HIP-1: Setting 5% minimum fee on network level

Why not have the 5% built into the code but not displayed? eg: if a validator shows 1% fee it is actually 6% fee.

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@geekguyaus

Simply hiding the fee does not change anyhing, it makes it look even worse as delegators will not be aware of that. It should be public and out in the open, transparent.

@rocktheblockchain

I have never even understood the 0% fees anyways. You set them, and delegators join or redelegate to you because youre giving them rewards for free. But as soon as you set the fee, most of those will flee and only a few loyal ones will stay, which would have probably stayed even if the ee wasnt 0% to begin with. I think Kratos is a good example of that, he had a lot of delegations and more than half (i believe) let after he set the fee to 5%. The rest follow him because they trust him and dont mind the fee. If they dont mind it now, they wouldnt mind it from the start.

tldr; those that get attracted to 0% fee will leave in more than 80% of the time, which can in the end cause the smaller validators to go back to unelected.

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Agreed, I was not thinking of it being a ā€˜secretā€™, not sure how to let delegators know though. (ok I had a bad idea lol)

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Agreed, we have thoroughly discussed this topic in Telegram, and it is fully supported by Harmony Community Node.

I also agree with @mindstyle that it should be fully transparent. That being saidā€¦ I would recommend that it is reflected in the ER.

This would get confusing for Validators like Sesameseed, who have a 100% fee. I donā€™t think that delegators will care much, if everyone is at 5% or higher. Many are only looking for the lowest fee.

Yep, I thought of Sesameseed and realized that I had a really bad idea. Iā€™m old and it was Friday evening, it made sense in my head at the time but not when I woke up :wink:

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Hello everyone!

Iā€™m leaning to 2.5% minimum fees as an special option for new validators and it must not be run on more than 5 epoch. The goal is to encourage delegators to newly elected validators so they can get first traction promoting their validator.

Nevertheless, I agree with general 5% minimum fees.

I wonder how difficult it would be to do this on a scale?

Total Delegation =

0-15MM = 0% minimum fee
15-30MM = 1% minimum fee
30-45MM = 2% minimum fee
45-60MM = 3% minimum fee
60-75MM = 4% minimum fee
75-100MM = 5% minimum fee
100-200MM = 7.5 minimum fee
200+ = 10% minimum fee

@leo @rongjian would this require significant work to implement, in code?

If not, this would encourage people to support smaller Validators, and help decentralize the delegations, potentially.

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Maybe increase everything by 2 or 2.5%?

Oh, i dont think this is an easy implementation, especially since this is core level change. That would require somehow checking validator balances all the time and changing the minimum fees accordingly while also taking into account the epoch changes. I am not even sure it can be done properly without many other issues arising from it. Not to mention cluttering the network with a lot more data. I wouldnt recommend it, not as a core level change.

@USSHarmony same about your proposal, it would require constant checks for how long the minimum fee is already active, and somehow force them to change after that? on a core level again.

Please lets try not to go into things that change the core network so significantly with a lot of new issues rising from those that we currently arent even aware of. We can wait for RJ and Leo to respond on this but i am pretty sure that kind of change would be actually bad for the core network.

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Was chatting to a long time Harmony delegator that stakes some of his coins with me and he is not too happy about the 5% fee, here are his thoughts.

ā€œI donā€™t like the 5% fee idea there. Smart guys can game the system and offer rebates kind of like rakeback works in poker. They can just pay you a portion of the fee back if you stake X amount of time.ā€

ā€œ5% fee can be ridiculously high in absolute numbers when the token price goes up.ā€

ā€œBut then again, that would incentivize more people to run validators.ā€

ā€œThey will still do their rebate campaigns to get the delegatorsā€¦ā€

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Ok so lets go one by one. That is one delegator talking, and those usually like to make money without actually having to work for it, and they think 5% is expensive for doing nothing? This delegator can check other chains and will quickly see most charge way more than 5%, while their validator is easier to maintain than that of Harmony.

If the validators want to make a rebate system, no one can stop them. They can even do that now with 0% fee to even further gain advantage. The question is, how many will do it? How to communicate this to people? How to track it etc, the ops to do this are no small feat. If they want to do it this way, ofc they can, no one is stopping them now, or ever. Will they? Very likely no.

If that delegator of yours is not happy with a mere 5% fee, then yes, maybe he should consider running a validator. I really wonder if he will still feel the same after seeing all the work being put in, besides the hw costs. And yes if things like these mean we encourage more to run validators, then that is only good for the overall network health.

2 Likes

Something like Ogre proposed would be great, but unfortunately almost surely out of scope.

We can also discuss the fee at lower than 5%, although compared to other networks even 5% is still cheap. This is just something that happened here due to EPoS and validators started the race to the bottom which is not good for them.

