Thank you for bringing this proposal to the forum for discussion, @Casey. Before diving too deep into the details of implementation, here is Validator.ONE’s initial comments on Harmony’s rationale behind HIP-30 with bold font representing text from Harmony’s original post and our comments below:
1. Enhancing network performance through sharding and node optimization.
Validator.ONE: We agree that 4 shards is unnecessary for now. 2 shards is optimal while keeping and enhancing the ability to efficiently scale to 4 shards (or more) at a time when necessary and after cross-shard technology has been further developed.
2. Ensuring long-term sustainability with a reduced token emission rate.
Validator.ONE: The concept of “long-term sustainability” is very subjective as it has been presented. We request that Harmony provide an estimation of the amount of ONE required to fund recovery efforts and how they plan to implement the remaining token emissions for ecosystem development. We tend to agree that all stakeholders, including validators and delegators, should contribute to recovery for the overall betterment of the ecosystem, but we’re less convinced that all stakeholders need to fund future ecosystem development.
We would prefer a more objective approach to token emissions be proposed where validators are expected to contribute X amount to recovery during a set timeframe with token emissions scheduled to return to its normal annual 441 million ONE when that amount has been reached. As Harmony responded above, they prefer majority of the token emissions go towards recovery, but don’t reference a specific amount that they consider necessary to achieve this goal.
As for token emissions for ecosystem development, we must vote No to spend token emissions for ecosystem development based on lack of information (no defined metrics or funding initiatives), economic and regulatory uncertainty (see recent SEC argument re: Bitrex/DASH on whether validators funding ecosystem development with block rewards triggers SEC security status), and Harmony’s reputation for poorly managing discretionary spending on ecosystem development (most notably DAOs, grants, events, Apes, RPC). Perhaps ecosystem development can be carved out as its own HIP, and validators can explore other ways to contribute whether via Validator/Developer DAO or a nonvoluntary or voluntary special assessment.
3. Increasing validator rewards by reducing the number of nodes and redistributing rewards.
Validator.ONE: We generally agree with this rationale and await Harmony’s response to the questions posed by other validators on how this will be achieved before commenting any further.
4. Encouraging new validators to join the ecosystem and fostering healthy competition.
Validator.ONE: Similar to our responses above, we generally agree with this rationale, however, it’s a subjective proposal and no data has been presented that demonstrates its past successes in encouraging new validators to join the ecosystem and fostering healthy competition, and how this would be achieved with theoretically less token emissions available for staking. In our experience validating on Harmony, we’ve seen several validators that have received Harmony Foundation delegations that either go silent yet continue collecting rewards or go inactive altogether (while keeping Harmony delegation for an unreasonable amount of time thereafter).
Other points to consider:
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10% minimum commission fee: Raise minimum validator commission fee from 5% to 10% or higher to account for the 50% reduced emissions and reduced validator operational efficiency (1 server per key). This ensures that validators won’t be as negatively affected by the reduced emissions, thus helping maintain network stability and security.
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Consider how this negatively impacts staking benefits and its impact on the Harmony community. While ecosystem development is a laudable idea, there is no ecosystem without community and users. Harmony validators and delegators have remained a steady constant since network inception and through all its ups and downs, and we wouldn’t want to alienate those keeping the network together by saying others are more deserving of its rewards. As validators, especially community validators, we need to communicate this message to our delegators and it’s important for us that the message is well received.
We look forward to reading Harmony’s response to both ours and everyone else’s initial comments. This is an important discussion that must be had.
