Following the Mercury upgrade, Neutron implemented a unique validator economic model that fundamentally differs from traditional Proof of Stake networks. This page explains how validator compensation, delegator rewards, and the overall economic incentives work.

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Neutron’s Distinct Economic Model

Neutron’s economic model introduces several key differences from traditional Proof of Stake networks:

Fixed Supply

NTRN remains a fixed-supply asset with no inflation-based block rewards

DAO Treasury Funding

All rewards are paid by the Neutron DAO Treasury rather than through inflation

Base Compensation

Validators receive stable monthly compensation for meeting performance requirements

No Slashing

Uses jailing, tombstoning, and validator rotation instead of slashing

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Validator Compensation

Neutron’s validator compensation mechanism provides predictable income while ensuring the network maintains optimal security economics.

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Base Compensation Structure

The x/revenue module handles validator compensation:
  • Target Amount: $3,000 USD per month per validator
  • Payment Schedule: Monthly distribution
  • Token Calculation: Uses network oracle to convert USD to NTRN tokens
  • Source: Neutron DAO Treasury
The base compensation amount is a governance parameter that can be adjusted by DAO vote to reflect market conditions or validator requirements.

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Performance-Based Rewards

Compensation is tied to validator performance across two key metrics:
Performance RangeBlock SigningOracle UpdatesReward Level
Full Rewards99.5% or higher98% or higher100% of base compensation
Partial Rewards95% - 99.5%95% - 98%Proportional compensation
No RewardsBelow 95%Below 95%Zero compensation
Both criteria must be met to receive the corresponding reward level. Failing either metric results in no rewards for that period.

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Delegator Rewards

Delegator staking rewards operate independently from validator compensation:

Target APR

Approximately 3% annually for all delegators

Payment Source

Distributed directly from Neutron DAO Treasury

Consistency

Returns independent of individual validator performance
This system ensures delegators receive consistent returns regardless of individual validator performance, as long as the validator remains in the active set.

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Treasury Responsibilities

The Neutron DAO Treasury manages multiple aspects of network economics:

Validator Payments

Monthly compensation distribution based on performance metrics

Delegator Rewards

Funds the delegator reward system targeting 3% APR

Network Security

Maintains significant self-delegation to protect against economic attacks

Ecosystem Growth

Supports protocol development and ecosystem expansion

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Treasury Self-Delegation

The DAO maintains approximately 22.5% of the NTRN token supply delegated through the Drop Protocol, which:
  • Protects the network from economic attacks
  • Facilitates liquid staking through dNTRN
  • Creates deep liquidity for NTRN and dNTRN tokens
  • Supports ongoing delegation management

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No Slashing Model

Neutron eliminates traditional slashing to protect delegators and encourage validator responsiveness during critical network operations. Alternative Enforcement Mechanisms:

Jailing

Temporarily removes validators from active set for minor infractions

Tombstoning

Permanently removes validators for serious violations like double-signing

Rotation

Replaces underperforming validators through structured framework
This approach protects delegators while maintaining strong performance incentives for validators.

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Liquid Staking Integration

Neutron actively promotes liquid staking adoption:
  • DAO delegates treasury through Drop Protocol
  • Creates significant dNTRN (liquid staked derivative) supply
  • DAO bootstraps dNTRN liquidity in DeFi protocols
  • Users can utilize dNTRN across ecosystem while earning staking rewards

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Benefits Summary

Validator Benefits

Predictable Income: Stable monthly compensation regardless of market conditions
Clear Requirements: Well-defined performance metrics
No Commission Competition: Focus on infrastructure quality over rate competition

Delegator Benefits

Consistent Returns: 3% APR independent of validator performance
No Slashing Risk: Protected from validator misbehavior
Liquid Staking: Access to dNTRN for DeFi participation while staking

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Next Steps

If you’re interested in becoming a Neutron validator:

Technical Setup

Follow the complete node setup guide

Oracle Configuration

Set up the required Slinky price oracle service

Validator Registration

Complete the validator registration process

Requirements Overview

Review all technical and performance requirements