New to working with escrow? No worries! If you just need to see the schedule, you can skip down to the bullet list in the second half of this post. Otherwise, a good place to understand the underlying reasons for having escrow at all is or blog explaing why Churn & Burn is Bad for everyone
The short explanation is that the earning potential of a node, our network performance and - most important - file durability are all strongly affected by node operator reliability. We do everything we can to reward a healthy supply/demand balance, including the encouragement of “graceful exit” by storage node operators (SNOs) leaving the system.
You don’t need an upfront stake to start earning STORJ tokens. Instead, there is a 9-month period in which a percentage of earning are placed in a holding account, or escrow. The funds stay there until a SNO chooses to leave the network. At 15 months, a portion of the balance is returned to the SNO, while the remainder is held indefinitely.
So, that means that if a SNO uses the graceful exit function when leaving the network, the funds are returned to the SNO when leaving the network. We want all departures to be graceful of course! If a SNO leaves without completing that graceful exit, then the funds will be forfeited to offset the cost of data repair caused by the storage node exit.
A helpful way to understand what this all means to you is to check out the table below, which shows the withholding model. The function is structured with a tiered reduction in withholdings as time goes by.
- Months 1-3 : 75% of storage node revenue is withheld, 25% is paid to the storage node operator
- Months 4-6 : 50% of storage node revenue is withheld, 50% is paid to the storage node operator
- Months 7-9 : 25% of storage node revenue is withheld, 75% is paid to the storage node operator
- Months 10-15 : 100% of storage node revenue is paid to the storage node operator
- Month 15 : 50% of total withholdings are returned to storage node operator, with the remaining 50% held until the node gracefully exits the network
The withholding model is designed to:
Incentive and reward long term reliable storage nodes
Ensure with fairness that nodes choosing to leave the network do so in a way that’s the least damaging to the network
Want to dig deeper? We’ve collected the most common questions around why and how the process was implemented at https://storj.io/blog/2019/01/sharing-storage-space-for-fun-and-profit/