Set the Validator Minimum Commission Rate to 5%?

Hi Everyone,

I’m Pete, I run the Regenerator Validator.

I might be shooting myself in the foot (my Validator’s Commission Rate being set at 2%) but I feel for the benefit of the Network it’s worth having a minimum commission rate of 3-5%.

This will help provide network stability and stop 0% validators driving commissions down. It also ensures Validators are earning enough to support secure and stable validation.

My initial thought was that a rate of 3% would be a good starting point but after discussions in the discord group, it appears a rate of 5 % is more popular.

I’m happy to put a proposal together but let’s discuss here first…

What do you think?

Pete :deciduous_tree:

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Well, in the validator channel on Discord, I’m hearing very strong support from preventing a “race to the bottom.”

Many PoS networks without minimums (such as Cosmos and Osmosis) saw validators setting extremely low commissions to try to capture market share (bad for Nakamoto Coefficient). This is bad for decentralization, as you get a few top validators with commissions that only work because they have a disproportionate share of the stake. It is also bad for validator economics, as most validators in the set are forced to set commissions at a loss in order to stay competitive.

Where did 5% come from? Not sure. In the CSDAO Delegation Program, we don’t normalize for anything below 3%. 5% sounds reasonable, but I’d love to see some data on validator costs and treasury management, and how 5% stacks up in real-world scenarios.

Historically, Regen Ledger hasn’t been highly competitive on commission, but some community members have been pointing out that that will likely change with Cosmostation soon support REGEN staking.

So, in conclusion, I’m in support of a 5% minimum.

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As an aside—are there other places where we should be mindful of policies that support decentralization and prohibit “dumping” (effectively what low commissions are—providing a service at a loss to gain market share). One far-out idea would be to have validator commissions be denominated in a stable coin, maybe with a commission on top. Venture capital funds charge 2% of principal and 20% of profits, which is a little different. What if a validator was able to say that they’d charge a flat $2,000/month, and take a 1% commission on top of that? This would make validation much less speculative, and staking rewards much more volatile.

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Interesting thoughts on the subject. I think most networks implement an only commission mechanism, it seems fair in the sense that you earn what you provide, but that’s more the case of a PoW network and not a PoS network. An only commission it doesn’t say much about how much a validator is earning, it’s related to the staked amount. I could set a 20% commission and earn 10$ a month, or set a 1% with millions of stake and earn a few thousands a month.

The fixed amount makes sense for me, specially if you have to meet some requirements and/or SLA’s. Let’s say that you would earn a fixed amount on each of the service requirements you meet:

  • 300$ for a validator
  • 200$ for each sentry node
  • 100$ for monitoring
  • 500$ for 8/5 technical support
  • 2000$ for 24/7 technical support
  • 300$ for community support
  • 300$ for marketing diffusion (blogs, videos, telegram channels)
  • 100$ for updating on time

Quantities are set just an example to illustrate the idea.

The thing would be how to enforce those SLA’s in a permissionless fashion, and not on a individual contract one.

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We support a 5% minimum. It seems to be a good, easily implemented solution for the interim. We are also open to exploring those interesting ideas on fixed costs, as Will and Blockscope mentioned. The cost of storage space increases over time as block height grows, so flat rate costs might need to increase on a scale related to block height.

Definitely in support of the minimum commission set to 5%, its always healthy to impose some restrictions to avoid commission wars.

5% min commission is a good and easy to implement idea to ensure that validators are able to cover their costs and avoid some kind of race to 0.

This has already been implemented on Osmosis and will soon be implemented on Juno

I’m in the support of the idea :seedling::raised_hands:

We’re in favor of the idea but then, as also specified above, how do we decide what’s the best minimum to be enforced and how do we calculate it ?

Just wanted to note that this proposal is now live: #6 Set a minimum validator commission rate of 5%

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