Crosslink: Early Tokenomics Design

[shieldedmark]

This post reflects the collective work of everybody at Shielded Labs. Also cross-posted to our blog.

Crosslink is the beating heart of Zcash. Like the heart’s two sides pumping blood to the lungs and the rest of the body, it depends on both stakers and miners to keep the network secure and resilient. Stakers manage the roster of finalizers, ensuring the network remains highly available and protected against potential future attacks. Miners continue to secure the network by validating and adding new blocks. Each plays a distinct but equally vital role in maintaining the health and strength of Zcash.

Crosslink achieves assured finality by introducing a network of Proof-of-Stake (PoS) nodes called finalizers to the existing Proof-of-Work (PoW) network. However, we are quickly realizing that focusing on finality may miss the bigger picture because with PoS comes staking and with staking comes yield.

This post outlines Shielded Labs’ early view on staking economics. It’s an initial design for our prototype that may evolve during implementation. We’re sharing it now to keep the community informed, and to get early feedback.

Overview

Security Budget and Issuance

We believe that hybrid PoS is more secure than PoW or PoS alone because an attacker must compromise both protocols to gain full control over the network. To achieve this, the block reward should be split equally (40/40) between miners and finalizers. Otherwise, an attacker could target the cheaper vector.

**

Staking & Delegation

In Crosslink, staked amounts are publicly visible for transparency and accountability. The community can see the total amount staked and how much is delegated to each finalizer. To preserve privacy, staking and unstaking occur in fixed 10-day windows, with stake amounts rounded to set increments (e.g., 1, 10, 100, 1,000, 10,000 ZEC), making it harder to link transactions to individuals. A 30-day unbonding period adds further privacy and security, giving the community time to detect and respond to potential issues (such as rollback attacks) before funds are released. It also encourages participants to keep some holdings liquid within the shielded Orchard pool, helping maintain a healthy anonymity set.

Every user stakes their ZEC with one or more finalizers of their choosing, and finalizers are ranked by total stake.

A Note On Privacy

The strongest privacy comes from holding funds at rest in a shielded wallet. When you stake, you intentionally disclose certain information, such as your staked amount, so the community can monitor and hold finalizers accountable. This creates an inherent trade-off between the individual benefit of maximum privacy and the public benefit of protecting the proof of stake layer. We recommend keeping some ZEC unstaked and liquid in the Orchard pool, enough to cover anticipated spending over the next 60 days, while staking the remainder. When you want maximum privacy, you can unstake and return to holding liquid shielded funds.

Staking Lifecycle

1. Choose a finalizer – From your wallet UI, select a finalizer based on factors such as commission rates, voting power, and other information.
2. Stake in Orchard – Stake ZEC held in the shielded Orchard pool. Staked amounts to each finalizer are publicly visible, ensuring transparency around their voting weight. Staking can only be initiated during fixed 10-day batching windows, and amounts must be in set increments (e.g., 1, 10, 100, 1,000, 10,000 ZEC) to help preserve privacy.
3. Earn Rewards – The protocol tracks rewards as blocks are finalized but pays them out only when you unstake, calculating your total based on your full staking period. Rewards are automatically added to your stake, increasing your position size. The rate of return is variable and will adjust over time depending on how much ZEC is staked across the network. Wallets, block explorers, and dashboards can show you how much you’ve earned so far, but the protocol only pays those rewards when you unstake.
4. Move stake – Reallocate your stake to a different finalizer during staking windows, but the change will only take effect after the batching period.
5. Unstake – Submit an unstaking request during a 10-day batch window. Your ZEC then enters a fixed 30-day unbonding period before becoming spendable.

Standard transaction fees apply for staking and unstaking. We also expect finalizers to charge commissions. Individual yield, from issuance, scales with your fraction of the total stake.

Roster Design

The roster includes the top 100 stake-weighted finalizers.

Requirements

We believe that if you can run a highly-available Zebra node, then you can run a finalizer, since PoS by nature is not resource-intensive. Minimum stake is determined competitively by the current roster participants.

Roster Lifecycle

1. Enter the roster by running a finalizer node and staking ZEC.
2. Receive delegations from others and compete for roster inclusion based on stake weight.
3. If a node falls out of the top 100 finalizers, they are removed from the roster.

Operational Monitoring and Slashing

Staking is not an isolated, passive act. By staking, you join the community, providing a crucial service to safeguard Zcash for the benefit of everyone. Your choice of a high quality finalizer rewards them through commission fees. By moving your stake elsewhere if an operator is performing poorly or misbehaving, you can help safeguard Zcash.

There will be no automatic, protocol-level slashing in this design, so the power lies fully in the stakers’ hands to reward and censure node operators.

Call to Action

We’d like to hear your feedback on this staking design as well as ideas on possible staking UX. We point people to the forums for feedback from external sources, so just reply!

[treasonous]

I could cry

[dismad]

Yes, yes, and yes. Looking forward to the feedback, I am very excited as a node runner to “transform” into a full fledge finalizer. For those who are interested in the howto make sure you check out the coin voting threads as well as the past and future SL workshops – the best way to learn is to DO.

