Reason: We are seeing a race to zero commission fee due to competition between validators. This has posed a disadvantage against small validators since they have no pricing ability compared to their bigger competitors.
Some potential validators stated more incentives are needed to encourage the participation of smaller participants. Small validators (with 1 key) need to charge a 10-20% fee (which is not so common) at the current token price to earn a proper profit. Personally, I would highly encourage validators to increase their commission rate, the current 5%- fee is not a sustainable solution.
Why cost so much?
Harmony requires active node management thus more time consuming unless we could provide automated bls key management as a first class feature
To have 100% uptime, a validator must run a backup node
Based on an FN who operates validators on multiple chains(including cosmos, tezos, near…), harmony is very demanding on disk write.
Feasibility:
Validators will eventually increase fees as it is not sustainable long term.
Other projects with similar rules: there are protocols where everyone has the same fee, in icon we cannot control the fee, in cardano you can set a fixed fee and a variable fee. (based on Ionut)
Con:
Some validators choose to have a 0% fee promotion period as promotion strategy
Some delegators say they won’t delegate if fee is higher than 5% (might be just outliers)
Some validators might promise a give back to certain big delegators in private. (this is not scalable + those delegators will delegate to big validators anyway)
As Maggie already gave a great introduction and background to the issue, I will strictly focus on possible solution.
Possible mitigations:
• Remove 1 epoch undelegation. This is in my opinion anyway a dangerous option for the security of the network. The main reason is that a lot of stake can be unstaked from the network very fast, for example in cases of price pumps. This can create instability and security issues in the network. Harmony protocol should rather have a redelegation feature without having the tokens unlocked, like I suggested back in March: https://github.com/harmony-one/harmony/issues/2510
• Introduce the concept of validator final fee = validator fixed fee which will be derived from protocol fixed fee + variable fee. The fixed fee would represent a fixed cost to run the validator(only the server part) as the human part also represents a cost and quite high compared to other protocols.
Challenges:
• The fixed fee is defined by every validator independently? If yes, this can be set again to 0 and is not a viable solution for the problem. This is how is implemented in Cardano protocol. The alternative is to set a fixed fee at protocol level and having it as a variable which can be changed with a new node.sh version. This would be helpful in cases of price increasing and decreasing, or other network conditions.
The fixed fee for operations is also depending on how big a validator is or how many nodes a validator is actually running. Therefore it might make sense that the fixed fee at protocol level is multiplicated with a factor for each validator. The factor would represent the size of the validator. In this way the fixed fee is defined for each validator and at protocol level.
The formula for the factor would have to be determined. As input parameter I would use the number of active BLS keys used by the validator and how many are officially permitted per node, like currently 10 BLS keys per node. One validator running currently 3 BLS keys but potentially 10 BLS keys should have the same factor or similar factor to a validator running 6 BLS keys but potentially max. 10 BLS keys as both of them wouldn’t need an extra node. Once a validator would have let’s say 13 BLS keys, then it should have another factor, which should be higher as this validator would need 2 nodes for 13 BLS keys. Therefore the fixed fee for this validator with 13 BLS keys should also be higher than the fixed fee for the validator with 10 BLS keys.
Depending on network conditions, it might make sense to consider that each validator should run 2 nodes(active node + active backup) per 10 BLS keys to ensure proper signing. Otherwise the signing could really suffer. Once the p2p layer will be improved, thus not having any further serious issues with signing, the fixed fee of the protocol can be changed to consider only 1 node per 10 BLS keys.
A bit more math:
• Fixed fee at protocol level for everyone -> variable a
• Validator fixed fee = a * validator factor based on active BLS keys
• Validator final fee = validator fixed fee + validator dynamic fee
At the end no validator should be able to set a fee below it’s own fixed validator fee. What would be recommended though is that a validator can also set a dynamic fee to compensate also for the human factor of running a validator and for the quality of services offered like active management of the BLS keys for epoch election, good uptime epoch after epoch, node backup if is not considered in the protocol fixed fee, etc.
