Zilliqa implements halving mechanism for mining rewards

The Zilliqa network has implemented a halving mechanism for block rewards earned by miners, reducing mining rewards by half every month to align with the network’s shift to Proof-of-Stake with Zilliqa 2.0.

This change was implemented in line with Zilliqa’s decentralised governance protocol. The relevant proposal was first published on the Zilliqa governance forum on September 24th, where it was discussed extensively amongst the community.

On September 28th, the proposal was published for public voting, allowing gZIL holders to vote on whether it should be implemented. By the time voting closed on October 12th, more than 97% of voting power was in favour of implementing the halving mechanism. 

Vote participation for this proposal was impressively high, with a quorum being reached just a few days after the proposal was first published for voting.

The halving of mining rewards aligns with the ongoing development and future migration to Zilliqa 2.0, which will forgo Proof-of-Work in favour of a consensus built on Proof-of-Stake. Reducing Proof-of-Work incentives is a necessary component of this strategy that aligns the interests of miners and validators towards adopting PoS and aiding in a smooth transition.

As mining becomes less profitable, miners will be encouraged to support PoS or participate in staking. They will continue to be rewarded for mining operations by the protocol until the transition to PoS occurs with the mainnet migration to Zilliqa 2.0.

How the halving mechanism works

The proposal outlines a halving of mining rewards for the months of October, November, and December 2024.

Therefore, the total mining rewards for October would be reduced by 50%, with rewards issued after the implementation date being reduced further to retroactively reduce average rewards issued by 50%.In November, an additional adjustment would reduce rewards again by 50%, resulting in miners receiving 25% of the original reward amount. The third and final halving would occur in December, with miners receiving 12.5% of their original monthly reward amount.

As this change is being implemented on October 14th, the halving of rewards must be implemented retroactively to account for the preceding days to which this proposal applies. Therefore, rewards for the remainder of October will be 22.25% of their original value. Rewards for November will be 20% of their original value and those in December will be 12.5% of their original amount.

This retroactive implementation achieves an identical effect to the halving mechanism being implemented from the beginning of October, aligning with the specified outcome of the proposal.

For more information, read the full proposal.

Reallocating ZIL to the community

The reduction in mining rewards will result in a surplus of ZIL tokens, which can be reallocated in various ways to benefit the ecosystem.

These resources can be reallocated to strengthen network security by expanding the set of reputable validators, conducting audits, and other related measures.

A portion of the surplus ZIL tokens may be allocated for community-driven investments, incentives, and development initiatives. This could give the Zilliqa community and gZIL holders the ability to help fund the applications and projects they most want to see deployed on the network.

As we approach the migration to Zilliqa 2.0 and Proof-of-Stake, expect further updates on how the surplus ZIL unlocked from this halving mechanism will be reallocated to the community.

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