[Shawn]

First impressions:

40 day unbonding period seems a bit high and will turn people off. Maybe consider going with 15 days like Namada.

I didn’t see a minimum stake amount to run a Validator/Finalizer? Is there one? Something like Ethereum with 32 ETH?

Without slashing penalties how do you ensure 90% + uptime for the Finalizers? How do you discourage people from spinning up many underperforming Finalizers? What if the slashing penalties didn’t burn the coins but donated them to the lock box/NSM?

[dismad]

@Shawn

40 day unbonding period seems a bit high and will turn people off.

Not me. IMHO, finalizers should be folks who want to support the project long term. Long term players should be rewarded more, if possible. This variable can be controlled by simply staking less.

@Shawn

I didn’t see a minimum stake amount to run a Validator/Finalizer? Is there one? Something like Ethereum with 32 ETH?

The market should work this out

@Shawn

What if the slashing penalties didn’t burn the coins but donated them to the lock box/NSM

idea, I’ll need to think this through but on the surface seems like a neat way to support the network long term.

[Shawn]

@dismad

finalizers should be folks who want to support the project long term.

Agree to some extent, but we also want attract as many as possible to help secure the network.
https://x.com/0xMert_/status/1966553654602658023

[dismad]

It comes down to priorities. Some value profit over all else, whilst others don’t. I can only offer my perspective.

[Chewbacca]

I think it would have been good if more reasoning was given for how the initial design decisions were reached. What was the thought process for not having slashing? I would think that the need for slashing increases the lower the node count, but maybe someone can rebuke me on that. What are the hardware requirements going to be? Is it going to be relatively cheap and easy to set up? Is there risks that all the nodes could end up been set up on VPSs or does that matter? Was churning the finalisers considered?

I wonder if you could also feed the design to different AI models to see can it come up with any suggestions too. Maybe someone in the community much smarter than me could look into that.

[aquietinvestor]

@Shawn

I didn’t see a minimum stake amount to run a Validator/Finalizer? Is there one? Something like Ethereum with 32 ETH?

Crosslink does not impose a minimum stake requirement in the way Ethereum requires 32 ETH to operate a validator. Since staking amounts are quantized, the effective minimum is one ZEC. However, in practice, participation depends on being in the active finalizer set, which is capped at 100. This means the minimum is shaped more by market behavior and delegation choices than by a protocol rule.

@Shawn

Without slashing penalties how do you ensure 90% + uptime for the Finalizers? How do you discourage people from spinning up many underperforming Finalizers?

Finalizers do not produce blocks, so the risks of downtime are lower than in validator-based systems like Ethereum. Their role is to confirm blocks, and the worst outcome is incorrect finality. As a result, the design does not include slashing for downtime. Instead, the market decides. Poorly performing finalizers are less likely to attract or keep delegations since delegators prefer operators that deliver reliable rewards. Over time, stake naturally flows toward those that prove to be consistently reliable.

[aquietinvestor]

@Chewbacca

I think it would have been good if more reasoning was given for how the initial design decisions were reached.

Agreed. We can publish a follow up post that goes into more detail about the reasoning behind our decisions. I think this will help give the community a clearer picture of why we decided to design Crosslink this way.

[ceb9ceb4ceb9cf89cf84]

very happy

[thailand85]

40 days is a terrible idea

#1 - We want adoption. It’s almost the only thing that matters. By forcing people to be diluted or lock up for 40 days here’s what happens

There is money risk (this token is highly volatile, it may go up or down a lot). Adding ‘In order to not get diluted I have to lock my tokens for 40 days’

This adds a HUGE RISK PREMIUM FOR POTENTIAL HOLDERS.

Human brains don’t think in terms of “I will just not stake” - the yield and lockup plays a huge roll in human psychology.

Asking for a 40 day lockup or to be diluted severely stunts adoption.

#2 - There’s no good reason to. Solana is a $130bil chain with a 3 day lockup. BNB is a $130bil chain with a 7 day unbonding period.

Chains that have huge unbonding periods to lock up tokens like AVAX, ICP etc are not adopted because it adds risk to holding an already volitile asset.

#3 - START WITH WHAT WORKS FOR OTHER CHAINS WHO HAVE RECEIVED ADOPTION. ATOM tried to do this and they are basically $0

Because you can’t add friction to an already volitile asset - with humans who overweight both dilution and interest returns - and get adoption.

We have so much going for us - we are winning. We can get the market to care about us as money. Let’s please not play lockup games.

It doubles the perceived risk of buyers by hacking the limbic system with “Outsized risk to receive returns or dilution”.

[Chewbacca]

@thailand85

There is money risk

I think another issue with the length of staking arises from the “soft punishment” non stakers inherit.

I’m trying to picture how this aligns with the use of the zashi wallet and spending of zcash. Presumably there will be a way to delegate from the zashi wallet, which is great because we can get 1,000s of unique delegators with relatively small amounts of zcash delegating. But that means they’re not using the other zashi app features for spending zcash and it’s a terrible user experience if the user has to wait 40 days to access their zcash again. Not even the slowest banks are that slow processing wire transfers. There is a conflict here and it may be tricky to find a good balance. I think you want to have a relatively quick turnover time from a UX point of view.

