Phuture uses validators to ensure the proper operation of the platform. Validators execute three core protocol functions:
Validators interact with Phuture's smart rebalancing logic to retrieve data on which assets are out of balance and the desired trade quantities. This information is parsed into the 0x order router for execution. Validators with the requisite bonded stake are whitelisted to interact with Phuture's rebalancing router to ensure proper execution.
Validators monitor the health of asset reserves and move assets between off-platform destinations and Phuture's smart contracts. When reserves exceed the target, validators move assets from Phuture to off-platform destinations. When reserves fail to meet the target, validators move assets from off-platform destinations to Phuture.
On a periodic basis validators will refresh dynamic data stored in a reference contracts. An example of a dynamic dataset is market cap data. This data is used to mint indices that are based on dynamic datasets. In addition, validators will reallocate index shares within the protocol's vault to ensure indices built on dynamic datasets have the correct claim on the protocol's assets.
Phuture interfaces with keep3r network to manage and pay validators for executing tasks on the protocol.
Validators are paid with KP3R tokens that are generated through the bonding of either KP3R/ETH or KP3R/PHTR liquidity pool tokens. By providing liquidity to the KP3R token we are able to un-bond and reclaim 100% of the value of the liquidity token. Thus, once validators calls have exhausted the available KP3R credits, the liquidity tokens can be un-bonded and then re-bonded for more KP3R tokens. Of course, the protocol will monitor its available credits on keep3r network to ensure a new bond is in place before the previous one is removed. This effectively allows one pool of capital to pay for validator calls indefinitely and minimises dilution to PHTR token holders.
As Phuture deploys onto other chains we cannot rely on the services of keep3r network to manage and pay for the use of validators. Phuture is utilising a two stage process for covering validators costs.
Initially, PHTR token holders will cover the operating costs of validators by rewarding them with PHTR issued from the treasury contract. This is necessary because index fees will be insufficient for covering validators costs early on. If index funds were used to cover validator costs the drag on performance would be greater than the index fee paid.
Once enough fees are being generated from indices, they will be used to buy back PHTR and reward validators. At this stage, the protocol is self sufficient and issuance from the treasury will cease.
It is important to note that the breakeven point, where fees equal validator costs, differs for each chain and will be drastically lower for chains with excess block capacity.