I certainly understand the logic behind all these arguments. Please keep one thing in mind:
If you force large validators to have higher fees, there will be lots of small validators, owned by the same people. Instead of balancing BLS keys, they’ll balance validators. That won’t have the intended effect.
Hey Flinx, thanks for the reply.
This proposal serves two purposes:
help small validators cover some basic cost, the current problem is that they don’t dare to increase fees due to competition.
help small validators have some pricing advantage compared to the big ones. atm we are seeing a race to 0% commission fee because validators think this can help them gain more delegation.
of course, this proposal is not a fundamental solution. big validators can set up more validators but there are also cons for them doing that as well. it is always a trade-off: the new validator set up by the same validator will lose its “scale effect” and it is not that easy to ask all his delegator to just undelegate and delegate to his other validator.
I disagree here as the purpose of the fixed fee per validator is not necessarily a “forcing” for validator but it should actually help them in their race to zero currently. So actually big validators should be happy to actually cover their operational costs. The fixed fee per validator does that in a fair fashion for both small and big validators!
Then mathematically if a big validator starts to split it into multiple small validators with lower fee then is totally fine, it covers their operational costs.
Then from a business perspective it makes absolutely no sense to start now to manage even more validators with multiple bls keys and to start to organize the staking distribution. Speaking and getting to your delegators would be very time intensive and the rewards wouldn’t really compensate for that time. In the end the total fixed fee per validator entity would be the sum of smaller fixed fees and for the rewards goes the same. I struggle to see the incentive for big validators to start behave like this.
So from both mathematical and business perspective I don’t see the argument for big validators to start create many smaller validators - the big question is for what, with what purpose?
If this would be otherwise, I would like to see some clear explanations both from a mathematical and business perspective.
This approach is certainly eliminates the race to 0 fee and would be great news for medium sized and big validators (50m+), but I don’t believe it will have a big impact on centralization, since it doesn’t address the core problem of low validation participation. Staking is still more attractive then validation, except if you’re a big holder with a holding of several times the median (very small group). Also I see a potential danger of centralization of on-chain value to big validators over time, as they profit the most from this change. Please take a look at following examples:
example 10% fee: regular stakers (1000 One -just under median stake): Business as usual, their staking rewards are just slightly lower.
medium holders/self validators (median stake - just under 2x median stake): If you happen to hold the exact median, validating is just slightly more profitable than staking, but at a significant time investment. You also constantly face the danger of dropping out at the next median-rise.
If the holding is higher than the median (10%+), staking remains more profitable.
big holders/self validators (several x median stake): The higher the exact multiple of the median stake their holding is, the higher the incentive to spin up their own validator. There’s just very few wallets that fall into this category though, the potential for decentralization is low
big validators/staking businesses (50m+): The real winners, since fee competition is out of the question they reap guaranteed rewards at high fee rates while the core-mechanics that drive stakers towards big validators are still in place.
example 20% fee: regular stakers (1000 One - just under median stake): Business as usual, but their staking rewards now noticeably lower.
medium holders/self validators (median stake - just under 2x median stake): If you happen to hold the exact median, validating is more profitable than staking, but at a significant time investment. At just a small deviation of the median, the profitablity starts falling of fast. Just 25% above the median, and validation ceases to be attractive compared to staking.
big holders/self validators (several x median stake): The higher the exact multiple of the median stake their holding is, the higher the incentive to spin up their own validator. There’s just very few wallets that fall into this category though.
big validators/staking businesses (50m+): The earnings are significant. Due to the high guaranteed fees and a structure that is still favouring staking centralization to big validators (they can offer effective staking while small ones often can not) there’s a big shift of on-chain value to a few big staking-providers over time. The biggest validators would earn close to 10m ONE a year.
To sum up: A flat fee, as proposed, disproportionally benefits big validators, and a dymanic fee, as proposed, fails to be effective as a staggered “income tax” since the next node could be simply spun up under a second validator with the same branding. It also doesn’t do enough to incentivize big stakers to spin up their own validators, as staking is still more profitable in most real world cases. A low fee doesn’t do enough to make self-validating profitable and a high fee poses significant danger of value centralization to the wallets of big providers over time.
