This was our solution to excess keys being used by validators with 5+ keys, if there’s anything you can take from it to enhance your proposal.
Our solution serves as a credit system. If a validator bids in the upper range (1.05-1.35xEMS), they receive part of a credit funded by validators with 5 or more keys who bid in the lower range (0.95-0.65xEMS). The protocol would fund this credit by slashing a validator’s bid. Validators with elected bids in the 0.95-1.05xEMS range would be unaffected by this proposal as their bid would neither be slashed nor would they receive any of the available credit. Additionally, the normal EPOS rules for bids below 0.65xEMS and above 1.35xEMS would still apply and remain unchanged by our solution. Therefore, this would only adversely affect validators that operate in the 0.65-0.95xEMS range, where the most key mismanagement occurs.
There are certain rules from a logic standpoint that we consider important to include to make this a complete solution:
- Those with 5 keys or less won’t be subject to a slashed bid for operating in the lower range, which provides them with a bidding advantage over validators with more than 5 keys;
- Despite not being subject to lower range bid slashes, validators with 5 keys or less would still be eligible for the additional credit for elected bids in the upper range;
- Validators with more than 5 keys and elected bids in the lower range (0.65-0.95xEMS) would be subject to diminishing rewards the lower they bid with the severity of the reduction in rewards based on the validator’s key count. For example, if there were two validators with the same bid amount in the lower bound, the validator with a higher key count would earn fewer rewards per key than a validator with a lower key count;
- Credits rewarded to those bidding in the upper range diminish based on a validator’s total key count. For example, if two validators with the same bid amount in the upper bound, the validator with a higher key count would earn less of the upper range credit per key than a validator with a lower key count.
Our solution is intended to achieve the following objectives:
- Incentivize all validators to bid as close to 1.35x as possible;
- Disincentivize validators from adding keys to the lower range without cause;
- Minimize key usage without cause by all validators;
- Provide validators an opportunity to gain an ER advantage over validators with higher key counts than their own;
- Minimize disruption to delegators; and
- Incentivize delegators to choose validators who minimize key count.
Our solution ensures that a validator always carries an advantage over a validator with more keys than their own while holding validators of all sizes accountable for responsible key management. Medium-sized validators will hold an advantage over larger validators, and smaller/unelected validators would hold an advantage over medium and large-sized validators. This creates a system where validators are encouraged and incentivized to bid as closely to 1.35xEMS as possible.
We haven’t proposed it yet because it’s a bit complex and may be difficult to find consensus.