Bullet summary:
COTI provides a decentralized solution that is designed to enable secure and trustworthy payments. This solution relies on the distribution of Trustchain responsibility to several types of nodes that are run by network users. Nodes are needed to verify transactions and to ensure that the COTI network remains safeguarded against potential fraud and cyber manipulation, such as double spending attempts, penny spend attacks, sybil attacks and more.
There are four types of nodes in the COTI network, including Full Nodes, DSP Nodes, Trust Score Nodes, and History Nodes. The most common node type is a Full Node. We expect the number of Full Nodes to be in the hundreds, or potentially thousands at network maturity, while a reasonable number of DSP Nodes will be in the dozens and a lesser amount for Trust Score Nodes.
In the current development stage, Full Nodes are the only available nodes that can be run by network users. DSP Nodes and Trust Score Nodes will also be operated by users as the network matures.
Full Nodes are the main client-facing servers of the system. Each transaction sent from a wallet is received by a Full Node and propagated to the entire system. Full Nodes perform Trustchain Consensus by receiving new transactions from wallets, validating them, doing Proof of Trust and attaching them to the DAG. Full Nodes also execute COTI smart contracts in a decentralized manner. On the COTI network, Full Nodes can define their own price list for users and compete for them. Consequently, COTI Full Nodes are responsible for collecting fees on all protocol usage and transferring the network fee to the network pool.
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✓ Simple, inexpensive and easy to run Full Nodes
✓ All node operators can earn profits from running nodes
✓ Node operator Trust Scores increase in line with the amount of work performed for the COTI network
✓ Merchants can run nodes and set their fees to zero to attract more customers
When running nodes, operators provide the network with useful resources, including CPU, memory, storage and network bandwidth. These resources are not cost-free, which is why node operators are compensated and have the opportunity to earn a reasonable ROI.
Full Node operators receive fees collected from transactions. The more transactions that a Full Node processes, the more it earns.
COTI’s staking model is built to be competitive to decentralized finance (DeFi) income models and provides a means to generate a steady income from the process of transaction approval on the COTI network.
The economic model of COTI nodes is designed to be fair, efficient and flexible and is based on finely tuned fee distribution mechanisms and staking requirements.
As real world transactions are usually denoted in fiat currencies and node operator fees are a percentage of these transactions, a natural hedge for the COTI coin price is created. This is a major advantage over other staking models and currencies.
All nodes are required to deposit (stake) COTI native coins to participate in the network, although the requirements are different for various node types. DSP Nodes and Trust Score Nodes, which are more substantial components of the network foundation, require higher staking than Full Nodes.
In the COTI network, transactions are created according to several patterns defined by the transaction type. The most common types are payment for goods or services, remittance payments and singular transfers.
In the first two cases, a transaction originator creates a payment request, and the transaction is created according to it. The transaction originator must input the Full Node address in the payment request in order to pre-select the node (a Full Node is selected by users for singular transfers).
COTI provides an automated tool for Full Node selection, enabling a merchant, or any other transaction originator, to choose nodes according to the specified criteria. Merchants also have the ability to run Full Nodes themselves
Full Node operators set fees autonomously, which makes setting competitive fee structures important. If a user knows a Full Node with a better price list, it can be re-selected when sending transactions.
Important note: server throughput is limited, so large merchants can work with a pool of Full Nodes which are chosen at random at the time of transaction.
As a rule, Full Node fees are collected in the same token as the main payment. Full Nodes are free to define which tokens they process and accept for fees and those they do not.
Full Nodes can swap tokens they have received in various ways:
For standard payment tokens, the network fee is calculated from the transaction flow and debited from the merchant’s virtual account in the network fee pool. The merchant is required to deposit the estimated amount of COTI native coins into the pool, or alternatively to cover the deficit at the end of the day.
For singular transfers, all fees are payable in COTI native coins.
All information presented below describes the basic model of Full Node staking. Future models will cover DSP and Trust Score Node models, as well as their delegated staking models.
As described, Full Node operators gain fees by approving merchant transactions. Merchants select the nodes they wish to work with according to the node’s trust score, which is determined by its level of service quality and fees.
Node operators can set fees as they see fit, with the understanding that other node operators may set lower and more competitive fees. The following model assumes 0.05% as a fee, although a node operator can set higher or lower fees.
