Renegotiate the deal with Stride
Stride is using the Hub’s security for a pittance. For example, Coinbase Custody and its 20% commission yielded less than 150$ in Stride-derived commission between Aug 1 and Sep 1. That’s the Hub’s biggest validator with a way above average commission that isn’t even making enough commission to pay for equipment, let alone man power. Small validators are essentially indentured servants of Stride getting effectively nothing.
I propose that Stride should at least match Neutron’s payments to validators, which isn’t that much either, but can at least cover equipment costs, or we should stop providing ICS to Stride.
Big and small validators please chime in on this. Do you like having your expertise/time/effort valued so little?
This is an interesting commentary. I would love to know the extra cost associated with validating stride (or any ICS chain) in addition to cosmoshub. If it is a predictable increase, this should probably factor into ICS discussions, and I wonder how that would integrate with permissionless ICS.
Last I checked, Stride was paying the Cosmos Hub ~$1k/day, while Neutron was paying the Hub $10/day.
Did the economics of Neutron’s deal change?
Medium – 12 Nov 23Interchain Security: Risks & Economics
Following Chorus One’s recent piece about Consumer Chain on-boarding and centralization, in which we shared our concerns related to the…
Reading time: 14 min read
aidan:Last I checked, Stride was paying the Cosmos Hub ~$1k/day, while Neutron was paying the Hub $10/day.
Did the economics of Neutron’s deal change?
This is correct Aidan, what @pooch might be referring to is the idea that we suggested last year to use part of the unclaimed NTRN from the airdrop and sent to the Cosmos Hub community pool as reward for validators which was finally implemented. Stride has some of the smartest and most talented people in the Cosmos ecosystem, they already identified for example the opportunity for LSTs for the upcoming Namada MASP with the shielded set rewards. Stride has achieved a lot and the Cosmos Hub should feel proud and thankful to have Stride as a consumer chain
Cosmic_Validator:what @pooch might be referring to is the idea that we suggested last year to use part of the unclaimed NTRN from the airdrop and sent to the Cosmos Hub community pool as reward for validators which was finally implemented
Ah that’s interesting I missed this - do you have a link to this proposal / the implementation? Would like to read up on it
Sure here is the proposal: https://forum.cosmos.network/t/approved-cosmos-hub-neutron-validator-alignment
Neutron has a profitability issue, but is different in 2 aspects: • indeed they “airdropped” NTRN to the validators to help them cover their expenses • they aren’t really generating any sizeable revenue yet, but once they do it will be distributed to everyone and not only to a subset of the validators. We have zero ATOM delegated from Stride (if the only wallet is cosmos10uxaa5gkxpeungu2c9qswx035v6t3r24w6v2r6dxd858rq2mzknqj8ru28, which I believe it is), and we get approximately 0.30 STRD per week in rewards plus dust in other stTokens. And yet we are compelled to run a node, with all the responsibilities and risks that it entails and without seeing much of the $1k/day that are paid to the Hub – it certainly does not cover our infrastructure expenses. Stride has had a very positive impact on the ecosystem, that’s not debatable. But perhaps a change in the economic model would be in order so that it is more fair and balanced? For example, delegating more widely (if a validator must run a node because they’re in the top n-95, then they should also benefit from the liquid staking delegations); alternatively switching to PSS could be an option so that validators can opt…
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On behalf of the PRO Delegators’ validator, we fully support the idea of renegotiating the Interchain Security (ICS) agreement. There are clear inefficiencies in the current arrangement, and both Stride and the Hub’s validators are struggling as a result. For example, we noted some operators in the set are failing to push Stride upgrades in a timely manner, potentially due to the lack of profitability as opposed to infrastructure costs. This suggests that there may be systemic issues with the agreement between Stride and the Hub that need to be addressed. Additionally, we have been granted by the AADAO the opportunity to conduct a thorough analysis of Partial Set Security (PSS), a key upgrade in ICS 2.0. You can find the full details of our analysis here: ICS 2.0 Economics : Partial Set Security (PSS) Financial Model Tokenomics Introduction: Given the upcoming launch of ICS 2.0, referred to as Partial Set Security (PSS), we have been tasked to build a financial model as part of a grant submission to the Atom Accelerator DAO (AADAO). Given the prevalent misconceptions regarding shared security models, we recognized the critical need to address this matter.…