It also fails to address the stake migration to bigger validators due to opportunity cost at all.
If you really want to incentivize staking participation and maximise your number of validators, you have to specifically incentivize potential small validators with a flat income that is not tied to any staking value and offsets their opportunity cost of not having the exact median stake.
Ideally you’d like to target holders that are hovering close to the median. They are the biggest pool of potential validators that could drive decentralization. For that you have to make validating more profitable than staking to them.
A proposal on how that could look like you can find here:
Some excellent points in here. A couple things to add -
I agree that this won’t fix the centralization problem, but I don’t think that is the intent. There are other solutions addressing that issue.
I like the idea of a fixed fee, but it needs to be low, so that the new, smaller Validators, can still put out an attractive variable fee of 0, if they choose… and have an attractive total Fee.
I also like the concept of making that fixed fee dependent upon BLS… so that larger Validators are forced to have a higher minimum fee. This will allow the smaller & new Validators to keep their fee under the larger/ medium sized Validators, even if everyone chose to have a 0% variable fee. It will also help the larger Validators by ensuring that they can pay their bills.
As far as I understood it the proposal is supposed to combat “a disadvantage against small validators” and “to encourage the participation of smaller participants”, which is essentially decentralization.
Either way, I fear it lacks any mechanic to do either. The core problems of small validators are:
a) Self validators (holdings close to the median, not trying to attract delegations): Staking is more profitable than validating. A small base-fee does little to remedy that. A large-fee makes big validators rich over time (value centralization).
b) Small validators (close to the media trying to attract delegations): Delegators prefer big validators because of opportunity cost. The proposal does nothing to remedy that, it even takes away from the possible marketing reportoire (0 fee promotion).
Basically only established validators profit from this proposal, as it secures their income. For struggling validators this change is miniscule.
A BLS based fee upgrade would have to start much earlier. As proposed it would only affect 10 validators, and for half of them the upgrade would be at the lowest level.
To stake with small validators that are stuck inbetween medians, delegators would pay up to 40% in opportunity cost. The BLS based fee upgrades would have to be ridiculous to make that an attractive prospect.
The proposal is not meant to solve all problems of the PoS systems but rather to solve a specific one in a fair fashion.
I’m not really following why big validators would benefit from it, to be honest. Also you don’t have the same fixed fee for each validator and that is actually correct because big validators have much higher operational costs than small validators! Not to say about managing BLS keys, is harder for bigger validators to manage it and be elected epoch after epoch. That’s why the proposal has a BLS weighted fee and not a general fee for all validators. Also you can do multiple flavors of the proposal, one with fixed amount of x ONE or with x%.
Example 1
Fixed fee of the network=4%
Validator 1 runs 6 keys - this means the validator needs only one node(as long as it’s possible to run 1 node with 10 BLS keys)
The fixed fee for validator 1 would be 4% * weighting factor(to be determined, for example let’s take 1). So the fixed fee for validator 1 would be 4%.
Validator 2 runs 13 keys - this means the validator needs 2 nodes. The fixed fee for validator 2 would be 4 * weighting factor(again to be determined but let’s say 1,1). So the fixed fee for validator 2 would be 4,4%.
Validator 3 runs 26 keys - this means the validator needs 3 nodes. The fixed fee for validator 3 would be 4% * let’s say 1,2=4,8%.
It is very important to determine a good formula and value for the weighting factor as a bad value could give indeed a too high x% value for the big validators. And a too high x% from high total rewards for the validator could be more than the necessary for the operation costs. But that’s why math exists, to use it. A better approach can be though the one in example 2, which is not using % for the fixed fee.
Example 2
Fixed fee of the network=25$ in ONE = 4166 ONE at ONE price of 0.006. 25$ to take a price which would cover operational costs for a single validator node(without backup). This fixed price is also just an example.
