Incentive Testnet: Key Factors for the Success of Blockchain Protocols

In recent years, the popularity of Proof of Stake (PoS) Blockchains has been continuously increasing. Evidence of this trend includes Ethereum's transition from Proof of Work to PoS, the flourishing of the Cosmos ecosystem, and the emergence of new PoS public chains such as Aptos and Sui.

The PoS consensus mechanism relies on a network of validators, which presents two main challenges for projects: first, if the network depends on decentralized external participants to execute consensus, the value of internal testing will be limited; second, nodes can be expensive and require specific maintenance skills and effort.

These factors have led to the emergence of incentive Testnet. Cosmos was the first to launch such a Testnet through its Game of Stakes project, which is a mechanism for testing the blockchain in a decentralized manner before officially launching core functionalities, while also reducing risks.

Definition and Function of Incentive Testnet

Incentivized Testnets are typically gamified program projects that encourage external validators, developers, and other users to participate in testing the Blockchain network and receive rewards for their participation. Historically, incentivized Testnets have primarily been used to test Proof of Stake infrastructure.

A successful incentive Testnet can help the protocol establish a robust network of node operators, ensuring stability and full decentralization when the project goes live, while simulating a decentralized PoS network, testing the underlying infrastructure, and identifying potential issues.

To attract participants, core teams typically offer incentives, the most common being native tokens or stablecoins of the protocol. Recently, the application scope of incentivized Testnet has expanded to multiple aspects, including testing smart contract deployment, governance voting, trading, cross-chain infrastructure, security measures, and general protocol usage.

Key Considerations for Building an Incentive Testnet

Set clear goals

Deploying an incentivized Testnet can have various objectives. The project team needs to first identify which key components of the protocol they want to test in a decentralized manner, and then consider factors such as project scale, entry requirements, and success metrics. Most projects focus on the performance and security of node infrastructure, but other objectives can also be set.

For example, some trading and lending protocols utilize the Testnet to educate early users and test the performance and functionality of exchanges and lending mechanisms. A certain DEX project successfully recruited over 11,000 traders, which not only tested the ability to create market efficiency and ensure adequate liquidity but also identified and fixed some significant issues.

Set the admission threshold

The admission criteria ensure that applicants must meet minimum standards to participate. Common requirements for validators include having the hardware necessary to operate a node, possessing validator experience and corresponding technical skills, and sometimes considering geographical diversity to ensure wide distribution of nodes.

The number of participants is also an important factor in achieving full decentralization of the network. The threshold for testing exchange functions and lending protocols is usually low, as the risks of participation are small, and rewards can also be capped based on performance.

KYC is almost a universal requirement for all incentive Testnet projects, which is to ensure compliance in the distribution of testing rewards and to prevent witch attacks.

Design incentive mechanism

The core of the incentive Testnet lies in ensuring comprehensive testing of all functionalities through project design and reward distribution, and helping participants gain appropriate experience to prepare for the mainnet launch.

Testnets are usually conducted in phases, focusing on key testing of various parts of the network one by one. For example, a public blockchain's testnet is divided into at least three stages: first focusing on validator setup and code deployment, then on economic mechanisms and DeFi primitive products, and finally on validator performance.

Rewards are usually the native tokens of a project after the mainnet goes live, and some also use stablecoins. Recently, many projects have allocated about 1% of the token supply for the testnet. There are mainly two types of reward methods: milestone/task-based and performance-based. The former can effectively execute stress tests for specific functions, while the latter helps enhance community experience.

Promote mainnet launch

The community building and experience accumulation promoted by the Testnet project are crucial for the success of the network. Validators gain operational experience, developers become familiar with tools and documentation, and community contributors compile learning materials and provide support, all of which help in building a high-quality community.

Some projects distribute grants during the Testnet phase to incentivize tool development or provide validators with the opportunity to obtain token authorization from the project treasury. Additionally, some projects launch multiple Testnet projects, continuously offering incentives for testing opportunities to maintain community vitality.

In summary, the incentive Testnet serves as an important mechanism that not only effectively tests the various functions of the Blockchain network but also cultivates and consolidates the community, laying a solid foundation for the long-term success of the project.