Thank you Luke and Demo for your feedback on the impact of the Liveness winddown timeline. We’d like to propose a new schedule based on your feedback:
- No more than 5 days business from CIP Approval: Liveness rewards set to 67% of current levels
- +30 Days from (1): Liveness rewards set to 50% of current levels
- +60 Days from (1): Liveness rewards set to $0.60
- On April 30: Liveness rewards set to 0
This schedule would prevent potential slippage in the liveness end-date by using a strict date for setting Liveness to 0 while also extending the winddown period to end 125 days from today. Ideally this gives you and similar market participants
enough time to evaluate impact and adjust your own processes/obligations as needed.
I’ve included the full updated text below and in the attached Word doc. If no more feedback, Cumberland would be ready to sponsor this CIP to move to vote.
Canton Improvement Proposal: Removing Liveness Rewards from Validator Rewards Pool
Abstract
As the network continues to grow, there is an increasing potential for the free rider problem to emerge with Validators and liveness rewards; Validators can collect liveness rewards as incentives from the network without
otherwise participating in the network and adding utility.
To mitigate this and encourage participation among validators operating on the network, we suggest adjusting the Validator liveness rewards cap while leaving other aspects of Validator rewards unchanged.
The reduction in liveness rewards would begin no more than 5 business days following CIP approval, along the below schedule:
- No more than 5 days business from CIP Approval: Liveness rewards set to 67% of current levels
- +30 Days from (1): Liveness rewards set to 50% of current levels
- +60 Days from (1): Liveness rewards set to $0.60
- On April 30: Liveness rewards set to 0
New values in the Canton Coin DSO configuration would be set as follows for each stage:
- No more than 5 business days from CIP Approval: Validator Liveness Reward Cap = $3.33
- +30 Days from (1): Validator Liveness Reward Cap = $2.50
- +60 Days from (1): Validator Liveness Reward Cap = $0.60
- On April 30: Validator Liveness Reward Cap = $0
Specification
Updating Liveness Reward Caps
Super Validator node operators will perform 4 on-chain votes to make the following changes.
Vote 1 - Effective at Threshold:
Change
issuanceCurve.futureValues.0._2.optValidatorFaucetCap,
issuanceCurve.futureValues.1._2.optValidatorFaucetCap,
issuanceCurve.futureValues.2._2.optValidatorFaucetCap,
issuanceCurve.futureValues.3._2.optValidatorFaucetCap
From 570
To 3.33
On DevNet, followed by TestNet and then MainNet.
Vote 2 - Effective 30 days after Vote 1:
Change
issuanceCurve.futureValues.0._2.optValidatorFaucetCap,
issuanceCurve.futureValues.1._2.optValidatorFaucetCap,
issuanceCurve.futureValues.2._2.optValidatorFaucetCap,
issuanceCurve.futureValues.3._2.optValidatorFaucetCap
From 3.33
To 2.5
On DevNet, followed by TestNet and then MainNet.
Vote 3 - Effective 60 days after Vote 1:
Change
issuanceCurve.futureValues.0._2.optValidatorFaucetCap,
issuanceCurve.futureValues.1._2.optValidatorFaucetCap,
issuanceCurve.futureValues.2._2.optValidatorFaucetCap,
issuanceCurve.futureValues.3._2.optValidatorFaucetCap
From 2.5
To 0.60
On DevNet, followed by TestNet and then MainNet.
Vote 4 - Effective on April 30:
Change
issuanceCurve.futureValues.0._2.optValidatorFaucetCap,
issuanceCurve.futureValues.1._2.optValidatorFaucetCap,
issuanceCurve.futureValues.2._2.optValidatorFaucetCap,
issuanceCurve.futureValues.3._2.optValidatorFaucetCap
From 0.60
To 0
On DevNet, followed by TestNet and then MainNet.
Other Impacts
This CIP will also supersede work to be done as part of CIP-0073 to allow allocating liveness rewards to non-operating parties.