As I mentioned in the proposal the fixed fee of the network should be a variable which can be updated.
Validator 1 runs 6 keys - this means the validator needs only one node(as long as it’s possible to run 1 node with 10 BLS keys)
The fixed fee for validator 1 would be 4166 ONE * weighting factor(to be determined for exampling let’s take 1). So the fixed fee for validator 1 would be 4166 ONE.
Validator 2 runs 13 keys - this means the validator needs 2 nodes. The fixed fee for validator 2 would be 4 * weighting factor(let’s say 2 because here we have a fixed amount). So the fixed fee for validator 2 would be 8332 ONE.
Validator 3 runs 26 keys - this means the validator needs 3 nodes. The fixed fee would be 4% * let’s say 3=12498 ONE.
To me it looks pretty fair and is not an advantage for big validators if implemented correctly. With the fixed fee, even the smaller validators would have their operational costs covered. Also they would implicitly have a lower fixed fee compared to bigger validators which would also represent an incentive to stake with them more.
Besides this I agree with you that there are more issues to solve. I’m not yet the architect of a blockchain project to solve all these issues.
As far as I understood it is meant to make small validators more competitive and encourage validator participation. I don’t see this solution being efficient in achieving that. If I misread the intention, I’m sorry about that and stand corrected.
A % fee raise won’t be making small validators more competitive as they struggle to attract delegations in the first place. They don’t have any stake they could earn fees from and this proposal would not help them attract such.
Self-validators would not profit from those fees, as they would pay them to themselves.
The % fee changes you are proposing are so minsicule, they would barely make an impact in attractivity for undecided delegators. Struggling validators would still continue to struggle as their opportunity cost (outside of the effective range) for delegators is very high. If the sole purpose of the proposal is to end the race to 0 fees, it obviously achieves it’s goal.
But that’s just ending the fee-competition among amongst established high level validators. They even gain in attractivity, as they offer the lowest possible opportunity cost (effective staking) and cannot be undercut in terms of fees.
The ending of 0 % fee is not necessarily a bad thing, but it does very little to achieve the advertised intentions.
A base fee that is not bound to any total stake the validator has attracted, on the other hand, is a whole different story and very much in line with a proposal that I posted a couple of weeks ago. Although it doesn’t help small community validators to attract delegations, If implemented correctly it could fix the opportunity cost gap for self validators. We’d need a more aggressive approach tough, to really make a difference. As outlined with $25 in ONE, it’s a drop in the bucket compared to the staking opportunity-cost for self validators in most cases.
It doesn’t help much if your server costs are covered, but you earn 30% less than if you’d stake.
Not at all. From an architectural point of view, fees should never solve such kind of problems or for sure should not be the primary problem it would solve.
The concept would solve the race to 0 and offer some sort of basic income in a fair way for everyone so that validators would always have at least their server costs covered. In terms of numbers, is just an example. This can be debated for sure and decided if the fixed fee should also contain a part of the validator job(human part, bls key management, server management, etc.). Then the numbers would be higher. This will require some analysis to find the sweet spot between offering fair fees for validators and not asking too much from stakers so that is still attractive for everyone.
Also be aware that this is not the final fee and validators should always add the x% they want to ask for their services but when they want to offer promotions or set a low limit, the fixed fee instead of 0 would be the lowest fee they can offer. And here small validators can always offer a lower promotional fee than big validators so in some sort it does help actually the small validators.
Also some important points which in my opinion are important to consider:
Small validators should also work harder and be more present and active in order to gain more delegations. If I’m honest I don’t see this happening too much. If nobody knows you, why they should delegate to you? You should come with a proposal and be active. For me the job as a validator was always like this, pretty much hard work and competition with other bigger validators. Out of the blue sky it won’t fall anything and no free money. If everyone takes this as an easy ride, then maybe staking is actually better for them.
I’m convinced protocol cannot change the laziness and attitude of some validators.
