Pocket Network (POKT)

From CryptoWiki

From its partner's Fuse's blog (25-2-2021):

"Pocket Network can be thought of as a decentralized peer infrastructure layer for any compatible blockchain."

Basics

"Pocket Network is a decentralized relay network that provides apps with RPC access to the long tail of blockchain networks using independent full nodes."

History

Audits & Exploits

Bugs/Exploits

"In May, the chain halted temporarily due to a change in transaction indexer but did not impact node count overall. Tendermint began treating nodes beyond the MaxValidators limit (5k) differently, causing a temporary spike in jailed nodes. PUP-8 upgrade increased the node limit to 50k to address this."

Governance

Admin Keys

DAO

"Pocket DAO: A whitelisted group of holders of the POKTDAO token (on Gnosis Chain), which is strictly used for governance on Snapshot and currently has a supply of 61 POKTDAO. Members must go through a proof-of-participation onboarding process before admission to the DAO. The DAO votes on Pocket’s monetary policy, validator requirements, and other protocol updates while retaining 10% of total POKT rewarded for relays and 99% of transaction fees."

Treasury

Token

Launch

Token Allocation

Inflation

  • Parameter Update Proposal-32 (PUP-32) set the minting to roughly 220,000 POKT per day (~4.9% inflation).

Utility

Burns

"Since the implementation of Pocket Improvement Proposal-29 (PIP-29) in May 2023, Pocket gateways (access portals) must pay a $0.00000085 fee per relay to the Pocket DAO, which is then burned."

Other Details

Coin Distribution

Technology

  • Whitepaper can be found [insert here].
  • Code can be viewed [insert here].

Implementations

Transaction Details

How it works

"Pocket Network is a Web3 node infrastructure protocol that creates a two-sided marketplace for RPC node providers to offer developers access to blockchain data.

A remote procedure call (RPC) is an application programming interface (API) interaction that allows apps to communicate with servers on a shared network like Ethereum. RPC nodes enable users (applications/developers) to communicate with blockchains. Relays (calls) to RPC nodes are usually required by apps, exchanges, wallets, and analytical tools for a range of tasks including, but not limited to, retrieving wallet balances and smart contract event logs, or interacting with DeFi liquidity pools.

Pocket Network’s protocol runs atop its Proof-of-Stake blockchain, which uses a Stake-for-Access (SFA) model, also known as a work token model. In other words, Pocket requires its node providers to stake the native token (POKT) to provide services on the network. Simultaneously, end users are required to stake POKT to access the network’s services. Previously, the protocol would mint new POKT for each relay, directly paying nodes through minting rather than paying for each RPC relay. Inflation is no longer tied to relays and is, instead, determined through Pocket DAO governance. Most recently, Parameter Update Proposal-32 (PUP-32) set the minting to roughly 220,000 POKT per day (~4.9% inflation). Currently, service nodes earn POKT in proportion to their stake-weight (and rewards multipliers).

Additionally, since the implementation of Pocket Improvement Proposal-29 (PIP-29) in May 2023, Pocket gateways (access portals) must pay a $0.00000085 fee per relay to the Pocket DAO, which is then burned. This fee is called the GatewayFeePerRelay parameter, which specifies how much USD-equivalent POKT the gateway operators owe for every relay they send through the network. Of note, paying Pocket users spend an average of $0.000004 per relay, which shows that gateways (currently only the Pocket Portal) are still net positive in fees earned after paying the gateway fee per relay to the DAO.

The key participants in Pocket Network are described below.

  1. Service Nodes: These nodes stake POKT to provide servicing relays to users (applications/developers); get compensated in POKT per relay fulfilled and proved; retain 85% of total POKT rewarded for relays.
  2. Validator Nodes: These nodes stake POKT to validate the PoS blockchain; confirm blocks that contain proofs of the relays serviced; retain 5% of total POKT rewarded for relays and 1% of POKT paid for transaction fees (the other 99% is sent to the Pocket DAO).
  3. Users: Often applications or developers that stake POKT to request RPC relays to various blockchains. Currently, staking is conducted through the Pocket Portal. The Pocket V1 upgrade will change this dynamic by enabling decentralized demand-side access points for gateways and users.
  4. Pocket DAO: A whitelisted group of holders of the POKTDAO token (on Gnosis Chain), which is strictly used for governance on Snapshot and currently has a supply of 61 POKTDAO. Members must go through a proof-of-participation onboarding process before admission to the DAO. The DAO votes on Pocket’s monetary policy, validator requirements, and other protocol updates while retaining 10% of total POKT rewarded for relays and 99% of transaction fees.
  5. Gateways: Access points for developers to use the Pocket Network. Gateways must pay the Pocket DAO a $0.00000085 fee per relay serviced that is then burned by the DAO on a weekly basis. Currently, the Pocket Portal is the only gateway available and is operated by Pocket Network Inc. Pocket plans to launch its first community-run gateway by Q4’23."
  • From Ansem's Q1 report (1-1-2022):

