[Governance] Limit validators from 0% commission fee

There are 100 validators in Cosmos Network, and they work as the maintaining pillars of the Cosmos Network. For Cosmos Network to be secured in a healthy manner, validator node opeartion business must be sustainable, and maintaining business by making up for the costs of node operation does not seem like the right way. There are 12 teams that charge 0% commission fee to operate validator node. Each of them might have different reasons for charging 0% commission fee but this can be a a negative factor in making Cosmos a healthy network. Some information regarding 0% commission fee are as below (as of 2019.05.26) • Among 100 validator nodes, 12 nodes are charging 0% commission fee. • Approximately 1.9M (14% of all bonded Atoms) are charged 0% commission fee. • Currently, Sikka and Sparkpool are the two big validators who are charging 0% commission fee and they each hold 548 and 1,112 delegators. Considering that top 10 teams’ average number of delegators is 340 people, 0% commission fee could be seen as a valid factor in attracting more delegators. Cosmos Network is designed so that each validator is incentivized for the costs they spent on infrastructure, salary and…

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This is not possible to limit 0% commission fees because validators can return the fees back to delegators and effectively become 0% even if they charge 100%.

They will just change moniker to XXXXX | 0% fees

@asmodat indeed, but this would demonstrate the willingness of such validators to bypass the rules of the Cosmos community, and therefore they would designate themselves as bad actors and only non informed members of the community would delegate to them.

I therefore agree with this proposal in principle. The main issue for me is that

• if we do no agree on a minimum as suggested in the proposal, then I do not think it will solve anything as validators could propose e.g. 0.01% without “breaking the rules”
• if we agree on a minimum (.e.g 5%) than all validators will approaches this limit, as there will actually be no reason to delegate to a validator with a higher limit

If we want to fight centralization then I have few other ideas for you

• Variable bonding time (which is currently 0) based on factors such as

  • Self Delegations
  • Delegations
  • Commission Fees ?

• Variable un-bonding time (which is currently 21 days), that is extend it based on factors such as:

  • Self Delegations
  • Delegations
  • Commission Fees ?

How would that work ?
Those that want to bond to people that have waaay to much stake and make network not secure should be penalized by having to wait a 'bonding time" for example to bond to TOP1 validator it could take you a month or two, to bond to top 50 one hour, to bond to TOP 100 - 5 seconds.

Why ?
If you centralize the network you should be penalized, but its not the validators who should be penalized it’s delegators that make bad choices and harm the network.

Do you want me to make a well spec proposal for this ?

I think these are all good ideas for fighting centralization (i especially like the un-bonding part).
Also, Forbole shared an idea to apply “diminishing marginal voting power” which suggests that if a delegator delegates to a large validator, then they are given a smaller % of rewards than if they delegated to smaller ones.

Large validators might try to separate into smaller nodes, but this would mean that they’d have to spend that much more to operate all of the nodes.

My observations are as follows: People just blindly delegate to top 10, end of story, they do not care for commissions they pay even that’s why we need bonding time as variable -> this is first front of defense against blind behavior where people say “damn I am trying to delegate but I do not get rewards, what is going on ?”

And no you do not have push-out and split with this idea if you define right courve how this penaly is applied so that it’s not worth to split

It is quite difficult to know exactly what % commission fee is enough (should be minimum) for healthy node operation due to differences in costs of all validators.

But we suggested that 0% wrong, simply because validators will need at least a small revenue to cover for their operation fee such as cloud instances, and datacenter. If Atom price goes up to (this is an extreme example for simplifying purpose) $1000, maybe 0.1% commission fee could be enough. But even if Atom was that expensive, 0% doesn’t get you anything to make up for the costs.

I do believe that having a low commission fee is not so bad as delegators will be more open to the option of delegation, but if they are constantly exposed to 0% validators, any form of commission fee (even if its 0.01%) would be considered expensive, and general perspective of commission fee among delegators will be non-existent.

So, in conclusion, yes commission fee can be cheap as long as they can cover for their own costs to maintain the business, but 0% would only get you no money and bad idea about delegation prices.

I would define on your place proposal for a flat, monthly or weekly fee off delegations on top of the % fee. Then everyone can have 0%

I am a little confused by what you are saying about “flat monthly fee”.
How would that work? Could you kindly describe a little more?