Also it wouldn’t be fair that some lazy, low quality validators will receive same rewards as hard working validators. Here I also see room for improvement by introducing validator score. We have both small, medium and big validators, who didn’t performed well every epoch. This is not reflected in the system and is not ok in my opinion, because they still have the same staked amount.
There is also reputation where new and smaller validators have to gain reputation to get delegations to them. One example here is smartstake, who received quite some delegations by being active in the community.
I agree that further improvements can be made to reduce the incentive to stake with bigger validators but for sure the fee is not the right approach for that. The validator fee composed as fixed fee and variable fee solves another problem and helps a bit smaller validators by allowing them to advertise a lower fee than bigger validators but is not the solution for that. My recommendation for this would be that there is a dedicated proposal for staking distribution in the network so that proposals for that problem can be made.
So in the end I think a series of proposals should be made for every topic and implemented: war of fees and race to zero, validator ranking(score for validator performance), stake distribution within the network. This proposal tackles mainly the first problem I mentioned and I think is a very fair solution for the fees war.
Back in the past, I also created a proposal for validator ranking with scoring and shuffling, is on harmony github. It would have helped a lot if that would have been implemented at the beginning of the staking because in time stake settles and stagnates. Changes are really hard with the time. I’m saying this because I’m validating and seen this in many projects and is the same everywhere. People forget about their stake and currently is actually good that people still have to restake manually. Restaking is an incentive to log in again and check the stake. Otherwise people would just stake and forget.
@Maggie if we want to also tackle the staking distribution in the network, I would create another proposal discussion on the forum, strictly for that problem. The proposal I made isn’t especially oriented towards solving staking distribution but rather the fee wars and race to 0 of the validators.
The concept would turn the race to 0 into a race to x. The principle stays the same.
Some validators out there are not out to aquire delegations, but would run a node with their own stake to help secure the system. That’s not out of laziness, but because of lack of interest in running a staking business. Unfortunately staking is more profitable than validating for most in that category. The proposed min. fee would do nothing to offset the server-cost for them, as they pay them to themselves. I know that so well because I’m exactly in that category.
I was running foundational nodes for a year and participated in the beginning epochs of OS with redundant servers for my BLS keys. Unfortunately it became clear pretty soon that If I continue to validate, I’m leaving money on the table, as staking was the economically better decision (while freeing up a shitload of time). I’m not interested in running a staking business, but I’d love to participate in securing the network (I was even fairly decent at it). Paying with time and money (which I don’t mind) just to earn less then if I’d do nothing and just stake (which I do mind) just doesn’t make sense.
Now a proposal comes along that is supposedly helping me to bridge that gap by raising the fee… that I’m paying to myself. Brilliant.
I certainly don’t want to diminish the great contribution you have been doing. Your work is verifiably top notch and you are a pillar of the community. You obviously deserve to be rewarded accordingly and I’m all for it. It should just not be advertised as support for smaller validators, as its literally doing nothing in that area.
In that case I also don’t think we have to overly complicate the structure and a fixed fee should be fine. Later down the road, should harmony appreciate, a readjustment of the minimum might be appropriate.
My biggest interest is in growing the value of the chain, therefore I’m a strong proponent of everything that favors decentralization (I believe they are correlated). Harmony’s current system only makes sense for staking businesses, leading to stake centralization. This proposal just further manifests that path. We will never have passionate validators that secure the chain without a business intent, as they are actively disincentivized to do so. Obviously many of you run your business with passion, but if you disregard the former group you just leave a lot of decentralization-potential (and therefore value-potential) on the table. I firmly disagree with you that this problem should never be tackled from an architectural view, what else is an economic system for?
I personally cannot continue the discussions anymore due to simply points and my time is very limited:
Race to x, but the x covers at least some operational fees. If people are happy with 0 and don’t want x, well go ahead and let it like that. Small validators would also have a lower x, an advantage for them in competition with bigger validators.
