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Skuld Hard Fork - Update On Progress

Layer 1 scalability is becoming the bottleneck of wide adoption as the blockchain space expands. To date, there is yet to be a straightforward solution to these challenges when considering the constraints imposed by security and decentralization. However, as the underlying computing and networking infrastructure improves with time, new ideas are introduced that further increase the efficiency of layer 1 platforms.
In the strategic plan published in July 2022, Callisto Network placed at the center of its vision the improvement of the Callisto Network efficiency with upgrades that offer value to users and miners, ensuring the long-term sustainability and longevity of the network.
With this in mind, several upgrades are planned to be introduced. The first step is the Skuld Hard Fork, which includes the following upgrades: (i) a burning mechanism, along with improvements regarding (ii) the block time, (iii) block size, and (iv) changes in transaction fee that solves inefficiencies that the network faces in its current state. These upgrades are part of the long-term plan towards achieving 100,000 transactions per second, and upgrades will follow them in the consensus mechanism.

Innovations & Improvements

1- Block Reward and Burning Mechanism

After Ethereum switched to Proof of Stake, it has been clear that the miners' rewards decreased significantly. As the majority of the existing Proof of Work networks' tokenomics follow the Bitcoin model, with rewards falling over the years, security issues will be raised with time, as the incentive for miners to secure the network decreases. In addition, continuous inflation can have a negative effect on the price of the underlying asset.
At Callisto Network, we argue that there are better ways to achieve wide adoption, and we strongly believe that this model results in miners quitting the network and thus decreasing its security. We believe that the security of a network cannot be related to temporary price variations that can result in significantly reducing the network's security
The introduction of a burning mechanism can have significatively positive results for a blockchain network, especially when the burning ratio is connected with the network’s utilization. Hence, the first step to ensure the highest security and long-term network viability is to adopt a fixed reward per block.
Compatibility with Ethereum wallets is of high importance towards massive Callisto adoption. In this direction, the designed burning mechanism shares many similarities with the Ethereum burning mechanism as it includes a Base Fee that is burned and a Priority Fee that is distributed to the miners, further increasing their rewards through second-order auctions.
In addition to increasing miners' rewards to enhance network security, the introduction of fixed block rewards along with the burning mechanism provides strong incentives to Cold Stakers. The Cold Staking dApp is the most used one on Callisto Network, where more than 1.1 billion coins are frozen, representing approximately 37% of the CLO coin circulating supply.
If the decreasing block reward model was followed, the Cold Staking APR, which receives a portion of the newly minted CLO coins, would decrease significantly, reaching zero when the total supply is reached. Instead, the rewards for the Cold Stakers are ensured through the fixed emission per block policy.
Also, Cold Stakers will benefit significantly from introducing the burning mechanism that will result in:
1- Higher APR especially when the network is fully utilized.
2- Deflation in the long term.
The burning mechanism and the fixed monetary policy have been implemented on the public Callisto Network testnet since November, 10th, 2022. Since then, the tests have been ongoing, and we are excited to announce that the initial results from the testnet have even exceeded our expectations.
The following is an example of a standard transaction with a transfer fee of 0.0210315 CLO. From this amount:
- 0.021 CLO has been burned.
- 0.0000315 has been paid to the miners as a priority fee.
0.021 CLO were burnt during this transaction ( Callisto Network testnet).
Here is an interaction with a smart contract involving a transfer fee of 0.1083893 CLO, of which 0.108 CLO were burned, and a priority fee of 0.0001623 CLO was paid to the miners.
0.108 CLO were burnt during this transaction ( Callisto Network testnet).
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In addition, a dedicated statistics page is under development. It will present statistics about Callisto Network, the coins in circulation, the burning mechanism efficiency, and the dApp usability.
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Screenshot of the Callisto Network Advanced Statistic page.
Screenshot of the Callisto Network Advanced Statistic page.

2- Variable Size Blocks

Having fixed-size block rewards can result in increased latency when bursts of transactions need to be validated. With the adoption of DeFi platforms, transaction bursts are getting more common. To further improve the user experience, a scalable network is essential to adjust the block size to the network utilization through variable-size blocks. To handle a spike in transactions, the gas of the blocks will increase from 8 million to 15 million to include more transactions.
These values were selected to achieve the highest possible decentralization of the network, further increasing its security.

3- Minimum Gas Fee

A problem that many layer 1 networks face is spamming transactions. Through these transactions, the network resources are spent inefficiently, increasing the size of the blockchain and creating delays to users that want to perform transactions over the network. Spam transactions can severely increase the latency of validating a transaction and can create financial loss to dApp users.
Increasing the minimum transaction cost to 1000 gas is the one-way solution to improve network usability. In this direction, the price of a standard transaction performed on Callisto Network is increased to 0.02 CLO, thus keeping this cost among the lowest and most competitive in the market.
Considering also the high-security standards of the Callisto network - which cannot be compared to any other existing network - and the fact that CLO is a PoW blockchain, Callisto Network will continue to offer the cheapest and most secure transaction on a layer 1 platform.

4- Block Time Reduction

In order to further enhance the DApp user experience on Callisto Network, the block time will also be reduced by about 20% through difficulty calculation changes. As more blocks will be minted each day, more rewards will be given to miners who are expected to further support Callisto Network.

Conclusion

The Monetary Policy Hard Fork (codename Skuld) is one of the major components of Callisto Network's strategic plan.
Besides limiting inflation in the first step to stopping it in the long run, it provides a higher incentive for miners and maximizes the APR of Cold Stakers and offers an improved user experience to dApp users by further decreasing the latency. It is, therefore, the foundation for upcoming upgrades such as ZPoW or the DAG size reduction.
Although the strategic plan initially foresaw a Hard Fork for the last quarter of 2022, in light of the results of the tests, it was decided to extend the testing period by a few weeks to fine-tune every parameter.
Several test models are being tested on Callisto Enterprises' private testnets... Skuld is approaching, be prepared!
As the Hard Fork is coming, please be prepared to mine and perform transactions over the Callisto Network testnet. Rewards will be distributed to users who will point their GPUs for mining or will interact with the testnet dApps allowing to test in optimal conditions the proposed optimizations. The exact days will be announced after the testing in our private testnets is finished.