IV.II Validators

Economically, all Validators must be incentivized off-chain or use periphery smart contracts. There is no Validator compensation in the core protocol. This decision was made because the Validator landscape is complex and the chance of accurately encapsulating these complex economic arrangements on-chain was nil.

For the basic function of providing signatures for Update Collateral, it is expected that Validators and Minters will enter into binding, off-chain legal agreements specifying applicable terms and appropriate compensation. It is anticipated that Validators in the M^0 protocol will eventually correspond to auditors off-chain. The ultimate function of the Validator is to provide as close to real time attestation of the Eligible Collateral being used to generate M as possible.

While the protocol considers all Validator addresses to be fungible, there are in fact many specializations that could occur off-chain in the Validator ecosystem. For instance, there may be Validators that specialize in signing off on on-chain Collateral Value updates, while others act as “sentinels” and exclusively exist to call Cancel and Freeze on errant Minters. The level of specialization could even go beyond the initial methods of the protocol as periphery contracts are added by the ecosystem.