I’ve never said the problem of staking distribution shouldn’t be tackled from an architectural point of view because here I agree with you, it should really be tackled at that level! I’ve said this "From an architectural point of view, fees should never solve such kind of problems or for sure should not be the primary problem it would solve." So only fees shouldn’t solve the problem of stake distribution. Other principles have to implemented from an architectural point of view in order to solve the stake distribution like capping validators, make stakers earn less if they continue to stake after a certain point with big validators. Also none of these will completely solve the problem but would mitigate, though is a different discussion.
Unfortunately in all PoS systems is the same. There are many single validators not interested in running staking businesses but wanting to validate and they all get out there and hustle to get delegations. It was and it is for me the same. So this has nothing to do with Harmony. This is a general and hard problem in all PoS ecosystems from many perspectives, especially security.
You are continuing to clame the proposal was meant to solve staking distribution and propagate small validators to higher ranks. Have you read the reasoning from Maggie? - "Reason: We are seeing a race to zero commission fee due to competition between validators. "
I understand and feel you from the perspective of being a long term supporter and FN. Here I’m totally with you and very strongly agree that all FN should have been supported more during OS. There is no doubt about this! All FN were the first guardians of the network, first comers, first supporters, all should have been at the table!! 100% What I see in other networks is that the Foundation stakes with these first supporters more, so they have like a delegation program. I think something like this could have also been or be a solution to support all FN and old supporters of the network.
Have you read the rest of the paragraph? The part with “disadvantage” and “small validators” literally starts 4 words later. I’m not sure what the part with “propagating small validators to higher ranks” means, the main idea was to incentivize and support them, basically make the rank they’re at profitable. If that’s not the case, fine.
Maybe I fail to see the great threat that the race to zero commission by itself poses to the network. It seems there are always people that would fill the gap of potentially alienated validators.
Are you sure there are no POS examples out there where running a node is more profitable than staking?
Anyhow. I don’t care much for special treatment due to FN status and I certainly don’t feel forgotten or underappreciated. I just think the chain might be more valuable if we would have kept more of those perfectly capable and experienced validators around to decentralize the network. It’s quite unfortunate that so much potential was left on the table.
Sorry I hijacked your thread. I appreciate you taking the time!
Read the whole post, i understand your logic @Zelpresso We actually don’t know if big validators will split into smaller ones to take advantage of lower fees, but this is a possibility.
I think the next reasonable step is to increase the slots to 640 and later on to 1000 and see what happens. We actually haven’t seen the EPOS system working fully with all spots, so we cannot say yet it is not working as intended. So i would do this first, and yeh i agree that we should switch back to 7 epochs for undelegation like mentioned by @ChainodeTech and also allow redelegation in 1 epoch to other validators (this is probably what RJ will do).
We also gotta be careful on making delegation too unattractive. Not all delegators will turn into validators because they don’t have the technical knowledge to run one, thus the reason they delegate. If it is too hard for them to run a validator they might give up and just sell their stash, which would be catastrophic.
I initially thought setting a minimum fee was a great idea (it might still be). Now i am being much more conservative, and i would try that only after we opened all 1000 slots/100%.
I gave it another thought… I’m now even more convinced this min fee is a terrible idea. So we established that it’s purpose is to stop the race to 0.
Is the race to 0 a problem for network security?
No, there will always be someone validate the system and reap the rewards. Someone will take their place. Epos is making sure of that.
It’s a free market. Low quality hairdressers might be running around and offering free haircuts. If they turn out to look like shit the customers will learn from that and go to a professional next time. You just have to give them time to learn.
Now who is profiting from the fixed fee?
Self Validators:
Hell no, they are paying the fee to themselves.
Small Validators/Newcomers:
Meh, with those little delegations it barely makes a difference. Yeah, they might be earning a fixed income, but they are robbed from the opportunity to use 0 fee as a marketing tool. Not all small validators are incompetent. Some might just be late to the game, and they are starting to play with an entirely different rulebook where the winners are already set.
Big Validators/Established Validators:
Hell yeah. They had all the time to scoop up major delegations with 0 fee commissions and now they can’t be undercut anymore. Latecomers… bad luck.