"Their economic structure is setup to incentivize full node operators by paying them when developers need to use the network to access data for their applications. Many developers need access to high quality read/writes directly from blockchains, but don’t always have access to RPCs specialized for their applications. Pocket describes itself as an “Uber for servers” because you technically don’t know what *server* you will connect to when you query their network but they handle all of the service requests via their blockchain to provide users what they need. As more developers use the Pocket Network, node operators make more money from participating in the network, which in turn incentivizes more node operators to join the network.

Pocket Network’s economic system is very clever and it is designed in a way that reduces costs substantially for developers using the network. There are three main functions: staking, minting, and burning POKT. On the application side, you have the ability to put your POKT in escrow while you are using the protocol. For developers, instead of paying fees to a company for some infrastructure-as-a-service, with Pocket Network they can stake POKT up front for access to the network and then use the network until they remove that escrow. Because Pocket Network is not a centralized company that needs to charge fees to cover margin or pay for cloud hosting services, all of this overhead is removed and it is much cheaper for developers. Regarding nodes within the Pocket Network that service developer’s requests, they stake POKT for the right to do work within the network and they will earn a certain amount of POKT for each request that they serve from the application side."

"It incentivizes the maintenance of Validator Nodes that empowers dApps to interface with decentralized networks without a single point of failure. Pocket Network is decentralized because the information about the transactions relayed through it is stored on the Pocket blockchain-powered by Tendermint consensus. In simple terms, a dApp will ping a Dispatch Node, letting it know the blockchain it is trying to connect to. The dApp is then paired with 5 Validator Nodes who are running a full node on the desired blockchain. Each request from the dApp is routed to all 5 blockchain nodes, through the Validator Nodes, and the responses are sent back. The dApp then takes the 5 responses and finds the rational majority, ensuring they never have to trust a single node."

Fees

"Of all transactions, roughly 1% of the fees goes to block proposers (validators), and 99% is sent to Pocket DAO. Transaction fees on Pocket Network function similarly to gas fees on Ethereum. Fees can be customizable depending on the platform used. Consumer Pocket wallet apps simplify the process, reducing the possibility of errors. On the other hand, service nodes tend to use a command line interface (CLI) when interacting with Pocket Network. Because CLIs do not have guardrails, they open the possibility for human errors.

In Q1’23, a service node erroneously entered the “send” amount into the “fee” category via the CLI. This fat-fingered mistake led to an additional 90,000 POKT being sent as a transaction fee, which cost the validator roughly $7,200 (on the date of the transaction). That extra 90,000 POKT led to a 31% increase in Q1’23 transaction fees and the subsequent 27% QoQ decrease in Q2’23. Without this outlier, transaction fees would have only steadily decreased by 2% QoQ for the past two quarters."

Upgrades

"Pocket DAO, voters are implementing stake-weighted servicer node rewards, and by increasing validator node rewards by a factor of five."

Staking

"Validators are service nodes that also propose and validate blocks on the Pocket blockchain. Hence, all validators are service nodes, but not all service nodes are validators. The top 1,000 service nodes for POKT staked can become validators (which keeps validators constant). Validators earn 1% of transaction fees and 5% of POKT inflation when they are a proposer for a given block."

"Pocket Validator Nodes stake POKT token to ensure desirable behavior and they are rewarded with newly minted POKT for each completed relay. A Validator Node can run full nodes on several blockchains at the same time. This enables the existence of multiple independent full nodes on the serviced blockchains being run professionally and reliably, just like they are by centralized cloud providers.

Applications taking advantage of Pocket Network also need to stake POKT. The amount that they stake will determine the number of relays that they can request each hour. At the current stage of development of POKT Network, the supported applications will have the right to a certain number of relays per hour indefinitely, as long as they continue staking, and they can withdraw their POKT at any time."

Validator Stats

  • An average of over 60% of the POKT supply has been staked over the past four quarters. The amount of POKT staked grew steadily over the past year, with Q2’23 seeing over 1 billion of total POKT staked for the first time.
  • From Twitter (29-12-2021):

"The protocol had 600 nodes in January. Today we’re pushing 18,000."