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Hi, @aidan . Thanks for the reply. Please show your work on the 1k$/day. Please don’t get me wrong: Stride is great for the ecosystem, there is no doubt about that. I wholeheartedly agree with @Govmos in that Stride itself could make things right simply by revisiting their delegation strategy (across all chains). Here’s a model that could work just via a script and an account that’s authorized to delegate and redelegate: • Never delegate to a validator that has been slashed, ever. • Only delegate if a validator has been up for 3 months or more. • Use a quadratic function to determine the delegations to the top 95% excluding those eliminated by the constraints above. • y = a x^2 + b x + c; quadratic function • b = 0; keep it simple • c = amount of ATOM to delegate evenly to eligible validators • z = total ATOM to delegate • z = integral y dx from 0 to 0.95 = a * 0.285792 + c * 0.95 • c = 0.1z; evenly spread 10% of total ATOM to delegate • a = ( total ATOM to delegate * ( 1 - 0.1*0.95 ) ) / 0.285792 • Rebalance all the delegations 24 hours after the last rebalance. Notice that there is no subjectivity in the delegations and they’re derived from on-chain…
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I really think ICS 2.0/PSS solve a lot of these issues. There’s no optionality currently, and I think it creates a lot of animosity for validators of both Neutron and Stride. The sentiment i’ve heard from some validators and people involved in these projects seems to be, for lack of a better word, rough due to incentive misalignment.
Who wants to do complex upgrades on a chain that’s barely paying you for work?
ICS V1 is the culprit here. Let validators opt in and out, and explore other revenue models.
The delegations would be recalculated on every rebalance, ie every day, so DragonStake would get a big bump up on day 1, then would drift back down day after day as long as they remain in the 95%, and then get a big bump again when they’re the last of the 95%. Coinbase would remain largely unaffected since they’re #1 and would just have their portion of the evenly distributed ATOM staked to them.
ICS V1 is the culprit here. Let validators opt in and out, and explore other revenue models.
Totally. The back-of-the-envelope calculations leading to the 95% cut-off had very bad assumptions in them. (No offense the author of the calculations, whom I greatly respect. At the time, I didn’t pay attention to the forum enough to voice my real-world validator economic experience.)
if i understand you correctly there would be one issue with this approach - re-delegations are still subject to unbonding period cool-down
but anyway, even having that executed every 21 day is much better that what we see now, thumbs up for raising that discussion
Redelegations are not subject to the unbonding period, they’re instantaneous. They are potentially constrained by the max entries parameter, but I think that just requires a little business logic in the script.
@aidan , does the 32 validator limit for Stride still exist?
Hey all! Interesting discussion. I want to give a few counterpoints from the consumer-chain perspective. ( Note: This is my personal opinion as a long-time Cosmos community member, and not as an employee of Stride Labs. My employers may / probably do have a different opinion ) I think looking at ways for Stride and the Hub’s valset to be more economically-aligned makes a ton of sense but, as I’ve said many times in the past, this needs to be handled both from the consumer-side and the provider-side of the equation, not just from the consumer-side. Over the last year Stride has averaged between $60,000 and $600,000 in ARR for the Cosmos Hub per Defillama , with an average cost to run the Stride chain estimated at $500,000 annually (node costs). Stride has been profitable for the Hub in the past, although it is not profitable currently due to the abysmal price action of tokens throughout the ecosystem that make up Stride’s revenue. This revenue is distributed to all validators that have opted in to secure Stride, contrary to what the following message states: highstakes: they aren’t really generating any sizeable revenue yet, but once they do it will be distributed…
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RoboMcGobo:This revenue is distributed to all validators that have opted in to secure Stride, contrary to what the following message states:
highstakes:
they aren’t really generating any sizeable revenue yet, but once they do it will be distributed to everyone and not only to a subset of the validators.
