# LCO Reward Specification

#### 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.

***

### 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:

$$
P\_{LCO,i,t} = PP\_t \cdot \frac{S\_{LCO,i,t}}{S\_{total,t}}
$$

***

### 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.

***

### 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

***

### 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:

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

***

### 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