Right now you have a % fee off delegators rewards its called commission fee and can be set from 0 to max_commission. Beside that fee there can be a second - flat fee that validator receives for his operations which is not % but simply a constant he defines in range from X to max_flat_commission. Before your delegators receive rewards this flat fee would be filled first every week and ensure you can sustain service and only then delegators would begin to receive their rewards. On top of that you would have this % fee you can define as 0 and threat as bonus. Second option you can propose to have it on protocol level that all validators 1-100 receive some flat fee of the network for every week of operations without a downtime. This fee would be small (not to cause sybil attacks), lets say 100 or 200$ a month, so its literary 0 vs what entire network earns and ensure regardless if you are big or small you can sustain operations and are not in a loss at least on the hardware. TBH I am fan of a second option more because its incredibly easy to implement and solves the issue you presented at least to some degree then on top of that implement this proposal to have complete solution.…

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Cosmostation agrees with this proposal.

Delegators being exposed to 0% commission fee somewhat undermines the effort of other validators trying to build a sustainable business by providing value to the Cosmos network and getting delegations in return. Validators all have different costs in maintaining their businesses depending on the services they provide, the number of people employed, the server specs they are using, etc.

Most validators, both big and small, are trying to maintain their businesses through validator commission collected from their delegators. Some validators provide value to the network, and in return set a realistic commission rate as they see fit in order to get compensated for their work and be able to sustain their business.

I believe that there is certainly room for improvement in this aspect and therefore agree with this proposal.

If for example top 3 validators than get almost all rewards and get commission, can up anonymous validator with 0% commission and call this others new validators independent validators but is controlled for the same entity.

Im not a lawyer but i work in bank fraud prevention.
Blockchains like Cosmos have public recorders.

I can write more and more but cosmos whales kill my good intentions and hope.
I predict this the day of launch, but time to time rigth?
Or better wait for rich validators delegate some alms to my validator?
Or I can look to work in another real decentralised project?

The 0% commission approach chosen by some validators, from my perspective is long term sustainable in the following cases:

1. the validator has a big stake in the game and he can afford anyway to sustain the infrastructure from his self generated earnings
2. the validator has a bad infrastructure so very small costs ==> he is not reliable for the long run
3. for some reasons the validator doesn’t pay for his infrastructure (but that means that he is not in the control of the servers so they might end up being stopped anytime, so his infrastructure is not reliable)
4. a marketing approach to attract delegators at the beginning, but that might be a double edge sword when he will decide to increase his % commission.

However I can’t say that I consider a good idea adding a limitation in the design of the protocol to restrict the possibility of adding 0% commission, instead maybe the validators that use 0% commission understand that they are not bringing much of value or confidence for the long run.

I think many validators out there are working to solve this issue of centralization. Active or not, some validators which we can call ‘whale’ are also into this topic.

It would be impossible to force the large validators to distribute their funds somewhere else, and many delegators are currently more interested in profit making than the decentralized philosophy of blockchains.

It will take time, but it doesn’t mean that we can’t do anything. My proposal draft here is just one thought, but @asmodat also has a different proposal to vary unbonding / bonding time depending on each validator’s status. I think these ideas would be helpful in achieving the level of decentralization we want

meleatrust cosmos validator update

Hello Cosmos people

Reading time: 2 min read

For number 1, I think it deals with the idea of PoS, where number of stakes represent the power and responsibility an individual has within the network. Blockchains rely on not single, but distributed multiple nodes securing the network. Self-bond is a good number to see how much stake this validator has in the game, but too much in one basket also represents a big risk. Number 2 and 3 are the risks which delegators cannot really see unless an accident through bad infrastructure happens (large downtime or even double sign). The history of Cosmos Hub is quite short so there is no real good reference except Game of Stakes of past testnets to see if these validators were actually thoughtful about their set up. For number 4, yes it is a double-edge sword and I think it will take time for the market to choose reasonable ‘pricing’ for their services. But still, for us, 0% means ‘no pricing’ which would disrupt the market and not provide any incentives which was the original design of Cosmos. To me, the reasons you mentioned are actually supporting the idea of how it is not very good to have 0% commission fee. Yes it is best if validators act upon the thought that no value is added…

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Thank you David,
One of the idea was that it will be healthier if delegators are aware that paying, even a small fee, is the right idea since validator operation, as you should know as well, is not a cheap cost.

For this idea to be a much more normal thing in the market, I think it will take time, but during that time, validators should put the effort to make that happen.

If Atom, which is the first whitelisted fee token in the network, is not given as incentive of validation by 0% fee, it would be hard to imagine how the value/price of Atom will be high in the future.

This is impossible to enforce. I think I already saw an ad for a validator charging 0% fee plus a bonus. They can just add enough bonus to override the minimum fee if they want.

Cosmos can never stop people offering a bonus through a side channel. The best you can do is build social consensus that low fees are a bad idea. I wouldn’t support this proposal if it adds code, but maybe it can be a sort of declaration of social consensus that low fees are bad.