The rise of 4% to 4,4% (from 10 bls on) doesn’t make a difference. Who the hell is gonna take the risk to try a new validator to avoid a fee of 0.4% to of a 10% APR?
Delegation movement on chain will essentially stop. Say Bye Bye to any possibility of stake-decentralization
Bonus Problem: Just imagine the major fees coming in once harmony goes to several $bn mcap. Are we gonna re-negotiate the fee and piss off the biggest up-keepers of the system? We are just further solidifying a flawed system and minimizing its capabilities to self regulate.
Bottom line: If you’re not earning any money, raise your fee. If someone undercuts you and gets some of your delegations? Bad luck, that’s how markets work. It would actually beneficial for stake decentralization. This proposal is working against it.
I got a proposal that would lower staking rewards of regular stakers from 10% to 9% and will incentivize small validators to spin up their nodes with EPOS like proportional rewards. At the current validator-numbers, people would flood to validate themselves.
I want point to a few things that don’t make sense to me :
One validator running currently 3 BLS keys but potentially 10 BLS keys should have the same factor or similar factor to a validator running 6 BLS keys but potentially max. 10 BLS keys as both of them wouldn’t need an extra node. Once a validator would have let’s say 13 BLS keys, then it should have another factor, which should be higher as this validator would need 2 nodes for 13 BLS keys.
The same fee on 6 seats will earn you double than on 3 seats (if all are elected and their effective stake is the same). So while total cost for a “big validator” might be higher, their earnings are multitude and therefore scaling gains exponentially in profit.
I like the idea of a fixed fee, but it needs to be low, so that the new, smaller Validators, can still put out an attractive variable fee of 0, if they choose… and have an attractive total Fee.
They’d benefit from a HIGH fixed fee, which would leave them enough income, even if they set their variable fee to zero.
Not to say about managing BLS keys, is harder for bigger validators to manage it and be elected epoch after epoch.
More keys means you can stay closer to median. The inefficiency of going say from 100 to 99 seats is MUCH better than going from 2 to 1. And it’s easier to play it safe, as the net rewards difference would relatively be smaller. (Which i believe has been referred to as “opportunity cost”.)
Extra :
some people’s job is running a staking service, some people run their validator besides their regular job, doesn’t make the later “lazy”.
Some delegators say they won’t delegate if fee is higher than 5% (might be just outliers)
I’ve read one person argument it’s because they believe in such scenario they’ll get higher staking rewards from Binance, which would make the exchange pay their customers rather than earn from them.
Haven’t really read through the thread rigorously, but I’d just like to chime in that I consider anything around 10% too small. I saw a couple people commenting that it won’t really reduce validator centralization: well of course, who cares about validating over staking when the forced minimum fee is 10%? Of 10% that is literally only a 1% penalty on total return of your stake…nothing…
Do something bold. Force the minimum fee to be like 30-50%, and delegators will start having second thoughts about free-loading (myself included). But those who absolutely cannot validate will still delegate to avoid being diluted.
I think there’s more elegant solutions than lowering the stake-rewards by 50% & jacking up the earnings of staking businesses exponentially. Imagine a validator that has 10k one self-stake, but 100m in delegations, becoming a super-whale in no time. Also delegation movement on chain would stop, because for people it doesn’t make a difference if they pay 50% here or 50% there, no new validators would stand a chance do acquire delegations. Whoever happens to be on top at that time can start shopping for yachts.
We could lower the staking rewards by just 10%, and distribute that as income to validators not on a per-stake, but per-block-validated basis, and make free-loaders like us come running for those validation slots. Instant-Decentralization.
The higher the fee, the lower the possible % discrepancy and the lower the chances to aquire delegations in the first place. At a 10% fee there’s no reason to switch because established validators can’t be underbid and the stake-movement would pretty much stop. No matter how high the fee, if you don’t have delegations you don’t have income.
The minimum fee is supposed to fix cost covered and actually some earnings left that are better than delegating.
I reckognise there’s also the issue of actually collecting delegations to get elected in the first place, which would be there independent if the minimum fee is zero, low or high.