Liquidity Mining

Scaling

Interoperability

Other Details

Oracle Method

Compliance

"Pocket Portal locking addresses associated with Tornado Cash"

Their Other Projects

Roadmap

"Planned to fully launch in early 2024, the Pocket V1 mainnet aims to improve Pocket’s utility, introduce a new consensus mechanism, and improve peer-to-peer communication and the data persistence module. Notably, Pocket Network V1 will decentralize the demand-side access points for gateways and application developers.

Currently, there is only one Pocket gateway. It is centrally operated by Pocket Network Inc., a U.S.-registered entity. That is, Pocket’s architecture currently relies on a centralized, off-chain distributor mechanism. The off-chain relay distributor acts as a centralized choke point to the network where RPC requests can be restricted. This concern became a reality in 2022 when Pocket Network Inc. announced that the Pocket Portal would be blocking interaction with sanctioned addresses associated with Tornado Cash. As such, the Pocket team continues to have the roadmap milestone of removing this single point of failure in the protocol’s design.

The community-run gateways that are planned to launch by early Q4’23 will provide alternatives to the current Pocket Portal, currently the only gateway on Pocket. The V1 protocol upgrade will enable decentralized demand-side access points for gateways and application developers.

Tendermint BFT will be replaced with a more efficient implementation of HotStuff BFT. This will reduce communication bandwidth and computational requirements. The migration also means moving from Round Robin leader selection to VRF (Verifiable Random Function) leader selection, combined with CDFs (Cumulative Distribution Functions) that consider validator stake, resulting in a blind, pseudorandom process resistant to denial of service (DoS) attacks. Additionally, transaction validation will optimize storage usage by excluding invalid transactions from blocks. These changes are set to provide a more secure, streamlined, and storage-efficient system."

Revenue

"Decline in the POKT inflation in Q2’23 led total revenue to decrease by 45% QoQ in USD terms. Supply-side revenue accounted for 97% of total revenue, while POKT burns accounted for 3%. Theoretically, transaction fee revenue is included in total revenue; however, in practice, it accounts for a negligible amount that it rounds to 0%. Pocket Network’s total revenue is calculated from multiple sources:

  1. Supply-side revenue (minting): This revenue comes from inflation, where 85% is minted directly to service nodes based on the number of relays serviced and 5% is minted to block proposers (validators). What’s not recorded as revenue is the remaining 10% that goes to Pocket DAO.
  2. Transaction fee revenue: This revenue accounts for the 1% of the transaction fees rewarded to block proposers, while the remaining 99% that goes to Pocket DAO is not considered revenue.
  3. Protocol revenue (burns): This revenue accounts for gateway fees being burned. That is, after PIP-29, a gateway fee per relay of $0.00000085 was introduced where gateway operators send gateway fees to Pocket DAO to then be burned weekly."

Usage

"Pocket’s protocol is serving approximately 1 billion RPC requests every day, and is on course towards a goal of supporting 100 blockchains before year-end. At the same time, as Pocket Network has seen explosive growth in the number of active nodes on the network (all the way up to almost 50,000 nodes in May of this year), infrastructure costs of the protocol have risen as well."

"In the month of July we did 200M relays. We’re on track to break 5B in December. We’ve topped over $500M in revenue for nodes in 2021 and on track to break $50M for the month of December."

  • From Our Network (4-9-2021):

"The network saw a historical average of ~4.5M requests a day pre-August. Now the network is printing an all-time-high of ~41M average daily relays. Key drivers for relays have been demand from Dark Forest players and Austin Griffith's scaffold.eth tooling for solidity developers. Pocket’s recent integrations of other chains has lead to an increasing diversification in which traction is being sourced including Fuse and xDAI."

"Average daily relays on Pocket has averaged ~4m and ~1/3 of the network’s peak at 12m in April. Over the last four weeks, 142M relays have been driven by the Pocket Gateway. In May, node operators served 169.7M relays from blockchain applications."

Projects that use or built on it

Competition

Pros and Cons

Pros

Cons

Team, Funding, Partnerships, etc.

Team

  • Full team can be found [here].
  • Has 'a team of 25 full-time contributors.' (25-2-2021).
  • Michael O’Rourke; CEO

Funding

Partners

"The Fuse Foundation will exchange 750,000 FUSE for 250,000 POKT to broaden access to Pocket’s RPC call relay service for the Fuse ecosystem."

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