For adding to your proposal, this could help this:

create a formula of equilibrium could be established in the commissions, so that those who have more voting power are forced to charge more commissions

Or even a large validator to pay more% of the fee to the community fund of your rewards than a small one. Thus we achieve a balance by decreasing the rewards directly in the major validators.

Another help for decentralization

The proposal of the community fund can be used so that the biggest validators maintain it, we establish a variable so that the more distributed the network the more % of the small validators come together to maintain the same community fund …

The option to cover the Fund with a constant variable depending on your voting power, this could be executed as follows:
If we set an additional commission exceeding even 100% commission for validators that approach to own 33% of the network and that this additional commission goes directly to cover the community fund by the main Validators. Depending on your% share of the network, your% contribution to the fund will be. This could help decentralization and still remains an incentive for them and the whole community through the community fund

I actually think your point is valid.
It should be best if this 0% situation could be solved without adding code, but through social consensus.

That way, like you mentioned, the marketing strategy to provide bonus to delegators with paybacks could also be prevented.

I imagine that the implementation in the code is the safest for the network. This constant actually adds value to the network by means of a self-constructed inflation (community fund) through the cost inflation of validator rewards and not from the inflation of the monetary base. Creating a small economic cycle that in my opinion is good.

The option could be given in this function to turn it off or modify the% contribution constants to the fund, in case the fund already reaches very high levels and the network is sufficiently decentralized. Although this fund would act as a support to stabilize in the decentralization making the centralization tends to disappear.

If we separate the community fund directly from the constant inflation of the monetary base, it is good and it maintains the community fund if a proposal is approved to limit the max supply. This helps in the draft that I want to present for a proposal in the supply limitation. Also to avoid the exponential growth that always have the validators with more volume in comparison to the smaller ones that also decrease their value exponentially with an inflation of the monetary base.

We are a team currently charging no commission fees. Why do we do it? How do we plan to finance our infrastructure? • We don’t want to fall out of the top 100 list. It’s also the biggest risk for nominators delegating to smaller validators. This risk needs to be priced in into lower commission. • We have developed a high availability product for our validators and it’s being tested. Therefore, we are not charging delegators. Selling our product and IT security services to other validators in the future is part of our strategy. • We have sufficient self-stake to finance the infrastructure costs. Everything is financially healthy. A way to raise the commission fees is in our opinion: • nominators should be able to re-delegate faster (than currently 21 days) when a validator node drops out of the active validator set. Nominators should have more incentives to delegate to smaller validators. However, we should game-theoretically prevent the situation that big validators would split up and therefore occupy more slots. • rising slashing fees (we would oppose this idea strongly at this stage of the project) • the idea with variable bonding time (by @asmodat ) depending is…

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Charging different community tax based on the amount of stakes sounds fair.
It is meant for larger validators to be a more influencial / strong player in the network of POS. Thus maybe we can start dividing taxes like… 5%, 3.5%, 2%, 0% ranges depending on the delegations you have?

I just want to drop my 2 satoshis in on this one also - how is it that the commission can be set at zero anyway? I know that probably in this case it doesn’t quite have this issue but in other math functions I have seen zero is a value that marks the boundary because it has a particular mathematical property of causing everything in the same formula to also multiply to zero. It seems to me if conceivably there is no way even with lunar-levels of ATOM prices, that 0.01% commission should really be the floor on commission rates, then that should be the commission rate. I was involved with the Steem blockchain and within 9 months its delegation system turned completely into a circle jerk. But that also entailed a completely open, and fraudulent (imo) initial mined distribution as the chain was just a ‘PoW coin’ and then they all voted to change it to several zeroes more on the right hand side of the original decimal place, and then suddenly it was a delegated staked hybrid PoW/PoS system and the network has been marred ever since by the fact that these initial stakeholders had no slashing disincentive against collusion, and nobody could stop the network being turned into some…

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In my opinion 0% commissions directly affect the economic cycle of any system and this is not good, in my opinion we should start from a fixed maximum and reduce to smaller validators, but we can not force validators to decide the commissions that are interesting that they charge for their services but if we can establish an additional tax that is distributed proportionally depending on the size of the validator. That is why I wanted to separate the community fund from the inflation of the monetary base, to feed it with this new tax that also adds an economic value of interest for everyone in the cycle. This new tax acts as a balance by pushing delegates to smaller validators who will earn more proportionally by paying less taxes and contributing less to the community fund. The fund maintains the fixed growth constant, but the contribution to it is distributed proportionally depending on the size of the validator. If we could prove this in Tesnet we would see that it works very well, we could also try to reduce the days for linking to these minor validators by accelerating the decentralization process and avoiding the concentration of voting power while the delegates are…

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One question that I would like to clarify is: If we achieve a good decentralization with these implementations, we avoid the risk of an attack, could we reduce the period of unbonded depending on the security of the network? We have to bear in mind that many will decide to go to trade instead of redelegar after 21 days and this is not good for the network either.

