I wanted to start off by saying that I really believe in what Harmony is doing. I have yet to see a block chain successfully implement cross-chain sharding and achieve the transaction speeds that Harmony has managed. Kudos!
I actively want to see Harmony succeed and was looking at areas where I could get involved. Naturally, the question of staking vs. delegation was one of the first cases to be evaluated, which is what this post is about. I wanted to bring to light certain observations and questions based on what I have been able to research. Welcome thoughts, suggestions and comments by the community.
Sufficient compensation? The compensation for Validators doesn’t seem to align with the work effort that they have to undertake to keep nodes running. Using the Harmony Calculator (https://harmony.validator.services/) a staker could get a yield of 9.7% while a validator gets a yield of 10.30%. IMHO, this <1% advantage doesn’t adequately incentivize nodes to choose the validator route. Maybe this calculation is too simplistic but its what most people will use to get a sense for which route to take (staking vs. validating). One way I see to improve this is to spin up multiple nodes and that might improve the economics (but it also means more time and investment)
Newbie validator selection Even if one were to go the validator route, getting elected is a nightmare! Currently you need a bid of ~$5M and validators can register their nodes for 10K ONE coins. The problem is, most people who are looking to stake will chose the validators with historical performance on their side and have very little incentive to change that delegation if the validator continues to perform. This doesn’t bode well for the newbie validator. And frankly, I researched this and was aware of it, so i wanted to give newbies a chance but honestly you see weird things like an insane return rate (newbie validators with some history) or no return rate (newbie validators no history) and you leave thinking something is weird, I would rather just go with an established validator. I know the HARMONY team increased the number of validating nodes to 640 and this definitely helped but unless I am missing something, given the current conditions, why would anyone want to pick a newbie validator?! Would need to think through how to solve this but something definitely needs to be done about it.
Business of validation vs. greater community good There seems to be a conflict of interest with the fundamental concept of being in the “business” of validating versus what is best for the HARMONY community in terms of network enhancements. Large validators spin up multiple nodes because it is profitable and it takes a significant amount of effort to do so. Anything that will bring the profit margin of the validator down will be in direct conflict with what might be best for the community. As you guys well know – this is a major struggle for Ethereum right now. We need to figure out a way to make this conflict redundant.
Looking forward to great things from HARMONY in the future. ONE for all and all for ONE!