# Challenge Results The **60% of transaction fees** collected are locked in the Treasury for **14 days**, acting as a **prize pool** that both **Validating Nodes (VNs)** and the **Sequencer** "compete" for. The outcome of this competition depends on whether the **Sequencer** behaves correctly or whether a **challenge** raised by VNs is successful.

**The system is designed to align the incentives for both parties:** | Sequencer's Incentive | Validating Nodes (VNs) Incentive | | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | The **Sequencer's goal** is to **never make a mistake** in processing transactions. By behaving properly, the Sequencer ensures that the 14-day worth of revenue locked in the Treasury is **released to YAMATA**, maintaining a steady stream of revenue for the platform. | The **VNs' incentive** is to **monitor the Sequencer** closely and **catch any misbehavior**. If VNs can successfully prove that the Sequencer acted incorrectly, they are **rewarded** with the locked funds as compensation for their successful challenge. | This dynamic creates a natural balance in the system, where the Sequencer works to avoid mistakes and secure the Treasury revenue, while the VNs are motivated to uphold the integrity of the system by ensuring the Sequencer processes transactions correctly. *** ### Successful Challenge – VNs Are Correct If the VNs raise a valid challenge and prove that the Sequencer was wrong or misbehaving, the locked funds in the Treasury are awarded to the VNs. **Here's what happens:** * The VNs who agreed to the challenge are rewarded with 60% of the transaction fees that have accumulated in the Treasury for the past 14 days. * The Sequencer loses out on the 14-day worth of revenue and faces reputational damage.

**Example**: Let’s assume the network processed **$10 million** in transactions in one month, generating **$10,000** in fees: * **$1,000** goes to the VNs as part of the regular fee structure. * **$1,000** goes to YAMATA as part of the regular fee structure. * **$2,000** is allocated to the Future Reward Pool. * **$6,000** is locked in the Treasury for 14 days. If the challenge is successful, the **$6,000 in the Treasury** is distributed to the challenging VNs as a reward for identifying the Sequencer’s misbehavior. This serves as a significant incentive for VNs to remain vigilant and challenge the Sequencer when appropriate. *** ### **Unsuccessful Challenge – Sequencer Is Correct** If the VNs fail to prove the Sequencer’s misbehavior, the challenge is unsuccessful, and the 14-day locked funds continue to be gradually released to YAMATA. Here’s what happens: * The **Sequencer** is proven correct, and the locked funds continue to be gradually released to YAMATA as a reward for maintaining proper behavior. * The challenging VNs face reputational damage and are penalized for raising an unsuccessful challenge.

**Unsuccessful Challenge – Sequencer Is Correct**

**Example, u**sing the same numbers, if the VNs’ challenge is unsuccessful: * The **$6,000 in the Treasury** keeps gradually being released to YAMATA, rewarding the platform for the Sequencer’s correct behavior. * The VNs receive no additional rewards, and YAMATA gains the full value of the locked funds.