• I prepare the formula, tell me the inflation% of the actualy Community Fund please …
• The contribution formula to the fund, for each validator, must be the same as% of the voting power of that validator in the entire Cosmos network. I mean: if 90% of the current hash power is among the top 20 validators, these 20 validators should contribute 90% of the inflation of the Community Treasury

I think incentive which makes the holders to go trade the Atoms instead of delegating is depended on price of Atoms. If they can be sure that they can be more profitable by trading than by delegating, they will go trade their Atom anyways.
Yes, in a bullish market, shorter undelegation period could lead to more holders trading their Atoms, but this will also cause inflation rate to grow faster, which will eventually lead to more people delegating again.

I do not think community fund itself has an inflation rate but community tax is currently fixed at 2%.
But to implement different percentage of community tax, i think we should be aware of ‘target’ community fund amount. No fund has been used in community tax, so its actually very difficult to estimate.

unicorn:

slot

I do agree with the idea of raising slashing fees.
Although it is delegators’ interest to have smaller risk of losing Atoms, the idea of slashing is backed by the thought that validators should be secure and secure validators are free of slashing risks.

And yes, the issue which is bigger currently is decentralization, but we think commission take a role in decentralizing the network as well. There could be many ways we can make decentralization better but it would be difficult to address all the methods in one governance proposal so we focused on the issues regarding commission fees. But it is certainly interesting to see many opinions on this post

Yes, you are right. There is a relation between commissions and decentralization.

Maybe we could further limit the specs with respect to commission changes?
E.g.

• upon commission change some sort of tax could be paid into the community pool
• min/max commissions should have at most 10% differences - it looks almost fraudulent, when a validator specifies 0% min and 100% max commission

unicorn:

• upon commission change some sort of tax could be paid into the community pool

This is good idea to avoid quick commission change. I will further add that there could be community pool tax for having more than 15% commission as well.

I think I have managed to formulate two equations for an accelerated plan of attack on centralization. In this we are going to establish the following Variables: • Total stake = TS = 140M Atom • %Validator stake on the current Network = (Atom Validator * 100)/ TS = %V • Effective actual Inflation = EInf = 7.59% of 239M = 18,140,100 ATOM • CommunityFound = CF = 2% Variable to distribute the % contribution to the fund directly from the validators and separate it from the inflation of the monetary base. Will be taxes directly to validators based on their size: • Validator Commission = Vfound = (EInf * 2%) * %V or • Vfound = (((((7.59*239,000,000)/100)*2)/100)*V)/100 The following equation determines a variable time of unbond period in function also of its % of the total stake of the current network: • Validators = 100 • Unbond period = 21 days • Total unbond of all Validators = 21 * 100 = 2100 days • %V = % Validator stake on the current Network = ( Atom Validator * 100 ) / TS = %V • Vunbond period Validator days = Validator Unbond Period This allows the days to be less in the lesser Validators and more in the biggest: • Vunbond = %V * 2100 or • Vunbond = ( V…

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We are going to put two examples of practices to better understand the functionality. • Remember that the purpose is to push the delegates to smaller Validators to distribute the network by applying higher taxes to the higher validators reducing the performance of the delegates and the greater redelegation times in their participation in the network, a formula will use the community fund to establish the commissions and the other disposition the distribution of the number of days that a delegate must take to redelegation in another validator: Vfound and Vunbound 1 - In the first example we will see the result for the commission and the redelegation time applied to a validator with a load of 1,000,000 of Atomos in the network and a total of 140,000,000 of Atoms estimated in the network calculations: V1 = 1,000,000 * 100 / 140,000,000 = 0.714% stake on the Network • Vfound1 = ((((((7.59 * 239,000,000) / 100) * 2) / 100) * 0.714) / 100 = 2,590.40 ATOMs Commision to Community Found • Vunbond1 = (0.714 * 2100) / 100 = 14.99 unbonding days 2 - In the second example we will see the result for the commission and the redelegation time applied to a validator with a load of…