Keep in mind Avalanche has it set at 2%, but they dont require any work on election and bidding, and their VPS costs are lower than ours by quite a lot.

My only concern about this 5% fees (Iā€™m supporting it now that Iā€™m a validator lmao) is this narrative:
Oh look in Harmony every validator has 5% fees because it is on their protocol layer, while actually we can stake to coin B or coin C with lower fees validator because there is no rule of 5% fees there. If I can get same APR in this coin with validators who has lower fees, why would I buy ONE and stake to Harmony validators who have minimum 5% fees.

That will probably a weak FUD to easily gets debunked by our own community. But it something to be prepared for future fudsters.

Thats not even an issue. I dont know one member that would support and stake the coin they believe in, purely because we have 5% minimum fee, while others (how many really??) have lower fees.

People like that should not hold any coin then from the start. Not to mention going into another one BECAUSE of a measly 5% fee on rewards they make for doing nothing, could lead them into further downside, investing into another coin with its own price cycle etc etcā€¦ this argument is non existant if you ask me, and i never ever in my 6 years of participating in blockchain and staking have heard of anyone doing that because of such a trivial reason

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Hi, itā€™s me. I donā€™t have a problem with paying a fee, but raising the fee floor from 0 to 5 doesnā€™t solve the underlying problem, it only adds a layer of complexity to the competition of getting more delegators.

Right now setting a lower fee serves as an incentive to gain delegator support. If you simply raise the floor, other incentive campaigns will be used to serve the same purpose. The rebate was just an example. You can do other campaigns like delegation volume weighted raffles, private deals, etc.

On the flip side, a minimum fee would be good to incentivise more people to run validators and help with the decentralization, but justifying the raising of fee with such goal might not be optimal. It would be better to lower the barrier of entry to get elected. Besides, 5% today wonā€™t be the same as 5% in the coming months or years (I assume we are all bullish here). I support a lower % to ensure everyone will get paid something, but a flat 5% forever seems too much.

Perhaps delegators could earn bonus rewards the longer they delegate, and validator rewards could scale off that (give them a share of the ā€œbonus rewardsā€). Would it be too much to change the tokenomics?

A mandatory fee is a punishing mechanic to the delegators and just putting money from one pocket to the other. In modern game design, itā€™s also one of the core principles to reward the players for continued success instead of penalizing them for their failures.

Plus ONE with 5% minimum fee.

@leo Imo we can never take costs into consideration, if this was the case before having us all working with the former tokenprice, we wouldnā€™t have any validators (or maybe a small group of big ones)!
So people need to be here also for the network and the project and we need them to incentivize, even with lower tokenprice (~$0,05) it would have cost people $25 - 30K in total delegations just to run a validator, this has been given to a few people only. This is because of one of the important settings of EPoS, Effective Median Stakeā€¦ But this is not really the point.

In general we see validator feeā€™s somewhere in the range of 5 - 15% on most other networks. The goal is to have a fair earnings model for everyone without having to do 0% (where new validators would earn nothing, imo thatā€™s a bad incentive anyways!), so basically on the fee side nothing changes, new validators will still show 0% (likely), but actually they will earn 5%, other validators can set their fee accordingly, maybe some will lower it or maybe some will make it higher, we need to see how this plays out.

I donā€™t like the 5% fee idea there. Smart guys can game the system and offer rebates kind of like rakeback works in poker. They can just pay you a portion of the fee back if you stake X amount of time.

This is true yes, but up tho the validator of courseā€¦ itā€™s a free market and not the point hereā€¦

5% fee can be ridiculously high in absolute numbers when the token price goes up.

And what would he have done if you put 20% fee when the tokenprice was low to earn some fair fee? Is it that bad to earn something for the work you put into this?

And hopefully other people will run validators, the more people the more fun!
We (p-ops) always said the incentive to run a validator is not there when tokenprice is low, opposed to just delegate, but now the price is going up validators are not allowed to earn some fair money for their (past) work?

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Hey :slight_smile: yes so youre mostly looking at this from the delegator side, not really thinking about what the validators have to do to make it work, their costs and time, plus actually understanding how EPoS works.

Honestly 0% or 5% floor price is no different, if we were all competitive, and a group of us bigger validators wouldnt decide to go for 5% minimum, then the smaller ones would have issues getting delegations even with 0%. But as it is, we decided to go higher to give the smaller ones a chance to get delegations needed to get elected. Setting it at 5% can be the same, as we dont expect everyone to stay at 5% as bare minimum. Keep in mind the 5% can be discussed and can be lower.

And ultimatley yes, we want more validators, as delegating is, truthfully an easy way to make money where you dont need to be present every day and manage it all. unlike validators that have to.

As far as the last suggestion, it sounds nice but probably hard to incorporate into the core network. Will let @leo and @rongjian to reply the possiblities about this one.