The COTI network processes merchant transactions in an ever growing volume every month, which increases the potential for nodes to turn a profit. In August 2019, the COTI network processed transactions equating to 225M COTI (an equivalent of about $5M USD).
Assuming a 0.05% processing fee set by a Full Node, the potential income from transaction processing in August 2019 would have been 112.5K COTI.
As COTI’s staking model is aimed to compete with DeFi models, we are aiming for the network to offer approximately 30% in annualized returns on staking. This means that in August 2019, Full Node monthly staking would have been 4.5M COTI for all nodes combined.
Profits may increase as more merchants join the network and monthly turnover grows. Higher profits can also be registered by setting higher processing fees for a better quality of service (e.g., better uptime). New node operators joining the network will foster increased competition, which will lower returns, although we expect this dynamic to balance itself out under free market conditions.
To encourage node operators while ensuring a healthy network environment and staking allocations, we are offering two incentive programs for running Full Nodes:
Basic Full Node
As described above. One individual may run up to five Full Nodes.
Advanced Full Node
The same as a basic Full Node, but with a guaranteed return of 25% in annual interest. Each individual may run up to one Advanced Full Node**.
As of October 2019, when the first Full Nodes will be operated in a decentralized nature, the staking requirements will be as follows:
Basic Full Node
100,000 COTI*
Advanced Full Node
250,000 COTI** (with a guaranteed return of 25% annually)
*Staking requirements may change over time
** COTI ambassadors may run up to three Advanced Full Nodes
In COTI, node staking amounts must be sent to the node’s special address which is maintained by DSP Node consensus at the network’s maturity stage. As a temporary solution for the network’s infancy stage, stakes are deposited to a node’s special address belonging to the COTI financial server, which is responsible for disputes, processing network fees, rolling reserves and more. The operation flow for this address is pre-defined, so staked capital cannot be seized from the node under any circumstances.
Full Nodes have the opportunity to earn fees from merchants, as well as P2P transactions. Use our calculator below to estimate your potential earnings as a node operator in the COTI network.
Profits are relative to your level of service and fees you’ve set.
The following tables illustrate various scenarios for network transaction volume, number of nodes, fees and staking requirements.
Trusted users with high Trust Scores can become node operators after submitting satisfactory KYC documentation. At COTI, we’ve made running nodes as easy as possible — all you need is a Virtual Private Server (VPS) that meets the minimum requirements outlined below. You can read our technical guide on running a COTI Full Node here.
The requirements for running a Full Node are as follows:
✓ 16GB of memory
✓ 4 vCPU cores
✓ Bandwidth (up to 3.5 Gbps)
✓ Broadband Internet connection
✓ 24/7 availability
✓ Operating system: Ubuntu/Linux/Windows
The estimated costs for running such a VPS on Digital Ocean or Vultr is approximately $40-$80 per month.
Users can operate the following nodes in the COTI network in the near future:
Double Spend Prevention (DSP) Nodes
A set of highly trusted distributed servers responsible for DSP consensus, account balance control and general protocol and data integrity. Each transaction must be approved and signed by the majority of the DSP nodes, and users cannot directly connect to DSP Nodes. To run a DSP Node, a user is required to stake a substantial amount of COTI. This amount can be deposited solely by the DSP Node operator, or by a group of network participants delegating their deposits to the node operator.
Trust Score Nodes
Trust Score nodes are dedicated servers responsible for calculating and storing participant Trust Scores and KYC statuses. To run a Trust Score Node, a user is required to stake a substantial amount of COTI.
Running a COTI Full Node enables operators to collect fees from each transaction. To be eligible to run a Full Node, operators must stake 100,000 COTI for each node and set the fee they wish to charge per transaction. An operator may also choose to stake 250,000 COTI to run an Advanced Node and guarantee a 25% annualized return. COTI has been built to be a free marketplace and operators may compete based on their service level and fee structure. In August 2019, node operators processed more than $5M in transactions in the COTI network. We expect turnover to continue increasing monthly and encourage users to run full nodes on the COTI network.
We invite you to register to become a COTI Full Node operator today. For more information, you can view our technical guide and calculate your potential earnings using our Earnings Calculator. For all questions, feel free to get in touch with us in our Telegram group.
Website: https://coti.io
Github: https://github.com/coti-io
Technical whitepaper: https://coti.io/files/COTI-technical-whitepaper.pdf
