Computing Provider Collateral

Introduction

In the Swan Chain network, Computing Providers (CPs) contribute their computational resources to support the network's decentralized computing infrastructure. To ensure stability and economic security, CPs are required to provide collateral in Swan tokens. This collateral acts as a financial commitment, incentivizing CPs to act in the best interest of the network while also sharing in the economic rewards generated from providing computing power.

Collateral Model

The collateral amount for each CP is determined by an inverse correlation model based on the total computing power contributed by the CP to the network. The formula for calculating the collateral amount is:

$$C_{base} = \frac{C_{total}}{CU_{total}} + b$$

$$CU_{total} =\max ( \sum\limits_k N_{ECP}(GPU_k) \times f_k + \sum\limits_k N_{FCP}(GPU_k) \times f_k * W_{FCP}, CU_0)$$

$$\begin{cases}CU_0 = 3000 \\C_{total} = \text{Circulating supply of SWAN} \times 20\%  \\b=200\end{cases}$$

Where:

• $W_{FCP}$ represents the FCP resource bonus ratio, currently set at a constant value of 1.2

• $N_{\text{FCP}}(\text{GPU}_k)$represents the number of $\text{GPU}_k$ in FCP

• $N_{\text{ECP}}(\text{GPU}_k)$ represents the number of $\text{GPU}_k$ in ECP.

• $f_k$ represents the earnings growth factor

Currently, the computing units $CU_{\text{total}}$ in the network are capped at (CU_0 = 3000). If the computing units remain at or below (3000), the base collateral remains constant at:

$$C_{\text{base}} = \frac{10,000,000}{3000} + 200 = 3533$$

Example: If $CU_{\text{total}}$ increases to 6000

1. Substitute $CU_{\text{total}}$ = 6000 into the formula:

$$C_{\text{base}} = \frac{10,000,000}{6000} + 200$$

1. Perform the calculation:

$$C_{\text{base}} = 1666.67 + 200 = 1866.67$$

So, if the computing units (CU) exceed 3000, the base collateral amount will start to decrease. In the example where CU is 6000, the base collateral amount is 1867, which is lower than the 3533 calculated earlier when CU was 3000.

Revenue Sharing and APR Calculation

Once a CP provides collateral, they are eligible to receive revenue generated from both Universal Basic Income (UBI) tokens and paid jobs. The revenue model includes:

1. UBI Income: CPs receive UBI tokens as a baseline income for their participation, which is inversely related to their collateral and computing power.

2. Paid Job Income: CPs can earn additional revenue by completing paid jobs, which are offered at a market rate determined by user demand.

The Annual Percentage Rate (APR) for the CPs is calculated separately for both their operating revenue and collateral revenue:

• Operator APR: The revenue generated by CPs for providing computing power divided by their total operational costs.

• Collateral APR: Calculated based on the revenue earned by providing collateral relative to the collateral amount itself.

The total APR includes both the operator APR and collateral APR, providing a complete picture of the financial returns for CPs participating in the Swan Chain network.

Slashing Mechanism

To maintain network performance and accountability, CPs are subject to a precise slashing mechanism that penalizes inefficient or unreliable computing services. For each failed task, CPs face graduated penalties:

• Edge Computing Providers (ECP) lose 0.025% of their current full collateral amount per failed task (approximately 0.88 SWAN for a 3080 GPU), with around 48 tasks processed daily.

• Fog Computing Providers (FCP) lose 0.1% of their current full collateral amount per failed task (approximately 3.533 SWAN for a 3080 GPU), with around 14 tasks processed daily.

If a CP's collateral amount falls below the required threshold, they become ineligible to receive Universal Basic Income (UBI) tasks. To mitigate the risk of unexpected task exclusion, CPs are advised to maintain a buffer in their collateral amount.

Impact of Collateral Model

The negative correlation between collateral and computing power has several benefits:

1. Incentivizing Scale: CPs are encouraged to scale up their contributions to the network, as increasing their computing power reduces their collateral requirements.

2. Risk Mitigation: Collateral serves as a safeguard, ensuring that CPs have a financial stake in the network's success and discouraging malicious behavior.

3. Economic Participation: By allowing CPs to share in both operator and collateral revenue, the model promotes balanced economic participation, where CPs are rewarded not only for their computational contributions but also for their financial commitment.