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So I (obviously) have a number of thoughts regarding this matter. There are a number of interesting ideas proposed in this thread by @asmodat , @JLiBercrypto , and others on how to help decentralize delegation which definitely warrant further discussion. But for now, I’m going to respond specifically to claims related to the original proposal. nodeateam: • Among 100 validator nodes, 12 nodes are charging 0% commission fee. • Approximately 1.9M (14% of all bonded Atoms) are charged 0% commission fee. So 12% of the validator nodes have 14% of the bonded atoms? That seems…pretty okay. That seems to suggest that delegation is pretty statistically independent of 0% commission. Now within those 12 nodes, the delegation is heavily skewed towards a few larger validators such as Sikka and SparkPool . But that just suggests that delegation is skewed for reasons outside of 0% commssion or not. Also, sorry, super minor nitpick, but I assume there’s a typo, and it should be 19M? nodeateam: But, if delegators are constantly exposed to low commission fee, it would prevent delegators from choosing the validators who are actually actively making the network…

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I understand the reasons for setting a minimum, but I strongly disagree. Crypto was founded on libertarian principals. Cosmos seeks to become the governance behind the entire cryprto infrastructure. If we are to be better than those we are trying to replace we should not set unnecessary restrictions for any reason no matter how noble the intentions. It should be a true free market. You cannot assume to know everyone’s intentions and situations. To be decentralized you do not have to cater to the less well off. We as a network should utilize all the resources available including large corporations and people with access to cheap energy. Do not confuse “free market” with “fair market”.

I would vote against any proposal limiting the freedom of a validator to offer 0% commission.

The solution for limiting centralization should be simple so that ANYONE can see the purpose. Therefore limiting unintended consequences, and increasing end user confidence.

My thought is a validator cannot be delegated atoms if they have over say 7% of the total bonded atoms. I would probably set a limit for self staked atoms too. Maybe 3.5% delegated and 3.5% self staked. My only reason for choosing those number 10% seems too high and 5% seems too low. Lol.

I don’t know if it has already been discussed : couldn’t we make the commission fee depend on current voting power (percentage of delegated atoms) ? For example minimum commission fee could be set to current voting power * 3,33 : • new validators with 0 delegated atoms could then propose 0% commission fee, so they can attract delegators • with 2% voting power : 6.66% commission fee (or more) • with 5% voting power : 16.65% commission fee (or more) • with 10% voting power : 33.3% commission fee (or more) • with 20% voting power : 66,6% commission fee (or more) • with 30% voting power : 99.9% commission fee, so people are strongly discouraged to delegate to a validator that may then get more than 1/3rd of voting power. This rule also has some other advantages in my opinion : • it is very simple to understand • it gives the opportunity for newcomers to become validators, and at the same time it guarantees sustainable commission fee for validators that have been able get at least a few percents of voting power • it should incite people to redelegate to smaller validators At the end with such a rule voting power should be equally shared between validators, if…

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I understand the reasons for setting a minimum, but I strongly disagree. Crypto was founded on libertarian principals. Cosmos seeks to become the governance behind the entire cryprto infrastructure. If we are to be better than those we are trying to replace we should not set unnecessary restrictions for any reason no matter how noble the intentions. It should be a true free market. You cannot assume to know everyone’s intentions and situations. To be decentralized you do not have to cater to the less well off. We as a network should utilize all the resources available including large corporations and people with access to cheap energy. Do not confuse “free market” with “fair market”. This ^^. I agree wholeheartedly that we want the protocol to lean on free market economics rather than impose arbitrary restrictions in order to achieve a more distributed outcome. Moreover, we cannot ever accurately predict second order outcomes of imposing regulations on any economic system, especially one in which proposes to “tax the rich”. I would rather the voting power be slightly less distributed than it could be over it being less secure than it could be. Because at the extreme end of…

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chjango:

Moreover, we cannot ever accurately predict second order outcomes of imposing regulations on any economic system, especially one in which proposes to “tax the rich”. I would rather the voting power be slightly less distributed than it could be over it being less secure than it could be.

Well said. I tried to make this point but you put it in much better words than I could.

chjango: I agree wholeheartedly that we want the protocol to lean on free market economics rather than impose arbitrary restrictions in order to achieve a more distributed outcome. So what about the 21 days unbonding period ? It seems to me it is a pretty strong restriction rule that is imposed to everyone … Moreover, we cannot ever accurately predict second order outcomes of imposing regulations on any economic system, especially one in which proposes to “tax the rich”. I am not sure what you mean by “second order outcome of imposing regulation” but I do not see why you could accurately predict “first order” better. As for the rule I proposed, it is quite the contrary to “tax the rich”, as the more delegated Atoms a validator would get, the richer he would be ! I would rather the voting power be slightly less distributed than it could be over it being less secure than it could be. Even if at the end it is not distributed at all ? I am no economist but I am pretty sure that without any rules this is what will happen. Because at the extreme end of imposing a limit on 0% commission, is validators leaving the Cosmos Hub to seek other, more…

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This should exclude self delegations and then yes is a slightly better idea then preventing unpreventable 0% commissions (tho still would not prevent validators from returning commission fees and always being 0% anyway ). This however can be achieved indirectly by introducing Guaranteed Minimum Income below the level that could cause sybils and kill 2 birds with 1 stone (second one is the 0.76 Gini Coefficient of rewards from commission fees) and discouraging smaller players from participation. This way small players could afford 0%.

