OnionDAO: incentivising Tor exit nodes

Public Good Projects Discussion
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Project Name

OnionDAO

Project Description and why it’s classified as a Public Good

OnionDAO is a collective of Tor exit node operators, we hand out monthly POAPs for exit node runners. The DAO was founded in April 2022.

The Tor privacy network depends on volunteer node operators. Exit nodes are perceived as high risk for many people, and they are thus always in short supply. We make setting up a node easy and rewarding by having an easy setup script and monthly POAPs. Note: we are not officially affiniated with the Tor Project, we act as a decentralised and independent entity (though we are in touch).

The Tor network is a classic example of a public good: anyone is free to use it on equal terms.

Main Project Funding Sources

We currently have no funding. All development and activity since our April 2022 launch have been done through the generosity of community members.

Seeking project-specific funding or funding for general operations

We want to create a funding stream for exit node operators. We hope to investigate whether this causes more people to run exit nodes, and if so, we want to expand this exit node funding initiative.

Project Roadmap and Milestones

Our DAO is up and running, the goal of this funding is to run an experiment to see if providing (modest) funding for exit node operators makes more people create exit nodes. Our gameplan:

  1. Raise funds and stake them
  2. Reward node operators
  3. If this increases node operator count, attempt to raise more funding

We intend to set up an Ethereum validator that has a 0xsplits contract as the withdrawal address. That 0xsplits address will proportionally stream rewards to OnionDAO POAP holders.

Funding Request and Budget

We hope to get 11 ETH funding, which would allow us to pay node operators an estimated $6/year.

If we are funded with less than 11 ETH, we will use a sablier.finance wallet to stream rewards from a decentralised liquid staking token. If we are funded 11 ETH we aim to run a Rocket Pool validator, and if we raise more than 11 ETH, we will start with 1 validator and slowly deploy more. If we do not see an increase in Tor exit node operators, we will return the excess funding to Octant.

Team Information, including backgrounds and roles

The DAO initiative taker is mentor.eth, a fully doxed person who:

OnionDAO community members who very actively do DAO-related activities are gaditonecy.eth and @banj.

Social Credibility (development progress, awards, notable GitHub commits, referrals):

Discord contact

We gather in #onion-dao channel in the Rocketeer Discord server
User: mentor.eth

Eligibility Criteria:

  • Do you have a commitment to open-source (i.e. every open-source license accepted by the Open-Source Initiative) technology and sharing results publicly?
  • Have you provided transparency about how exactly funding will be used?
  • Are you advancing values of freedom and privacy (no surveillance and handling of personal data)?
  • Are you supporting decentralization in various fields (for example building Web3 projects)?
  • Have you provided social media channels to the extent that we can confirm social proof of your project?
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Any thoughts on why this is a better approach than NYM which has an integrated cryptocurrency into its mixnet which is meant to be more private than Tor?

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  • Total Funds Received from Octant so far: 10 ETH
  • Funds Spent: ~0 ETH. We put it in staked ETH and only spend the yield on it. See our endowment transaction history
  • Detailed Utilization: All development was done on volunteer time. All funds so far are used to fund the endowment contract that is used to incentivise exit node operators.

Milestones and Deliverables

  • Endowment contract:
    • Description: there was no out of the box platform that could administer an endowment fund on chain. The goal is to only spend the yield on our treasury so we can fund ourselves in perpetuity. Since no dApp was available that could daily distribute the yield of a staked ETH erc290 we developed one and published it open source.
    • Immediate Outcome: Smart contract code, deployed endowment
    • Funding Used: 0
  • Exit node scoring oracle:
    • Description: The endowment contract sends money to a 0xSplits wallet with the node operators in it. The oracle updates the weights of the 0xsplits based on the performance of the node operators according to the Tor official API. NOTE: we voted on the reward weight and decided on a quartic root of the bandwidth supplied. This means that the lowest performing node (1MiB/s) receives 3.24% of weight while the best performing node (210MiB/s) receives 10.8% of rewards.
    • Immediate Outcome: deployed oracle that updated the 0xsplits daily and posts the result into a Discord channel. Code available here
    • Funding Used: 0
  • Rewarding exit node operators
    • Description: The above code distributes the expected yield of our rETH treasury to node operators.
    • Immediate Outcome: daily payouts to node operators, currently slightly under the cost of running the node.
    • Funding Used: Our treasury is break even. See our endowment transaction history
  • Karma GAP: OnionDAO

Challenges

  • Time of volunteers:
    • Description: The handful that are volunteering their time are uncompensated. This means time availability fluctuates. It is the cause of the development of the endowment taking months.
    • Updates: Things keep moving. Being slow is the tradeoff we make for being unpaid. That’s ok.
    • Resolution: Just keep swimming.
    • Lessons Learned: Communicate time availability and imputed timelines clearly.

Outputs and Outcomes

  • Node operator base: not much moved. Probably because we are currently rewarding less than it costs to run a node. With the grant from the previous epoch we proved that running an endowment of this kind is feasible. We hope to attract more operators by pushing the rewards slightly over the cost of running a node.

Plans for Potential Funds Raised in the Next Octant Allocation Window

  • Increase rewards to be more than the cost of running a node:
    • Description: The current rewards are just onder what it costs to run an exit node. We want to push the rewards above this boundary to attract less idiologically and more practically driven node operators.
    • Expected Outcome: An increase in node operators
    • Funding Needed: 10 ETH
  • Set up a DAO legal entity
    • Description: We’d like to set up a DAO entity so we are best-in-class compliant. We have already explored options and will publish all documents/templates/practices we use publicly of course.
    • Expected Outcome: Legal entity in the Netherlands
    • Funding Needed: ~1-2 ETH depending on specifics.

Other Funding

  • Grant Funding Received Since the Last Epoch: None
  • Other Non-Grant Funding Sources: Yield on our rETH treasury.

Future Plans for Financial Sustainability

We remain committed to only spending the yield on our treasury to be able to run indefinitely. We also remain committed to only using decentralised staking tokens in our treasury.

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Really excited to have you all back, and its great to see that the results from funding have already produced some solid results for OnionDAO.

Wishing you the best this round!

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