On 13 September 2022, the Swarm Foundation began the most substantial upgrade to the Swarm network since its mainnet release. The upgrade will unfold in several phases and enable node operators to receive rewards for their services to the network. It represents an opportunity for people to offer spare resources (i.e. storage and bandwidth) to the Swarm network and eventually get compensated for it.

It is a pivotal moment for the Swarm network and for the larger Web3 ecosystem, as it creates new social and economic possibilities. Storage incentives are the foundation on which the next generation of private, secure, decentralised, inclusive and open-source dApps will be built.

Four key changes in the network

Bringing storage incentives to a functional state is an incredibly tough problem to solve. That’s why, according to Viktor Tron, lead researcher on the topic for the past seven years, this is nothing less than “the missing piece that will make the blockchain complete”.

The changes being introduced to the network are the following:

• Node operators can stake BZZ to participate in the redistribution of funds;
• Bee node operators can then receive BZZ for providing storage and bandwidth;
• the Swarm network will be economically sustainable;
• data storage will be persistent.

This blog explains the phases in which the upgraded incentives will be introduced and what each phase means for the network. A follow-up blog post will focus on BZZ staking.

Five roll-out phases, completion planned by end of January 2023

The upgrade will be completed in five consecutive phases, each introducing a different component and functionality.

The phases are as follows (dates are indicative):

Know your neighbour (Phase 1)

Unlocking the BZZ of the old postage stamp smart contract.

Released to mainnet on 13 September 2022

Stake and play (Phase 2)

Activating staking and redistribution smart contracts First week of October 2022 — testnet release First half of November 2022- mainnet release

The oracle (Phase 3)

Introducing the price oracle and network-wide price discovery Second half of October 2022 — testnet release Second half of November 2022 — mainnet release

A good neighbourhood (Phase 4)

Additional security and verification features — Part I Second half of December 2022 — mainnet release

Content extra-protection (Phase 5)

Additional security and verification features — Part II Second half of January 2023 — mainnet release

The time frames above will be detailed and confirmed on Monthly Ecosystem Calls from September through December according to this schedule:

• Testnet release of Phases 2 and 3 will be announced at the September Monthly Ecosystem Call on 29 September.
• Mainnet release dates for both these phases will be announced at the October Monthly Ecosystem Call on 27 October.
• Mainnet release of Phase 4 will be announced at the November Monthly Ecosystem Call on 24 November.
• Mainnet release of Phase 5 will be announced at the Winter Solstice Event on 21 December.

Phase 1 — Know your neighbour

Phase 1 launched on 13 September 2022 and opened the doors for all subsequent phases. It updated the old postage stamp contract and changed its address in the Bee client. As it is still ongoing, expect extensive testing during this phase. An exact release timeline for all subsequent phases will be based on the results of the tests.

The main benefit of this phase is that it allows the redistribution of the value that is currently locked inside the postage stamp contract. Before Phase 1 was implemented, all BZZ tokens used to pay for postage stamps were unavailable for redistribution. These tokens have now been unlocked and made available for redistribution.

Another important benefit of this phase is that it has provided nodes with the ability to probe their neighbourhood’s depth. Essentially, this means that single nodes will be able to determine the available storage of their neighbourhood. This is important since neighbourhoods will collectively participate in the redistribution process described in the following phase.

Phase 2 — Stake and play

This phase will introduce incentivisation for storing content by activating the staking and redistribution smart contracts. When both smart contracts go live, node operators will be able to stake BZZ and participate in the redistribution of the BZZs that were unlocked in Phase 1.

The redistribution process will be as follows: A random sampling of content in a randomly determined neighbourhood will take place. Everybody who wants to participate in the redistribution will have to stake a minimum of 1 BZZ and reveal the results of the calculation based on the random content sampling.

By staking BZZ, node operators will have “skin in the game”. They will have to prove they are actually storing the content chunks, since their chances of winning the pot increase proportionally to their stake. If they are not honest about it, a portion of their stake will be frozen at first and slashed later.

For further information on how staking will work, watch Daniel A. Nagy’s talk from the Swarm meetup in Berlin on 14 September 2022.

Phase 3 — The oracle

Phase 3 will deliver the price oracle contract. The price oracle is an on-chain contract that will dynamically determine network-wide storage price based on signals of supply and demand. It will rely on data provided by mechanisms introduced in Phase 2.

Put simply, the oracle will automatically determine the price based on a simple rule: fewer nodes = less storage = higher price of storage and vice versa.

As a consequence, the current price of storage on the Swarm network will change. The magnitude of change will be determined by the dynamics of the network.

Phase 4 — A good neighbourhood

In Phase 4, further mechanisms of verification will be introduced. With these in place, it will be possible to additionally verify the correctness of the reserve commitment, which serves as an additional deposit of funds to prevent cheating.

Phase 5 — Content extra-protection

The completion of the last phase will introduce a secondary reserve commitment, making it harder to game the system or perform malicious attacks, especially if the attacks are aimed at the integrity of the content.

Forth, to a world computer for everyone

Storage incentives represent the most important step for the Swarm network to grow its potential of becoming the hard drive for the world computer. The Web can now move towards becoming a more free, private, secure and accessible place.

Take note

BZZ utility token should not be purchased for financial gain or speculation. There are risks related with holding and using BZZ token, staking it and participating in the network as a node operator. The node may not receive any reward at all, amounts staked may be unexpectedly slashed, uploaded data may become unavailable or corrupt, temporarily or permanently lost depending on the performance of the network during these phases. Only by participating actively in the network, it’s parameters can be tested and patched when needed. An external audit on the upgrades will be parallely conducted with the estimate delivery date being March 2023. All dates and information in this post is indicative and may change without prior warning. Follow us on discord and twitter for updates. Let’s make the internet great again.

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