As a result, no additional changes will be made to allow granting of a ValidatorLicense with a default weight to an arbitrary party. For the avoidance of doubt, functionality described in CIP-0073 regarding allowing a party to create a MintingDelegation contract
will not be impacted by this CIP.
Motivation
CIP-0003 was initially raised to provide incentives to operate necessary infrastructure to interact with the network and offset the initial friction associated with engaging in activity on the network. As an initial set
of users has onboarded and a number of use cases have gone live, the network should shift its incentive structure toward active participation.
Adjusting the Liveness cap allows the Super Validators to signal a change in these incentives while removing the incentive to run infrastructure without active participation.
Rationale
Over the period 11/8-12/7, roughly 70% of validator rewards minted from the validator minting pool are associated with liveness rewards. The network has provided infrastructure operators with 132M CC of liveness incentives
during this time. Given the growth of on-chain use cases and on-chain activity, combined with a substantial queue of
new validators onboarding to the network, these incentives are likely to be no longer needed to bootstrap initial operators on the network.
As the ecosystem evolves and as more avenues emerge for acquiring Canton Coin to use to purchase traffic, Validator doing work on the network and acquiring Canton Coin via liveness rewards also provide less utility to the
network as a means of facilitating participation.
Backwards Compatibility
This CIP requires no new Daml models and no other breaking changes, so it will be fully backwards compatible.
From: cip-discuss@... <cip-discuss@...>
On Behalf Of Luke Streckenbach via lists.sync.global
Sent: Tuesday, December 23, 2025 3:32 PM
To: cip-discuss@...
Subject: [ext] Re: [cip-discuss] CIP-00XX: Remove Liveness Rewards from Validator Rewards Pool
I agree with Demo and think his proposed more gradual step-down is a better solution here. To preface, I’ll reiterate that we’re not opposed to a wind-down of liveness
rewards, but believe that doing so too abruptly will lead to
I agree with Demo and think his proposed more gradual step-down is a better solution here.
To preface, I’ll reiterate that we’re not opposed to a wind-down of liveness rewards, but believe that doing so too abruptly will lead to the loss of potentially valuable network participants.
As Eric has mentioned, liveness rewards were intended to help bootstrap an initial participant set on the network. From my perspective, they’ve been remarkably effective in this regard - today we operate validators on Canton for many large institutions, and
as everyone is doubtlessly aware, the attractive economics of joining have been a significant driver of interest across the board. Naturally, we've made it clear to everyone we've onboarded that liveness rewards will not last forever and that eventually activity
will be what drives the rewards earned. They're aware of this, but many haven't made their participation strategy a priority yet.
The core issue I see with this updated proposal is that it still effectively forces any NaaS operators charging fees as a percentage of rewards to start charging fiat within a month - if rewards drop to 12% of where they would otherwise have been within 30
days, this functionally breaks the economics for any competitive percent-of-rewards based validator pricing. This will happen at the same time as many currently-inactive customers stop earning rewards. As a result, the economics for many customers will be
abruptly inverted and they'll have a very small window to prioritize and evaluate participating before they're losing money to be on Canton.
I understand that this is intentional and aimed to solve the free-rider problem, but would argue that not all "free-riders" today are the same - we've always been very selective in onboarding participants we think can be net beneficial to the ecosystem, and
I'm confident that we and other operators will be better able to convert any "free-riders" to active participants if the network can provide a more gradual ramp into an activity-only rewards model.
If we think of historical liveness rewards as participant acquisition costs paid by the network, the
incremental cost to provide a slightly more gradual step down (as Demo has proposed) is trivial by comparison. That relatively small cost buys a materially extended timeline during which participants
can evaluate how they want to participate without their Canton presence abruptly turning into a net cost.
If you share the view that even a few valuable users that otherwise would have left will instead stay and build due to a more gradual ramp, it seems to me that the cost-benefit tradeoff for the network and CC holders is overwhelmingly in favor of that approach.
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