My message was admittedly a bit unclear, but I was referring to the revenue stemming from the LSM delegations, which are going to the whitelisted validators.
As I mentioned just below the part you quoted, what we get from that revenue sharing is extremely low and even when the markets pick up it will not cover our operating costs, by far (and we’re #49 in the active set right now, so not a top validator but not insignificant either).
Apart from that I agree with your position and ideas.
That latest upgrade allowing Stride to delegate to more validators might be a path to mitigating the issue, but indeed it would probably need to have other conditions than just opting in to avoid spreading the LSM delegations too thin.
highstakes: That latest upgrade allowing Stride to delegate to more validators might be a path to mitigating the issue The opposite actually. Stride attracted a certain amount of ATOM for liquid staking but still a small %. If Stride would spread these delegations across many validators rather than a smaller group then the revenue for each would be meaningless given the tiny delegations, as is the case with pstake for example. In addition, there are some complaints as if Stride chose a few validators randomly themselves when actually there was a robust selection process to which any validator could apply and then an evaluation that lasted months with governance proposals on Cosmos Hub and Stride. In summary, Stride chose the top validators of the Cosmos Hub by performance, contributions and other metrics guaranteeing that the ATOM deposited on Stride for liquid staking have the lowest possible risk for slashing since they are spread within the top subset of Cosmos Hub validators. Given than Stride is a consumer chain of the Cosmos hub it is its responsibility and job to select the best subset of validators with a robust selection process rather than a lazy spread to the…
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stride stakes to atom validators per cahortas per time. its the bonus youre talking about imo
I disagree.
Stride stakes over 4M $ATOM. That isn’t a small amount, and it could be spread more evenly.
The slashing risk… exists anyway. It’s kind of a foundational element of PoS.
A penalty would probably be in order when validators get jailed.
(Disclaimer: we have been jailed on Cosmos in October 2023, not because of a downtime but we got into the top n-95, didn’t notice, and we hadn’t opted into Neutron 
Still, that was our mistake and we own it and its consequences.)
On a side note, I see that Stride now delegates 28k atoms to us, and different amounts to 93 validators in total.
It’s something and I appreciate the gesture.
That’s an interesting idea actually. It could help “shuffling” the active set a little bit, too.
RoboMcGobo: • Distribute ICS fee revenues equally to every validator that has opted in to secure a given consumer chain rather than proportionally according to stake-weight. […] • Reduce the size of the validator set. […] IMO the set could be decreased by as much as 30-50 validators (or more), which would alleviate a lot of the unsustainable costs here. This aligns precisely with the recommendations we made in our analysis: Govmos: While we recommend retaining the Top-N model for Stride’s core public good mission, the chain could benefit substantially by utilizing exclusion lists for certain validators. Additionally, implementing a vote power cap would lead to a more equitable distribution of rewards. This is just one of many paths worth exploring based on the overarching vision. In our research on PSS economics, we examined the promising dynamics created by combining exclusion lists with a strict vote power cap: the-vote-power-cap We’ve also analyzed and suggested a pathway for scaling Top-N public good consumers as revenue grows: top-n-analytic-trends For Stride, which allocates 15% of its 500,000$ annualized revenue to the Hub (as well as…
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I’ve thought a lot about this as well.
The scariest thing, imo, about migrating to something like top-75% is that it introduces additional uncertainty around upgrades, as Stride will have to rely on a smaller subset of validators to upgrade on time (many of which would be CEXs).
Upgrading on time can already be challenging, so it’d require a lot of confidence that the remaining set would be able to process upgrades in a timely manner.
RoboMcGobo:Stride will have to rely on a smaller subset of validators to upgrade on time (many of which would be CEXs).
