User Incentives

Frequency incorporates a second form of staking called Provider Boosting. While Capacity Staking solely produces Capacity and is designed to help Providers maximize economic utility for publishing Message transactions, Provider Boosting gives users a mechanism to indicate support of, or withdraw support from, Providers by staking FRQCY. Provider Boosting is still in development, and specific aspects of the design described below may change before a Frequency Governance approved release

Boosting

Provider Boosting also involves staking FRQCY. Staked tokens generate Capacity (like Capacity Staking) and therefore require a Provider to be designated as part of the staking process. In this scenario, a different ratio of FRQCY to Capacity (the Boosting Ratio) is used, which is always less token-efficient than the Capacity Staking Ratio for the amount of Capacity generated. The Token Account that stakes the tokens also receives a reward, paid in FRQCY, to reward the Token Account holder for participating in Provider Boosting and expressing their support for the Provider(s) they chose to receive the Capacity generated by their staked tokens. The reward is distributed at the end of each Reward Epoch, a number of blocks set by governance and initially configured to a duration of approximately 14 days.

Users must maintain their full stake throughout the entirety of the Reward Epoch in order to qualify for a reward. Each Reward Epoch has a fixed number of tokens that can be minted to reward Provider Boosting participants, and those rewards are paid based on the ratio of the user's Provider Boosting stake to all user Provider Boosting stakes across all Providers. Token for rewards are not minted during, or at the end of, the Reward Epoch. Instead, tokens are minted at the time they are claimed by Token Account holder, sometime after the end of the applicable Reward Epoch. However, all rewards are capped at a maximum Annual Rewards Rate set by governance. Given that the reward is paid via new token minting, the reward for Provider Boosting contributes to FRQCY inflation.

Provider Boosting represents a user's approval or support of a Provider by virtue of the user staking tokens that increase the Provider's Capacity Allocation, creating a trackable continuous support metric. To allow the user to react to the behavior and actions of the Provider, the user has the ability to designate a different Provider to support with their stake at any time, without going through a thawing process. This allows a user to change which Providers they support at any time, signaling approval of a newly supported Provider, disapproval of a Provider that loses their support, or both. Changing which Providers they support has no impact on the rewards a user receives for their Provider Boosting stake.

Rewards

Provider Boosting provides rewards and incentives to both users and Providers who participate.

Users have two incentives to participate. The first is the actual token reward received for staking tokens via the Provider Boosting mechanism. The second is the ability to instantaneously and continuously provide or withhold their support or approval of particular Providers in the network in a way that has a direct economic impact on Providers. An on-chain, incentivized mechanism for users indicating support for application participants in the ecosystem is a novel mechanism in the space, and very different from how, for example, social networking applications function today.

Providers also receive value from Provider Boosting. They receive Capacity from users, which can substitute for Capacity they would have otherwise received by acquiring FRQCY and deploying them using Capacity Staking. Depending on user participation levels and Provider popularity, this could represent all the Capacity needs for a Provider. A Provider also gains block-level insights into user reactions to their product offering, policy changes, and other reputational criteria. This ongoing signaling can be a powerful feedback mechanism for a Provider as the set of participating users express their approval on a continuous basis.

A novel aspect of Provider Boosting is that while Providers receive Capacity based on user support, there is no on-chain function or mechanism for Providers to pay users for the Capacity received. Instead, the Frequency chain itself is paying the Reward to users for participating. This changes the nature of the user/Provider interaction involved in Provider Boosting. Instead of Providers "paying" users to support them, as some other cryptoeconomic systems promote, the network incentivizes users to stake, with no specific economic incentive for which Provider they support. This "economically agnostic" choice that Provider Boosting incentivizes users to make can increase the quality and value of the support or approval that Provider Boosting implies; this establishes real economic incentive for Providers to behave in the ways users support or prefer.

Visibility

Provider Boosting, via user staking to support Providers, is also a form of Provider reputation scoring. There are several ways these stakes can be interpreted. For example, rankings can be composed for total tokens staked per Provider, average tokens staked per user, rates of increase or decrease for a Provider, and so on. Each grants valuable insight to users about Providers with whom they may want to start or stop interacting, as well as signals Providers regarding user interest, approval, and support.

Since all Provider Boosting activity occurs on chain, all changes in staking activity are publicly visible. While Token Accounts used for Provider Boosting may or may not be associated with a user's MSA, all Providers in Provider Boosting are directly identifiable. This means there is no way for Providers to suppress visibility around public sentiment as expressed by Provider Boosting. The independent, public and decentralized nature of Provider Boosting is rare in existing platform-based communication channels, and serves as another incentive for users to participate.