Volume AMA: Pigeon Feed - How Validators Earn from Bots
Overview
“The Paloma network is very much a validator story. It is about validator wins, validator progress, and validator profits.” Taariq Lewis @LewisTaariq, CEO of VolumeFi (volume.finance) and host of this week’s AMA episode highlights the central role of validators at Paloma and how they earn rewards. He walks through the different phases of Pigeon Feed, Paloma’s online marketplace for message relaying. Phase 1 which is now live defines the performance and reliability metrics for validators leading to the performance-based order of message assignment in phase 2. Establishing a competitive fee market covers phase 3 while phase 4 is about how validators collect revenue for executing transactions on-chain and earn from Palomabots.
Driving more volume across the network and increasing its value before the GRAIN token is launched is top of the agenda. As Paloma continues to build up, and more customers use the network for execution ensure that the price of GRAINS will be supported by demand and not by hype.
Showcasing the power of the Paloma network, validators have managed a record of over $24M in bot transactions over the last four months alone without incentives or a listed token. The early success of Paloma’s Bitcoin lending bot becomes a compelling use case servicing the Bitcoin blockchain for Ethereum-based lending. The Curve TWAP bot still leads the pack, with over $20 million in volume transactions, followed by the Euro Off-Ramp bot and the Curve Degen Leverage bot.
Definitions
AMA - Ask Me Anything
Validator - or Pigeon in Paloma-speak, a participant in a blockchain network responsible for validating new transactions and maintaining the security of the blockchain.
GRAINS - Paloma’s native token.
Pigeon Feed - the on-chain marketplace for message relaying on Paloma.
Gas - the cost that users pay to network validators each time they wish to perform a function on the blockchain.
ETH - the native cryptocurrency of the Ethereum network, is the second most popular digital token after Bitcoin.
Bitcoin - the first digital currency that operates free of any control or oversight of banks created for use in peer-to-peer online transactions.
Intro
February marks the first anniversary of the launching of Paloma to mainnet. Taariq takes a step back to the many milestone achievements and challenges they have overcome. Paloma’s steady progress, resilience, and continuous improvements are markedly evident in the difference between then and now.
“We are way better than where we were last year. Every day, we get better and better.”
From only two chains, Ethereum and BNB in the beginning, Paloma is now deployed to to seven chains. The remarkable success of the Palomabots without incentives, working apps, and more validators coming on board are just some of the wins of the network.
The host shares a background about Volume Finance.
“Volume Finance is about decentralized custody, trading bots, and decentralized lending, all managed by the Paloma blockchain.”
The Phases of Pigeon Feed
Paloma is very much a validator story, Taariq shares. It is about validator wins, validator progress, and validator profits. One of the core goals of Paloma is for every validator to earn money so that it becomes a coveted space because the network burns and pays the most money.
Paloma testnet version 1.12.0 is about Pigeon Feed and monetizing relaying for validators. Phase 1 of Pigeon Feed, which is now live, tracks and collects performance metrics in a real-time window to reward relayer performance.
Validators can view their performance metrics at ‘paloma dq metrix validator <address>’ command. The Paloma metrics module will show the validator’s uptime, success rate, execution time, fees charged, and feature sets. These metrics will become a continued benchmark to improve Paloma delivery.
After collecting data from the performance metrics, Phase 2 of Pigeon Feed is where validators will be assigned messages based on their performance. Message assignment will transition from random, to performance-based at this stage.
Phase 3 establishes a competitive fee market where validators are assigned messages based on performance and cost. This allows validators to set their fees and relay costs, and do so dynamically.
“We're going to start ordering message assignments to Pigeons that have the highest messages and the lowest cost. If you’re the best performer with the lowest cost, you will get messages. If you are the worst performer with the highest cost, you won't get messages.”
Phase 4 is where validators get to claim their refunds directly on the target chain.
“You want to collect refunds on the target chain and those refunds will be in GRAINS because GRAINS will then have a market on that target chain.”
GRAINS will be swapped for ETH and validators can claim their GRAINS calculated at cost plus revenue. Once this phase is complete, Volume will no longer be issuing refunds.