We previously proposed utilizing an exclusion list to address those validators who have caused issues in the past. While this would be a bold step, setting important precedents within the ecosystem, Stride serves as a prime example of a chain that has been negatively impacted by the underperformance of certain centralized custodial validators.
As neutral contributors, we aim only to offer a practical solution to the challenge at hand, while acknowledging the significant political ramifications that such an action could carry. Ultimately, the decision rests with Stride, and we remain committed to supporting the best outcome for all parties involved.
Bump on the topic of absolutely pathetic rewards from Stride. The #1 validator (by far) earns less than 160$ per month given its withdraws on Sep 15, Sep 30, and Oct 15.
Stakewolle.com, forced to validate for Stride like all 113 validators with more voting power, earns 1.7$ per month!?! That’s 0.06$ per day. WTF.
We’ve proved the concept of ICS, which was totally worthwhile. Now, however, is the time to allow validators to opt-out of particular chains.
I bump the topic as well.
Successful chains (Akash, Noble, …) use Cosmos without incurring any fee
Stride is mantained at a loss and they do not distribute the ATOM across all validators
Me and others have difficulty to understand the sustainability of ATOM and it probably deserves a dedicated thread.
Indeed these numbers are problematic, we have previously shared our insight on this topic and believe that instead of switching to an opt-in model, @Stride should consider lowering the Top-N.
Govmos:In summary, we recommend lowering the Top-N parameter to 75% or below, combined with a vote power cap of 5%. These adjustments provide a more sustainable baseline while awaiting future revenue growth. As the revenue increases, more validators are expected to opt-in voluntarily and adjust their validator fee parameters to share more rewards with their delegators, by lowering their validator fee.
Govmos:Indeed these numbers are problematic, we have previously shared our insight on this topic and believe that instead of switching to an opt-in mod
How is that a solution? Do all validators get LSM delegations from Stride in the top 75%?
If not it just displaces the problem but does not resolve it in any way.
Furthermore, after 1 or 2 years being forced to validate Stride at a loss, we would just be told that we aren’t needed anymore, thank you for your service?
I disagree wholly with the OP’s premise - for the year 2024, Stride has generated 22% Hub’s $1.65m revenue - and that’s taking into account ATOM’s inflation rate [ see the data on Numia’s DataLenses ] I am however in favour of the suggestions in this thread about reducing val-size - concentrating the rewards for stakers, so that we get more than dust individually. RoboMcGobo: Upgrading on time can already be challenging, so it’d require a lot of confidence that the remaining set would be able to process upgrades in a timely manner. I understand this hesitancy from Robo. Cosmos Hub (the mainnet) has perfected the art of timely coordinated upgrades. I think the team at CryptoCrew, Hypha, Brian (Informal), and I can help you replicate the Hub’s processes so that Stride can also get better at val coordination. And a smaller valset would only make this easier! highstakes: Furthermore, after 1 or 2 years being forced to validate Stride at a loss, we would just be told that we aren’t needed anymore, thank you for your service? RIP. Yeh, the smaller valset size will mean this. However, assuming: • something like a final set of 50 vals •…
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I want to remind everyone of something: It is now possible for validators to choose their commission rate, per consumer chain. This means that if a validator feels that they are not making enough money from Stride, they can up the commission on the Stride consumer chain, without affecting commission rate on the Hub.
Sincere thanks for the reminder. Tongue-in-cheek “Woo hoo!”, now we will make 20x basically zero per day:
0.001209 NTRN
0.003954 stOSMO
0.000040 stLUNA
0.007995 STRD
0.006112 stSTARS
0.000688 stJUNO
0.000003784464989569 stINJ
0.001126 stATOM
0.000934646889938490 stEVMOS
0.007749 stUMEE
0.000002 ibc/FA33D22EED651DC2D251315AAE2E7C5BA924D308081EE9760AE653AA2F6661CB