Testnet 2 Incentives Retrospective

Summary & Key Takeaways

This week, Aleo wrapped up the incentivized portion of testnet2. Over a period of 10 weeks, over 10,000 nodes from around our community participated in mining blocks, which helped us test our technical architecture and validate our crypto-economic design. These were critical steps to prepare for our forthcoming mainnet, and we are happy to report that this effort was an amazing success for several reasons, outlined below:

• We validated the concept of Proof-of-Succinct Work as a mechanism to incentivize the market to drive down the cost and drive up the efficiency of generating zero-knowledge proof. At one point, the single fastest miner was computing an unbelievable 10k proofs per second, and the overall network hash rate peaked at over 20k proofs per second.

• We had an incredible show of participation and support from the community, who in total and at various points were running over 10,000 nodes. This level of participation distributes control and accountability among many parties, thus promoting the security of the network and its decentralization at launch.

• Over a dozen individuals identified or submitted fixes for various bugs, and added support for additional functionality above & beyond what the team initially shipped.

• We were able to identify and fix critical issues relating to our consensus. In particular, we moved from a Nakamoto Consensus to an algorithm called ASERT, and fixed a small but critical bug in how proofs were being generated as part of PoSW.

• Multiple mining pools are now up and running, which will help distribute hash rate around the network, and ensure that control and accountability are distributed among the mainnet’s network of participants, rather than any one collection of entities.

While we view the testnet as a success, there were some things that did not work as we anticipated.

• We did not anticipate the level of miner competition on our testnet in the early days. As a result, the quadratic rewards scheme did not distribute rewards as widely as we hoped.

• Our baseline GPU PoSW miner implementation is still much slower than what top miners on the network are using, and thus there is a large disparity between the top miners and everyone else. On the one hand, this tells us that there is already a robust community of thoughtful leaders and developers that will innovate to contribute to the protocol’s security. On the other hand, we would like to narrow this gap to increase the number of participants who can meaningfully contribute.

So the incentivized portion of testnet2 was a significant step towards our mainnet launch. Here are next steps based on our experience with the incentivized testnet.

• First of all, subject to the rules below, every mining node in the Aleo network (excepting the top 100) from January 5 - January 12, 2022 will receive 125 Aleo Credits even if they did not find a block. We want to grant this given the lessons we learned as part of the testnet were invaluable, but we couldn't have gotten there without robust participation, so we want to reward that contribution.

• Next, we're organizing a competition to develop and open-source faster GPU provers. This is an industry initiative that we're calling the ZPrize. Aleo is organizing the effort and contributing up to an additional 8M credits (and additional cash incentives) toward these prizes. This initiative should enable significant improvements to the baseline Aleo prover, which should help democratize participation in mining and lead to higher hash rate and greater security at mainnet launch.

Claiming Rewards

Incentive rewards will be calculated and awarded to participants according to what was laid out in this blog post. In addition, subject to fulfilling KYC requirements—and to Aleo’s discretion more generally—the following awards will be issued:

• If our network crawler detected your node running on our network from January 5 00:00 UTC and January 12 23:59:59 UTC, you will be awarded 125 credits regardless of whether or not you found a block.

• If you submitted a pull request to snarkOS or snarkVM that was merged, you will be awarded 500 Aleo Credits per PR. Our team is already in contact with many of these individuals, but if you submitted a PR that was merged and haven't heard from us please email testnet@aleo.org.

• If you participated as a beta tester in our Aleo mining pool, you will receive 500 Aleo credits.

• If you ran a mining pool, and registered with the team according to our previously published criteria, you will receive a 31,500 Aleo credit reward. This process involved significant direct communication with the Aleo team, and the individuals/teams that this reward applies to have been/will be notified individually.

If you participated in the incentivized testnet, and met one of the criteria outlined above, here is what you need to know to claim your rewards.

1. Please ensure you have saved the address and private key for the node you used on testnet2. These will be required at a later stage in the process to confirm your participation and ownership of a miner. DO NOT share this information with anyone, including anyone claiming to be Aleo (or a representative of Aleo). When it comes time to verify your participation, there will be an official blog post with all the instructions. Again, DO NOT share this information before then.

2. ALL participants who are eligible to receive rewards MUST go through a KYC process if you are not from the US/Canada. Unfortunately, US/Canadian citizens are not eligible to receive any rewards UNLESS they are accredited investors.

3. Please upload the IP address of your miner and the dates you were mining to this

   form. Doing so will help us ensure the integrity of the rewards process.

4. Lastly, if you participated as part of a third-party pool, you will have to coordinate directly with the mining pool operators. Aleo is not responsible or liable for the structure/execution of payouts for third-party pools.

Lastly, please note that the Aleo team will be doing a detailed forensic analysis of the activity of testnet2 to identify anyone who may have been cheating the system. If you did not follow the rules we laid out in prior announcements, you will not receive rewards, and in general the Aleo team reserves the right to withhold rewards from any individual, for any reason.

Please note that these credits will likely be distributed as part of the mainnet launch. They are to be used as a payment mechanism for services on the Aleo mainnet. They are not investments or investment vehicles, and they should not be treated as such; their value is simply in their utility for mainnet functionality. By claiming your rewards, you represent, warrant, and acknowledge that you are:

• not acquiring Aleo Credits as an investment and have no expectation of economic benefit or profit as a holder of Aleo Credits;

• not relying on Aleo or any of its employees or representatives in any way;

• not acquiring any equity or other ownership interest in Aleo by virtue of owning Aleo Credits; and

• will not portray Aleo Credits as an investment or an opportunity to obtain an economic benefit or profit.

What's Next for Aleo

Our team remains focused on launching mainnet in Q3 of this coming year. In the meantime, please note that while the incentive period for testnet2 has ended, the network will continue to run. Meanwhile, development of testnet3 has already begun. Critically, this testnet will add support for deployment fully-fledged Leo programs and enable users of the testnet to interact with those programs via transactions generated off-chain. This will be our final testnet prior to mainnet launch, anticipated Q3 of this year.

Thanks to everyone for your contributions which made this testnet a success. We couldn't do it without the efforts of the whole community, and we're excited to launch this network together in 2022.