Paying for Chainlets

Chainlet Deposit Fee Collection

Once the price is set by Musical Chairs, how does a developer actually pay for a Chainlet? To reiterate, the Musical Chairs process determines the amount each validator will receive for each Chainlet, but the actual price that the developer pays will be (Musical Chairs Price x number of active validators for their Chainlet).

When the next epoch begins, each developer’s Chainlet fee deposit is reduced by (Musical Chairs Price x number of active validators for their Chainlet) and distributed to the addresses of the validators in the Active Set. This means each validator receives the Musical Chairs Price amount of SAGA tokens per Chainlet they validate.

Once the fee deposit is collected by the validator, they are on the hook for validating and meeting the SLA requirement for that Chainlet. In the middle of this epoch, another Musical Chairs auction process begins for the subsequent epoch. Unless the validator changes their bid, their current price automatically rolls over to the next epoch. There is significant value for validators (and their delegators) to be included in the Winning Set. Therefore, those validators in the Losing Set will want to lower their bids to get back in the Winning Set for the following epoch, ultimately lowering the price of Chainlets.

Further Improving the Developer Pricing Experience

There are some further optimizations we can implement to make the developer experience better. We will go into more details with the following ideas in the future, but we wanted to leave a small glimpse into the future design of the Saga pricing mechanism.

First, the Musical Chair auction mechanism ensures that the price will constantly change from epoch to epoch. One way to reduce volatility is to charge developers a moving average of the price from the last X epochs. This way, epoch by epoch, the price variation only contributes a small movement to the actual price and the developer is able to better predict the price of Chainlets ahead of time.

Secondly, we can denominate Chainlet prices in USD instead of SAGA tokens. By having dollar-denominated Chainlet prices, there will be a much more predictable market for developers. Because the payments will still be made in SAGA tokens, this mechanism will require some form of price oracle system or bonding curve.