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Terra’s payment network is growing at a rapid pace, and we expect staking rewards from transaction fees to increase dramatically. The daily transaction volume of Terra has grown 35% month-over-month with the tax reward also growing 100% month-over-month since the mainnet launch. In fact, with Columbus-3, Terra’s tax rate jumped from 0.11% to 0.5% — 10x the genesis tax rate!
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First, check out the repo:
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```
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$ git clone https://github.com/terra-project/santa.git
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$ git checkout master
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```
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Let’s assume that Terra’s transaction volume, total voting power (about 220,000,000 Luna), and unit price of Luna (roughly 300 KRW) remain the same. **Even without Project Santa, we expect the annual staking return to be in the healthy 6-10% range.** This is based on cash flow projections from [Hashed’s recent blog post](https://medium.com/hashed-official/capitalizing-on-terras-growth-a-valuation-framework-for-luna-f7d2e4b750f8), which lays out sound arguments behind how improved cashflow to Luna stakers will have a positive impact on Luna’s unit value. (For further details, please read their detailed report linked above.)
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Then, build and install:
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```
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$ make install
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```
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To initialize the config file for Santa:
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```
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$ santa config
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```
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We are excited to support Terra as it continues to expand beyond Korea and into Mongolia and Singapore. 2020 is going to be a year of exponential growth, so if you have a great idea for Terra, don’t be shy and share your proposal. Happy Holidays!
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To edit the config file:
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```
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$ vim ~/.santa/config.yaml
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```
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Terra Validators,
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To add a key to an account containing tokens to be doled out:
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```
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$ santa keys add
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```
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To recover a key:
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```
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$ santa keys add --recover
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```
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Finally: to start santa and have Christmas come early:
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```
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$ santa start
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```
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- Certus One
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-
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