I do not think that this will solve the issue, as there are multiple problems. I would counter this proposal with the proposal below:
Root Problems: When additional validator slots become available below the Lower Bound (currently EMS * 0.85), larger validators quickly deploy more BLS keys to fill these validating slots, and pursue increased rewards for their delegators. This makes it very difficult to bring new Validators into election, as they are competing against far more experienced Validator operators, with the ability to adjust their Bid more effectively. Additionally, as the value of $ONE rises, the cost of starting a new Validator becomes extremely prohibitive. We need EMS to go DOWN, not UP.
Background: Prospective Validators who want to join our community have a difficult time gathering the necessary delegations to reach the EMS * 0.85 Lower Bound, and become elected. It is very difficult to gain the support of delegators who will not earn anything until the Validator becomes elected. Compounding the situation, if an opportunity arises where the lowest bid is more reasonable for a new Validator to become elected, it is usually far below EMS * 0.85, encouraging larger validators who are trying to improve their Expected Returns (ER) to add more BLS, and fill these slots. Not only does this make it nearly impossible for a new Validator to become elected without some sort of “Angel” Delegation, it also encourages experienced validators to battle each other for the highly prized slots below EMS * 0.85. Additionally, with the band so tight, new validators who have only 1 BLS must continue attempting to attract new delegations, even though their ER is negatively effected by the fact that they must grow well past the Upper Bound in order to have enough total delegation to safely deploy a second BLS.
Motivation: In order to become more decentralized, we need to allow new Validators to join the electorate, participating in consensus. This also encourages participation of Community Minded Validators, by incentivizing them to contribute to the ecosystem in some way, in order to attract delegations.
Specification: I propose lowering the Lower bound to EMS * 65, and the upper bound to EMS * 1.35. I would also propose weighting Stake Weight more heavily. To those who are not familiar, Stake Weight is effectively, how much a Validator bids per BLS key. I feel that modifying these two variables would not only solve our problem, but also be the simplest to develop, as it would mean modifying two existing variables in the binary, as opposed to re-writing new code. Below is an example of why I feel that this would solve our current issue.
- EMS = 6,000,000 ONE
- Upper Bound (EMS * 1.35) = 8,100,000
- Lower Bound (EMS * 0.65) = 3,900,000
- Stake Weight variable becomes more impactful
- There are 3 current factors which Validators can use in order to maximize their ER
o Shard population (How many BLS occupy each shard) – irrelevant for this discussion
o Stake Weight (Plays a marginal role, and is almost immeasurable)
o Occupying BLS slots below the Lower Bound
By far, the best way to increase a Validator’s ER is to occupy BLS Slots below the lower bound, as each key gets rewarded as though the bid was EMS * 0.85 (currently) or EMS * 0.65 (proposed). Being diligent as a validator, and noticing when a large amount of BLS become available presents an opportunity, as rewards become quite nice when a Validator can win BLS slots below the Lower Bound. This is by far the most effective way to raise a Validator’s ER. This also creates the effect of high competition, and attrition, as Validators fight for these prized slots, and push each other out of election. By lowering the Lower bound, we will make it more reasonable for new Validators to join our ranks, as the incentive for larger and more experienced Validators simply isn’t there. To further sweeten the incentive to not bid extremely low, we can increase the importance of Stake Weight (Bid per BLS) in calculating rewards. By putting more weight on the Stake Weight, we encourage larger Validators not to occupy the slots below EMS, because dividing their total delegation between more BLS will result in decreased rewards, as their Stake Weight will be reduced.
A careful balance must be struck between Stake Weight and the Lower bound, or else this could have the same unintended consequences as merely incentivizing the range from EMS to EMS * 1.15. I would recommend that we revisit the issue 1-3 months after implementation, to evaluate the effectiveness of the change, and potentially tweak the modification to Stake Weight.
Suggested Voting Options: Yes or No