To the point @aquietinvestor made above regarding slashing; if there is no need for slashing since the finalisers aren’t block producers doesn’t that also mean the attack vectors that unbonding periods are defending against are also less important?

[artkor]

Personally, I think 40 days is an acceptable period. And I am prepared to increase this period if the community votes in favor of it. I understand traders’ concerns: volatile assets and all that. But if you bought ZEC with the intention of selling it quickly, just keep your coins on the exchange in a pending order and wait for your wave of profits. Here, we are primarily concerned with network security issues, not someone’s profits.

It is evident to me that there will be enough people willing to stake limited ZEC in the long run to ensure a sufficient level of security. If not, this can always be changed along the way with the future holder management system.

The main difference that distinguishes Zcash’s tokenomics from Cosmos, Solana, and so on is that you have a limited emission volume. This means that staking is not just a struggle for holders against endless emission, but a real multiplication of their future wealth.

And yes, if the percentage of staked funds is lower than the amount of idle funds, the percentage of rewards for stakers will be proportionally higher. That’s how it works. So if someone is not satisfied with 40 days, I will gladly take their unclaimed share of the reward for myself, proportionally with other zcashers.

[Chewbacca]

I think a major issue regardless of how long the unbonding period is, but definitely considerably more of an issue the longer it is, is how “soft punishment” affects long term investors that leave their funds idle in the orchard pool. These holders are providing a very important function to zcash as a privacy focused network. Has there been any consideration given to rewarding holders within the orchard pool? There needs to be some counterbalance applied, somehow, such that the holders in the orchard pool providing the most important function of the network’s raison d’etre do not get any soft punishment via dilution. This has to be addressed.

I think we were all hoping (I was anyway) that staking would somehow originate from within the orchard pool so as to eradicate this conflict.

[artkor]

I‘m in favor of any kind of incentive for long-term holders and against creating inconveniences. And I may be wrong, but it seems to me that a longer unstake period is more likely to encourage long-term holders, as a longer unstake period will deter short-term holders. This means that long-term holders will receive a higher percentage of rewards. Let me give some examples to illustrate this point.

The current daily emission is 1,800 ZEC. 40% of this value is equal to 720 coins (I am not taking into account a possible transition to the NSM model, I am simply using the current parameters).
Thus, 720 coins will be distributed among finalization participants on a daily basis.

1. Let’s assume that the lock-up period is 2 days. This implies a huge share of participation in staking by all holders, both long-term and short-term. Let’s assume that there are 10 million free ZEC placed in Zashi (very optimistic). For finalization stability, this is more than enough ZEC, because it is unlikely that there could be a single validator out of 100 who owns 5 million coins. But we are considering a state of calm in the cryptocurrency market.

In this case, 720 coins are divided by 10 million, which equals 0.000072 coins. That is, 0.02628 ZEC per year per 1 ZEC — a yield of 2.63% per annum. But in this case, if the price suddenly rises sharply, then theoretically, a certain imbalance may arise when a large number of holders begin to withdraw coins from staking, and then all our finalization security may be at risk. Because there will be a validation imbalance.

2. Now let’s assume that the lock-up period is 30 days. Short-term holders may not want to get involved with this, and we will get, say, 5 million coins in staking (this is still a fairly optimistic forecast). In this case, the reward percentage will already be 5.2% per annum in ZEC, which, frankly speaking, is not bad. Imagine that right now someone is offering you 5% per annum in Bitcoin. It’s fantastic.

I won’t bore you with other calculation options, but it seems that the models suggest an increase in rewards for long-term holders if the lock-up period is extended (increasing).

And most importantly, price fluctuations will not threaten to destabilize validation, which means that we will have a stable distributed network of finalizers.

[artkor]

By the way, if the top 100 finalizers are determined by the market in free competition, then probably the validator change should have a shorter lock-up period. I don’t really know anything about this from a technical point of view, but it seems to me that this is a possible parameter for PoS. At least from an economic point of view, the motivation for the transition has other reasons than the complete unlocking of coins.

[artkor]

Right now, Binance is offering more than 40%. And although this rate varies depending on market conditions, short-term holders have the opportunity to earn returns right now without staking. Although I don’t encourage such loans because it puts pressure on the price. But overall, the market is the market. Staking must be able to compete with all of this in some way.

UPD, oh no, this is a short loan rate, and it’s very favorable for us right now. This makes the shorts more expensive.

And the Earn rate isn’t that high:

[Chewbacca]

@artkor

Let’s assume that there are 10 million free ZEC placed in Zashi

Okay, lets try to brainstorm this. If we have 10 million ZEC allocated to staking earning a yield of 2.63% how many ZEC do we have in the orchard pool enhancing the privacy of the network and why would they forego the 2.63% to remain there? That’s the bit I’m most concerned about irrespective of unbonding period length.

[artkor]

I think we’ll only be able to see this in practice. Right now, I’m not getting anything for my coins in Orchard, and now that we’re on the verge of transitioning to Crosslink, I find it increasingly depressing. However, I continue to keep my coins there so that they have as long a shielding period as possible. And I’m motivated by other things.