I do appreciate the thought behind your idea it is cool how the economic incentives basically bring all validators equal. I’m sorry, but to me this is not simple and there are likely many unintended consequences that we do not understand. It is not so much tax the rich, but more regulate the rich which does not sit well with me. But, the biggest issue I have is it assumes everyone acts per the incentive economics. I think the assumption should be a malicious attempt to aquire power.

Thinking about your post gives me an idea…

What if all validators get one super vote (rather than a vote for each bonded atom), equal to all staked atoms divided by the number of validators. This would eliminate centralization governance concerns with validators. It would also incentivise the entire network to pay close attention to all validators not just the top dogs. It could increase the number of people who cast their own vote. You could think of the validator set like Congress and everyday is election day.

ddrdrck: So what about the 21 days unbonding period ? It seems to me it is a pretty strong restriction rule that is imposed to everyone … The 21-day unbonding period has an explicit security function to it and can, in no way, be classified as an arbitrary restriction on the cryptoeconomic system. The unbonding period’s function is a deterrent to the Nothing at Stake Attack and thus is a security measure that should not be removed or reduced from the Hub. The Nothing-at-Stake Attack describes a certain weakness present against all Proof-of-Stake-based protocols. The reason you stake ATOMs is because one ATOM is analogous to one unit of hashpower that would otherwise be spent in Proof-of-Work systems. Without ATOMs collateralized on the Hub (i.e. unbonded ATOMs), there would be no collateral to slash if an attacker stole tokens. 21 days is the minimum needed to mitigate Nothing at Stake, a well-documented attack for Proof-of-Stake networks. This means that when you unbond, you are still liable for slashing during those 3 weeks of unbonding in case any slashable offenses are found after you’ve unbonded but during the time you were bonded . This protects the Hub from…

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I understand your concern but in this particular case we are trying to find a way to make it more lucrative for every validator to provide staking services to Cosmos, not the contrary. Making distributions more equitable for all validators in the current set as a whole via a top-down rule seems suboptimal to me with unforeseeable consequences. The way I’d approach my business, as a validator—theoretically—is to think of how I could launch secondary markets that pipe users into my validator in an effort to differentiate my validator from the rest. Perhaps your validator could provide insurance to your delegators? A sort of SAFU-esque fund that protects your delegators in case you/they get slashed? Doing this does three things: • Justify a higher commission rate for your validator to attract delegators with a lower risk tolerance (a non-negligible market in staking). • Makes your profit margins higher because now you’re charging higher commission (not compete with other validators at 0 commission). And now you don’t need to race other validators to the bottom. • Gives your validator an edge in a competitive, free market for validation services. This is how I’d think…

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GreenPumpkin: But, the biggest issue I have is it assumes everyone acts per the incentive economics. I think the assumption should be a malicious attempt to aquire power. You’re correct, we should always assume malicious attemps when imposing new rules. However, I believe most people actually act per incentive economics. Besides, it is a basic assumption for the whole crypto eco system, whether it is based on PoW or PoS. Thinking about your post gives me an idea… What if all validators get one super vote (rather than a vote for each bonded atom), equal to all staked atoms divided by the number of validators. This would eliminate centralization governance concerns with validators. It would also incentivise the entire network to pay close attention to all validators not just the top dogs. It could increase the number of people who cast their own vote. You could think of the validator set like Congress and everyday is election day. This is an interesting idea, but in my opinion the consequences of such a change would be far more difficult to predic than setting a fixed or variable minimum commission fee chjango: The 21-day unbonding period has an…

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GreenPumpkin:

I’m sorry, but to me this is not simple and there are likely many unintended consequences that we do not understand.

I think that even in what we call “free market” certain ground rules should be made. While economic incentives are no magical tool to cause people to act in one certain way, it is still an efficient one. If we allow the market participants to constantly compete over pricing, validators constantly competing are going to end up lowering constantly, and higher fee validators will lose their delegators. I think this will only lead to lose-lose situation where nobody wins.

