Deep Dive: Nectar
A Layer 2 solution for node operators to provide additional rewards for uptime, storage, and bandwidth, built on top of Swarm.
The Deep Dive blog posts report on the community initiatives building on Swarm. The projects subject to Deep Dives are independent and autonomous from the Swarm Foundation and Association. Sometimes they are grantees, but their work is neither audited nor endorsed by the aforementioned organisations. Use them at your own risk, and always do your own due diligence. Presented incentives are layer2 ecosystem solutions and are not part of Swarm Foundation’s development efforts or agenda.
The content below has been taken from an interview with Nectar’s lead Felix Xia in November 2021.
It was an ordinary day in June 2021 when Dr Felix Xia, a businessman and tech veteran with 20 years’ experience in cloud and research, learned about Swarm: “I’d never heard of it before, but some of my business partners told me about it and I took a look,” he recalls. So he read the whitepaper, joined the AMA and started experimenting with it.
“It worked, and I thought it was a great project. I run a global company that offers cloud solutions and people started coming to me, asking me if I would be a sort of adviser to them for setting up nodes. It was then that I saw the problems node operators were facing with Swarm’s incentives,” Felix explains. Thus, Nectar was born.
Although Swarm does have a built-in incentives system, he believes it can be improved upon by providing additional rewards for node operators. Nectar, in his words, does just that.
What is Nectar
So what is Nectar? It is a Layer 2 solution running on top of Swarm. It uses its own NCTR token that node operators can use to stake in a common pot. As they provide uptime, storage and bandwidth to the Swarm network, nodes receive rewards from the pot.
What is Nectar
So what is Nectar? It is a Layer 2 solution running on top of Swarm. It uses its own NCTR token that node operators can use to stake in a common pot. As they provide uptime, storage and bandwidth to the Swarm network, nodes receive rewards from the pot.
By providing bandwidth and storage to the network, node operators make it more stable and secure. “That’s their contribution. And the rewards system should be based on that contribution,” Felix adds.
There are three dimensions to this contribution:
- Computing and communication capacity
- Commercial contribution (this relates to the amount of BZZ tokens a person has bought besides the investment in equipment and bandwidth)
- Stable factor (this looks at a node’s long-term uptime and network resource provision)
Based on these three factors, node operators get a reward every 24 hours, for all the time they are online and available for service.
If you’re curious about it, you can already install it and start experimenting with it. Currently, Nectar encompasses an alpha version of a Linux-based client that connects to Swarm. The latest release and installation instructions are available on their GitHub page. In case you get stuck, the team is reachable on Discord, Telegram and Twitter.
A different take on incentives
Besides providing additional incentives, Nectar also adds a new twist to how it looks at them.
The twist comes in the form of a grading system on which the stable factor is based. Nodes are graded on a simple 1–5 scale. Grade 1 is assigned to nodes that have been consistently online between 0 and 30 days. Grade 5 is for nodes that have been online between 120 and 150 days. If a node goes down during that period, it doesn’t lose its rewards. Instead, it is only downgraded to a lower grade. So even if nodes don’t perform at a 100% all the time, they still get rewarded.
“In other blockchain projects, if your node goes offline, you lose all your staked tokens. I believe that’s unfair, because sometimes things just happen and you shouldn’t be punished for that. Nodes that are stable for longer get better rewards than nodes that are less stable. But they all get rewarded, because at the end of the day, they all provide a service,” Felix explains.
Since Nectar is a Layer 2 solution, it can be used with any application, giving it abundant flexibility. Its tokens can be used, for example, to pay for services like downloading and saving a video, which rewards the developer and the network and which can also later be easily exchanged for BZZ tokens.
This holistic approach to rewards also convinced the Swarm Foundation, which is why Nectar has been added to the Foundation’s growing list of grantees.
Increasing stability and capacity
What Felix hopes to achieve with Nectar in the future is three-fold:
- At the base level, it would provide an incentive programme for node operators to create a stable and reliable network.
- At the second level, it would provide an incentive for any ecosystem that runs on Swarm.
- At the third level, it will be compatible with other infrastructure projects. This means that in the future, Swarm could leverage unutilised resources from other blockchain projects that, for example, offer decentralised storage.
By rewarding node operators differently, the Swarm network will also become much more resilient in the long run, enabling it to build a more robust ecosystem on top of it.
The first step to that will be a testnet launch at the end of November and a mainnet launch towards the end of the year, according to the Nectar team.
A game-changer
Excited about the project, Felix has no doubts Swarm has the potential to rewrite the rules of the game:
“I think that Swarm is the first viable commercial-grade case of blockchain technology. I’m happy to see a blockchain project that also offers technical applications, not just DeFi. We’ve already tried many other solutions that claim to provide decentralised storage and computing. But we don’t think that any of them could really run any commercial application in the future. We ran our own Swarm nodes and I see huge potential in it. It could power metaverse applications; it will allow people to provide computing resources; developers will be able to run any Dapp on it; or you could securely store valuable NFTs. I think it’s huge, this is going to be a revolution and Nectar will provide a rewards system for the participants, along with a DAO to help the community govern them.”
It’s a lofty vision and one that Felix is confident can be achieved. “But we need a stable network with larger capacities, which will increase its value as well,” he adds. Now it’s time for Nectar to get to work.
This blog post is part of the “Deep Dive series” that presents the most active initiatives building on Swarm who are taking ownership over the protocol. The projects subject to Deep Dives are independent and autonomous from the Swarm Foundation and Association. Sometimes they are grantees, but their work is neither audited nor endorsed by the aforementioned organisations. Use them at your own risk, and always do your own due diligence. Presented incentives are layer2 ecosystem solutions and are not part of Swarm Foundation’s development efforts.
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