“Once that is accomplished, we will have achieved the promise of Paloma in which validators are going to get paid for executing transactions on-chain. They can get to maximize that revenue.”
Taariq explains that users pay the fees directly to Paloma’s Compass EVM on the target chain which will then hold the funds for validators to claim their refunds. Paloma already records successful messages including the cost. Validators can then collect their fees and have the option to swap them back to ETH, USDC, or USDT. It will be an active market with no locks on the GRAINS, Taariq assures. Validators can also opt to bring the GRAINS back across the bridge for staking.
“If GRAINS are cheap, you can get more GRAINS. Then definitely bring them back across the bridge for staking.”
With Phase 1 now complete, Phases 2, 3, and 4 are expected to go live in March.
Driving Volume Across Paloma
While the work on Pigeon Feed is in production, driving volume across the network takes top priority. Taariq talks about Paloma’s recently launched Bitcoin lending bot. He notes that everybody has Bitcoin, and people will want to borrow against their Bitcoin and get some cash.
“Who is really perfect for handling your bitcoins, getting you a bitcoin loan, and then getting that loan repaid? There is only one protocol that will do that today, and that is Paloma.”
As returning customers use the network for more transactions, Paloma’s Bitcoin lending becomes a compelling use case servicing the Bitcoin blockchain for Ethereum-based lending.
Taariq reports that Paloma validators have managed a record of over $24M in transactions over the last four months. Taariq underscores that this was done without a listed token and incentives.
“There's no token price, there's no token trading. Validators are just cranking out, keeping those nodes on, and running that process. This is amazing!”
The goal is to ride the momentum and keep building on the value message before the GRAIN token is launched. The value message is that there is volume already being transacted on the chain.
“It is my approach that if we continue to build up, driving volume from customers who will keep using Paloma for execution, the price of GRAINS will be supported by demand, not by hype.”
If the price of GRAINS is supported by demand, validators will make money without worrying that the hype cycle has died.
Users will not be required to pay in GRAIN for easier transactions. They can pay in whatever token they are using on the Palomabot.
“If the bot's native token is ETH, that's what they pay for their gas and their relay fees. We're going to make it so easy.”
Once Pigeon Feed is launched, the expectation is that GRAINS will have demand. When validators need to sell their GRAINS to pay for gas, they will already have a demand curve.
“There will already be a price that will attract more people to buy GRAINS which will attract more validators and will attract more relay activity because people want to take advantage of it.”
Palombots
Taariq reports that Paloma’s Curve TWAP bot continues to be the most popular with over $20 million in volume, followed by the Euro Off-Ramp bot with more than $700k worth of transactions.
The Curve Degen Leverage Lending bot is also quite successful earning over $3 million in transactions. Even while still alpha software, it is a very straightforward model where users can put a leverage position on Curve, de-leverage automatically, or add more leverage.
“Paloma validators will handle the transaction for you and they will take your money and lever you up or they will take your money, lever it down, and send your money back to you.”
Palomabots amplify the power of the Paloma network for custody, cross-chain management execution, smart contract management, message relaying, and position management.
Closing
Taariq announces that a new project called The Juice is underway. He hesitates to share more about the project details but shares a hint of what’s to come.
“The Juice is coming and the juice is going to be juicy. We just like the juice and every bird, every Paloma Pigeon wants to hatch and you see that juice egg come to life.”
He encourages validators to read more about Pigeon metrics in the Paloma Weekly Wings. More Pigeons are joining the Flock as people are sharing how validators can make money on the Paloma network.
“That is in motion and we’re going to continue to fan it as we get ready to get more volume.”
He thanks everyone who tuned in to today’s AMA episode.
Stay tuned for the next AMA!
To find out more about Volume, check out Volume Finance (https://volume.finance/), join the Discord (https://discord.com/invite/Ebh6YjMShu), and follow us on Twitter (@Volumefi). Check out Paloma Chain on palomachain.com (https://www.palomachain.com/), follow them on Twitter (@palomachain), and join the flock on Discord (https://discord.com/invite/tNqkNHvVNc). Coo!
