LCO Reward Specification

Note: The numbers in this document are indicative and not final. They reflect the current framework discussed in Townhall 23 and may change based on community feedback and final launch parameters. We recommend reading this alongside the Townhall recording for full context.

Local Cable Operator (LCO) Reward Specification

A Local Cable Operator (LCO) is a network participant responsible for on-ground infrastructure deployment, management, and operational support of broadband connectivity within a given area. An LCO earns DBT tokens for enabling physical connectivity that supports hotspots, backhaul, and end-user traffic.

This section describes how LCOs earn DBT, including eligibility criteria, calculation methodology, and settlement mechanics.

Eligibility

To qualify for reward allocation in epoch t, an LCO must:

• Be registered and validated on-chain

• Provide documented operational support data for hotspots under its scope

• Maintain compliance with performance and uptime requirements

• Pass protocol integrity checks

Non-compliant or incomplete entries are excluded from reward calculations for that epoch.

Reward Components

LCOs earn rewards from the protocol based on:

1. UBI Allocation Component

2. Performance Pool (PP) Component

The relative contribution of each component depends on the protocol phase:

• Year 1: 100% UBI

• Year 2 onward: UBI + PP

Each epoch’s total reward allocation assigned to LCOs is derived from the global reward pool emitted by the protocol.

Year 1: Universal Basic Income (UBI)

During Year 1, all epoch reward allocation is distributed via UBI. Let:

• R_t = total reward tokens assigned to LCOs in epoch t

• L_t = total number of eligible LCO entries in epoch t

Then each LCO i receives:

$$Reward_{LCO,i,t} = \frac{R_t}{L_t}$$

This structure incentivizes early network coverage, broad deployment participation, and rapid onboarding of operational partners.

Year 2 Onward: UBI + Performance Pool (PP)

Beginning in Year 2, LCO rewards follow a hybrid allocation structure with two components:

• UBI Component: fixed baseline share of $R_t$

• Performance Pool Component: usage and contribution based share

Let:

• UBI_t = alpha , R_t

• PP_t = beta , R_t

• alpha + beta = 1

Governance can tune alpha and beta to balance coverage incentives vs performance incentives.

Performance Metrics

LCO performance is quantified using two primary scores:

1. Coverage Contribution C_LCO,i Measures the extension and density of network infrastructure supported by the operator.

2. Support Throughput D_LCO,i Captures aggregate traffic volume sustained by hotspots under the operator’s management.

A composite score for each LCO $i$ is defined:

$$S_{LCO,i,t} = w_{cov} \cdot \tilde{C}_{LCO,i,t} + w_{data} \cdot \tilde{D}_{LCO,i,t}$$

Normalization

Let:

• C_max,t = maximum coverage score among eligible LCOs in epoch t

• D_max,t = maximum throughput score among eligible LCOs in epoch t

Then:

$$\tilde{C}_{LCO,i,t} = \frac{C_{LCO,i,t}}{C_{max,t}}$$

$$\tilde{D}_{LCO,i,t} = \frac{D_{LCO,i,t}}{D_{max,t}}$$

This prevents single outliers from skewing the pool.

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Performance Pool Allocation

For each LCO i, the PP reward is:

Let S_total,t be the sum of composite scores across all eligible LCOs:

$$S_{total,t} = \sum_{j=1}^{L_t} S_{LCO,j,t}$$

Then LCO $i$’s share of the PP pool is:

$$P_{LCO,i,t} = PP_t \cdot \frac{S_{LCO,i,t}}{S_{total,t}}$$

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Total Reward Per Epoch

Year 1 (UBI only):

$$Reward_{LCO,i,t} = \frac{R_t}{L_t}$$

Year 2+ (UBI + PP):

$$Reward_{LCO,i,t} = \frac{UBI_t}{L_t} + P_{LCO,i,t}$$

Where:

• frac_UBI_t,L_t is the baseline shared equally

• P_LCO,i,t is the performance-weighted component

This ensures LCO contributions are rewarded both for participation and measurable impact.

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Settlement Mechanics

• Reward calculations are performed off-chain in each epoch

• Results are submitted on-chain as a single epoch settlement transaction

• Final rewards are minted or released in DBT at the start of the next epoch

• Each settlement logs per-operator allocations for transparency and auditing

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Example (Year 2+)

Suppose:

• Epoch reward allocated to LCOs: R_t = 100,000 DBT

• UBI weight alpha = 0.40

• PP weight beta = 0.60

• Total eligible LCOs: L_t = 100

UBI component:

$$UBI_t = 0.40 \times 100{,}000 = 40{,}000$$

Baseline per LCO:

$$\frac{40{,}000}{100} = 400 \text{ DBT}$$

Assume normalized composite score for LCO i is 0.015 and total network score is 1.000:

PP portion:

$$P_{LCO,i,t} = 60{,}000 \times \frac{0.015}{1.000} = 900 \text{ DBT}$$

Total reward:

$$Reward_{LCO,i,t} = 400 + 900 = 1{,}300 \text{ DBT}$$

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Governance Controls

Governance parameters that may be tuned include:

• UBI vs PP split \alpha, \beta

• Coverage vs throughput weight w_{cov}, w_{data}

• Epoch timing

• Normalization ceilings

These parameters enable protocol evolution while maintaining a transparent and measurable reward structure.

Compliance Notes

• Only active and verified LCOs are eligible for rewards

• Data feeds for coverage and throughput must be validated

• Failure to meet compliance thresholds results in exclusion from that epoch’s settlement