Cudos Labs: An overview of the Cudos Network, Validators and Rewards

The Cudos Network is a special-purpose blockchain designed to provide high-performance, trustless, and permissionless cloud computing for all. Consensus on the network is achieved through the use of the Tendermint Core and its Byzantine Fault Tolerant Proof of Stake (DPoS) algorithm. In addition to leveraging Tendermint Core, the Cudos Network is supported by the Cosmos SDK within the Cosmos Hub zone, in order to achieve high throughput, availability, and security.

The Cosmos Hub is a shared security zone within the Cosmos ecosystem that guarantees each special purpose blockchain derived from Cosmos, including the Cudos Network, benefits from the highest levels of security and development support from its robust open-source community of users.

The promise of compute, which is core to the Cudos Network’s mission, is also expanded beyond Cosmos-based blockchains, through the use of bespoke bridges and cryptographic approaches to cross-chain interoperability. While Ethereum is the first Layer-1 blockchain we plan to interoperate during our Mainnet launch, we plan to expand our compute offering to an ever wider array of DLT networks.

On the Cudos Network, developers, individuals and businesses will be able to deploy next-generation smart contracts that leverage Ethereum Virtual Machine (EVM) and Ethereum Web Assembly(eWasm)-based smart contracts with equal security assurances to traditional blockchain networks, but with the added benefits of faster transaction speed, fundamentally lower transaction costs, and the ability to design special-purpose workflows that extend beyond the current limitations of Solidity as a smart contract design language. This includes the pioneering ability to embed high performance compute workflows into the very fabric of the next generation of blockchain smart contracts, unlocking an extensive array of additional use cases.

This higher level of performance and security is made possible thanks to the Cudos Blockchain’s ability to leverage a strong community of validators with robust node infrastructure, who in turn assure users of the Cudos Network a high level of confidence in the various enterprise and developer use cases that are subsequently deployed on the network. What makes the Cudos Network stand out from other blockchains is the deep level of integration for high performance compute capacity at the very core of the network.

Validators, meaning individuals who have financially committed funds through a process known as staking, notarize, and in fact validate, every transaction proposed onto the network with high availability and trust levels that are assessed in a real-time and predictive manner. The Cudos Network rewards the most performant validators with predictable income streams and rapidly removes bad actors from its Proof of Stake network in order to assure a greater level of security for all participants. The combination of these factors, incentivise any individual today, from financial investors to data-center or compute infrastructure providers, to interact reliably on the Cudos network to either buy or sell compute capacity at scale.

Validators and Rewards

Validators play a special role in the Cudos Network’s day to day workings. They validate blocks, perform complex security checks on proposed transactions, interact with other stakeholders in various Governance votes that ensure the network’s security, integrity and viability on an ongoing basis.

In addition to this, the Cudos Network’s bespoke architecture provides metering and high performance compute in a programmatic manner which heavily depends on the network’s validators being highly available, highly performant, and retain their bona fides as good actors over time.

For this, they earn several types of standard rewards in addition to one-off additional ones:

  • They earn Staking Rewards to incentivize their crypto economic contributions to the network over time, with a favor for longer-term contributions as opposed to shorter term ones.

In order to incentivize the highest level of security, availability, and economic integrity on the network, the Cudos Network blockchain penalizes adverse behaviours, and the node operators or validators linked to these, programmatically. The types of penalties a validator can incur on the network have several levels of severity; some lead to immediate irreversible exclusion at cost, others lead to time-outs from additional Staking rewards and a change in their rating. Cudos as a team is working to ensure that these metrics are as real-time and accurately predictive to guarantee that strictly the highest quality of compute power is offered on Cudos Network.


Initially, while the Cudos network is being built and transitioned from a testnet to a fully functioning mainnet, validators’ revenue will come from staking rewards on Ethereum. These rewards will decrease over a 10 year period, however, network fees are expected to more than compensate for this revenue decrease.

Before releasing the fully-functioning mainnet on our layer 2, we will be onboarding users and validators in Ethereum via our staking rewards contract, which is expected to grandfather the staking rewards earned on layer 2. Due to our choice of bonding curve, the staking rewards validators can expect to earn with Cudos are higher during the first few months in order to reward early adopters of the project for their support.

The staking contract on Ethereum, once deployed, will work as follows: anyone willing to stake tokens will be able to choose between four reward programmes (RPs):

  • RP0: No lockup, no bonus

This bonus distribution has been designed to incentivise users to maximise the revenue by staking and supporting the network for longer, while allowing users to choose their own strategy. To be more precise, the rewards earned by a user are always proportional to the stake of that user and the lockup time. Effectively, the bonus can be thought of as a multiplier on the effective number of tokens that are counted when calculating the rewards.

Let us illustrate this concept with an example: given the four staking programmes described above, imagine that the staking is as follows:

  • 30% of the tokens staked are in RP0

In that case, assuming that within a month there are 300,000,000 tokens distributed as rewards, they would be assigned as follows:

These rewards will be distributed irrespective of the total amount staked in each reward programme — only the percentages are relevant. Thus, the APR will depend on the percentage of the circulating supply staked in the network. The chart below illustrates the expected APRs for this staking scenario, for 75%, 50% and 25% of the circulating supply staked each month.

The distribution of the rewards also aligns with the token release schedule in the network, following our release schedule curve.

As explained in our whitepaper, during the first few months the release is slower, and after ramping up before the end of year 1 decreases according to the release curve shown above. This was specifically designed to reward early adoption of the network, but is subject to change when we migrate to layer 2. We are still finalising the economics of our Cosmos-based blockchain and will share more details about it soon.


While still in Ethereum, validators will earn revenue from two different sources thanks to staking:

  • Staking rewards on their own stake

The minimum stake to be a validator is 2,000,000 CUDOS. Once that amount has been staked, validators can add more stake calling a special function in the contract written for this purpose called increaseServiceProviderStake.

Very soon we will provide precise instructions on how to onboard to our initial staking offering in Ethereum. Validators familiar with other staking projects will know some of the actions, as our Ethereum staking contract borrows some methods from the SushiSwap one.

The process for validators, which are known as Service Providers (SPs) in the contract, to be able to set up the staking account is as follows:

  • SP applies to be a validator, for Cudo to approve

There are a couple of extra steps in the process: As the wallet of the SP needs to approve the Staking Rewards contract to use and move tokens. We are in the process of writing precise documentation detailing all the steps needed to set up the staking account in Ethereum.

Once the mainnet is live, staking will be transferred to the Cudos mainnet along with the migration of users.

This is Part 1 of a three-part overview on Cudos Validators, Rewards, Delegated staking, Hardware Specs and Setup, so please keep an eye out on our social channels for parts 2&3 which you can access via the links below.

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