GreenPumpkin:

What if all validators get one super vote (rather than a vote for each bonded atom), equal to all staked atoms divided by the number of validators.

In Proof-of-Stake, I think representing voting power based on the tokens “on Stake” should stay that way. Having one super vote per validator could lead to sybil attacks, and also smaller validators voting against the long-term benefit of the network as they have less in stake than larger ones.

Thank you for a deep analysis of this post and replies. sunnya97: Now within those 12 nodes, the delegation is heavily skewed towards a few larger validators such as Sikka and SparkPool . But that just suggests that delegation is skewed for reasons outside of 0% commssion or not. From my assumption, this could also mean that people are more likely to delegate to • larger validators within top 10 • validators with lower commission It seems interesting that less people delegated to validators with 0% fee who are also outside of higher stake ranking. But currently, it seems delegators are more likely to choose among higher ranked validators. sunnya97: Are you claiming that delegators are unsophisticated enough to take into account other factors than just price in their decision making when collectively delegating hundreds of millions of dollars of value? Only thinking about pricing may not be the case for all large delegators who are delegating more than 100k Atoms. But Cosmos network and community is relatively a young one. New delegators may not be so aware of the factors other than commission fee at the moment, which can easily lead…

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nodeateam: I think that even in what we call “free market” certain ground rules should be made. While economic incentives are no magical tool to cause people to act in one certain way, it is still an efficient one. If we allow the market participants to constantly compete over pricing, validators constantly competing are going to end up lowering constantly, and higher fee validators will lose their delegators. I think this will only lead to lose-lose situation where nobody wins. Competition is the catalyst to creativity and innovation. Validators with higher pricing are forced to get better or get out. Validators who are smart or fortunate make a lot of money. Deligators get the highest return on their investment. This is a win-win-win. ddrdrck: I am not convinced that “free market” rules will be sufficient, at least right now. This ^^ is where you lost me. Using economic incentives to facilitate decentralization tends toward socialism. I for one will oppose such policies. I think you will find others who agree. nodeateam: In Proof-of-Stake, I think representing voting power based on the tokens “on Stake” should stay that way. Having one…

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GreenPumpkin:

This ^^ is where you lost me. Using economic incentives to facilitate decentralization tends toward socialism. I for one will oppose such policies. I think you will find others who agree.

Economic incentives usually align with Laissez-faire over raw capitalism. It’s kind of hard to argue Cosmos is a raw capitalist system when it has an on-chain governance system in place to promote changes and upgrades using certain consensus rules.

I agree most of the proposals on this topic align with LF, however they key word in my statement is ‘tends’. Allow me to elaborate. I believe that once the door is opened to regulation of certain groups the tendency will be to increase regulation and even taxation of those groups. I think it is a dangerous precedent to choose regulation or taxation to solve these issues. For this reason I am brain-storming ways to solve the network security concerns without regulation or taxation on certain groups.

You are absolutely correct about the on-chain governance system of Cosmos. It is very interesting to me how cryptocurrency was founded in part to overcome the shortcomings of government policy (regulation, taxation, inflation, ext) and Cosmos is a cryptocurrency with a governing body. Do you think we will create a system better than those we seek to replace if we start the same way they did?

GreenPumpkin:

It is very interesting to me how cryptocurrency was founded in part to overcome the shortcomings of government policy (regulation, taxation, inflation, ext) and Cosmos is a cryptocurrency with a governing body. Do you think we will create a system better than those we seek to replace if we start the same way they did?

Crypto anarchy is an interesting idea to toy with, but maybe it is time to realize it would lead to nowhere ? Current system is not especially bad (the mere fact that we are discussing freely about it comfortably seated behind our desks should be a sufficient proof). What we should aim for is to make it even better. As for regulation and taxation, I believe they are a necessity for any sustainable society, we can only hope to reduce them to the strict minimum by maximizing their efficiency.

Of course regulation and taxation are necessary, but we have different definition of ‘strict minimum’. Can you imagine the impact of such regulation on american business… Aanyways, this is turning into a political argument, and no longer seems productive. I apologize for my part that was not my intention. I could tell you had given this a lot of thought and I wanted to pick your brain. I will be watching this topic closely to see what is eventually proposed to the network. good luck.

