0% fee trap or Why you should avoid overbidding validators

TL;DR
You earn less when delegating to an overbidding low fee validator than you can earn with a validator who uses all his available voting power participating in committee even if its fee higher than 0%.

This is not tech explanation on how EPoS works and benefits delegators. The tech one was done by @rongjian in The Definitive Guide to Harmony Open Staking. But there’s one important thing, I want to point you to when reading the post, that everyONE delegator should clearly understand if he wants to get maximum from his delegation - Do not delegate to an overbidding validator!

How to recognise the overbidding validator?

The Overbidding validator is a validator that has a Bid higher than Effective stake + 15%. In this case everything higher than effective stake doesn’t participate in the committee and as a result doesn’t earn.

Here’s a quote explaining my words in tech manner:

“Each BLS key in the committee has a certain voting power proportional to the share of its effective stake among the whole committee . For example, if the sum of the effective stake of all the keys in the committee is 10k ONE, a BLS key with effective stake of 1000 ONE will have voting power 0.1 (or 10%).”

Delegate wisely :sunglasses:

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Great advice. I would differ on one point though. If the Validator is new, and has only 1 BLS, then they have no choice but to continue growing beyond the upper bound, in order to have enough delegation to safely spin up a second BLS key, and remain elected. When they spin up the second key, their effective bid would be halved, and the Validator would be in a better earning spot. The only alternative (currently) that a new Validator has in this scenario, is to spin up a second key before going above the upper bound… which would most likely mean that they don’t get elected.

This is actually an issue with how tight the current bounds are, and one of the first things that the Validators are handling with decentralized governance. A proposal to fix this has pretty much been hammered out, and should be up for a vote in the very near future!

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what you mean is clear for everyone, but the issue I raised is more about providing transparent information on current earnings and if the validator wants to spin more keys he should explain his strategy on how it’s available for him and approx ETA - then delegator can decide to wait and trust to a validator or choose another one.

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Thanks this is very useful advice for someone that has just joined the harmony DLT.

I have the following questions:

  1. How do I as a delegator find out the bid being made by the validator that I am interested in delegating to?

  2. How can I know the validator’s effective stake? Is this simply the total staked amount displayed in the validator’s profile?

  3. can you explain how the Validator’s “Max Fee Change” works in relation to the “Fee”?

Many thanks

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  1. & 2. are the same answer. They are the total delegations (delegation = stake), divided by the number of keys the Validator has deployed. This can be seen either on the https://staking.Harmony.one analytics page, or at https://Harmony.smartstake.io web pages.

If a Validator had 100 million ONE delegated to them and is using 20 keys, then their effective stake, or effective bid, would be 5 million.

  1. The max fee change, is how much a Validator can change their fee each epoch, up to their max fee.

Example: Assumed - a Validator has a max fee of 50% and a max fee change of 5%. If they are currently at a 10% fee, they could be 15% tomorrow, and 20% the epoch after that. Alternatively, they could also reduce the fee, going from 10% down to 5%.

The max fee change is just that. They could choose to modify their fee by 1% down to a 9% fee in the example above also.

  1. bid made (changes every epoch)


    at the figure above you can see a validator that overbids almost to 3,000,000 $ONE - this is not earning share for each BLS key (earning slot)!!!

  2. ‘EFFECTIVE’ in red square at the figure above (changes every epoch);

  3. The Fee can be increased/decreased at the ‘max fee change’ value every epoch. Let’s say this is a max step that can be used to changed fee in both directions at epoch change.

Example: the fee was 5%, max fee change = 10%, the next epoch fee could be form 6% to 15% (increase) and so if to decrease it.

Hope I could help.