The point that nodeateam is attempting the effect of a 0% commission fee system is going to turn delegations ugly and lopsided over time. We need to do something about this. Validators running 0% stakes will be encouraging other validators, especially those that aren’t as well established, or indie Validators without a network of well-connected marketers, to move towards a zero commission model. People will be running on fumes over time. Validators will find it hard to attract talented individuals as the rewards will be meager. Validators will beging to lose out on setting up infrastructure at formidable data centers (unless they have proper connections). Validators will begin worrying about being penny-wise on nickel diming their infrastructure setup while pound-foolishly missing many strategic work they can be doing, they might even start cutting corners in not running as many backups as they should. All these risk weakening the Cosmos staking world which will expose operational and security risks. Imagine a series of brownouts/outages and security exposures will surely spell doom for what we all hope to be the future Internet of Blockchains. As you can tell, I agree with…

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I agree on the fact that Nodeastream is arguing about the effect it will have and is probably already having on validators’ operations and delegators heuristics for choosing validators. And it does seem it has more to do with the Cosmos game theory than with anything else. Currently it seems that most delegators’ choosing heuristic is just to pick the one(s) on top and not much else because a high percentage assume they are the most secure given their reputation or recent performance. There is another smaller set of delelagors who divide their stakes across the board which should be the most logical approach. I would assume the practical approach for this topic, is to create a single proposal or different proposals (preferred) because it seems they have sufficient support from many people holding ATOM, delegators and validatorsto be considered to be implemented and to vote. The way I understand it there are several ideas that ATOM holders are entertaining to improve decentralization and balance fees to encourage small validators to participate in the network. Most can agree that having 5 validators the power to attack the network is bad and many smaller validations may not…

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This attack does not come from centralization? Would not it be an impossible attack on a well-distributed network?

I feel like I owe it to you to participate in discussion of unintended consequences. Theoretic consequences of number 2 or 3. • Validators are profitable at lower price atom so atom price is held lower. Opposite effect of Bitcoin mining reward halving. • There could be a case made that all validators essentially have to offer 0% for some period to gather enough delegations to be relevant. This could serve as a barrier to entry similar to a franchise fee or a 10mil pay to play… Possible this could improve network security due to validator must remain truthful to recoup entry cost. You remove the entry cost you lesson stake of validators. • Atom hodler’s go to other POS chain with higher returns, thus driving price down and forcing higher commission %. • A potential validator with lots of capital does not have option to attract new deligators with low fees. This forcing them rather than return atoms to general population buy atoms and self stake which in the long run increases centralization. • Some validators with lower than normal cost could use the higher commission to accumulate more and more atoms to the point where delegation doesn’t matter. • If…

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• Using a linear or exponential function in practice right now would cause just Sikka and Sparkpool raise fees to 4% or 5%. Two validators raising fees won’t cause a catastrophic effect where ATOM’s price is held hostage. • What entry cost is being removed? The same parameters are kept. There is currently an entry cost of 30k ATOM for a validator to enter the pool and if a linear or exponential function were in place new validators and even old validators without with less than n% of the total network could still offer a zero fee if they want to just like now. In practice 80% or 75% of our current validator pool could still offer 0% fees depending on what percentage is used as the initial point of the function. • Using a linear or exponential function, ATOM holders will still be offered 0% fees if there are validators willing offer it, it just won’t be possible to be offered by entities controlling a high percentage of the network. • The majority of current delegators choosing heuristic is simple. Delegate to the ones at the top. Thanks to that heuristic current top validators don’t seem to be have that problem even though most of the validators with lots of capital are…

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AGREED. I think this is about the health of the social contract, not about adding code that is unenforceable.

I’m waiting for Sikka to flip the fee to 100% one day and teach us all a lesson

A user can simply split his/her atoms among multiple addresses easily bypassing a maximum limit.

This is the free market at work. There are many delegators that have chosen validators with higher than 0% commissions. Not everyone chooses based on price. I see some at 7%, 10%, 15%, etc. People are free to do whatever they like. Whether we like their decision or not. I think that’s the point of “free market”.

I think no one can define what the philosophy of blockchain is. It is not a religion. It is a community made by many people, and more mass people to come. Liberal, free market, against censorship, I know those were keywords for blockchain culture for a while. I know it is important. But it does not solely give enough reasoning to reject any restriction. We should focus on efficiency and possible side effect of restriction than philosophy itself, when we discuss about governance. Talking too much about philosophy is out of focus.

My statement is not representing any side of this discussion, but to warn that those philosophy might not be an absolute religion for many others. Those are personal beliefs and it is subjective thing among people. And the internet of blockchain should absorb both side of philosophy.

There probably has to be some basic premise which gives a flavor of consensus. Otherwise, you have disorganization and congestion.

For example, if there were 50% libertarians and 50% socialists in the same dev environment they would be fighting each other instead of forward progress. Agreement or consensus on some basic issues are required for a smooth operation.