How to Incentivize new Validator nodes

Potential Governance proposal and discussion thread:

The topic of incentivising new validators has come up several times in the last few weeks, and with the recent “upgrade” to secret-3, it seemed time to re-raise the topic.

Summary

Running a basic Validator node requires roughly 58000 SCRT (~100k USD) staked in order to break even on server costs. This puts new Validators at a severe disadvantage when it comes to keeping and maintaining their servers. The Secret Network has high requirements for running a proper node, making the initial investment for just breaking even very large and potentially insurmountable given they’ll then show up at the end of the list.

I propose:

  1. Reconsidering the current delegations from the foundation (?).
  2. Creating a list of requirements that, once met, a new Validator node can at least break even on costs.

Cost Analysis of Running a Validator Node

The following are VPS providers and (roughly*) their costs, when starting a new node given the recommendations found on the vps compliance page:

Note I'm basing this off the following recommendations:
- Processor: E-series rather than E3 (due to age)
- SSD: 1TB+
- RAM: 16GB+ (discussions appear to be happening that 32GB may be required)

vultr: $185/mo
psychz: $144/mo
leaseweb: $89/mo
nforce: $95/mo
phoenixNAP: $210/mo

This is just for the basic hardware, not including load balancers, sentry nodes, or other costs. Taking an average of the above, we get the average cost of a single validator being
roughly $145/mo.

In order to reach the break-even point of $145/mo, a validator must have (roughly*) 58,000 SCRT staked. This is found given the following assumptions:

  1. SCRT is $2 each
  2. Monthly SCRT staking rewards are 2.5%
  3. The validating node uses a commission rate of 5% (rounding down from the actual average of 5.230%)

To get the commission of 1 SCRT:

Staking rewards per month = 1 * 0.025 => 0.025 = {reward}
Commission = {reward} * 0.05 => 0.025 * 0.05 = 0.00125 = {commission}
Commission in usd = {commission} * $2 => 0.00125 * $2 = $0.0025 = {commission in usd per 1 SCRT}

$145/0.0025 = 58000 SCRT

Therefore, in order to break even on running a validator node, over $100k USD must be delegated to the node.

Proposals

The following are several potential options for incentivizing new validator nodes.

Re-Balance Delegations

During the governance meeting on 9/15/2021, it was pointed out that over 500k SCRT has been delegated to an inactive validator (specifically, Iqlusion). Perhaps there should be a list of rules for receiving a delegation, such as having a minimum uptime, as well as the minimum requirement (thoughts) outlined below.

Set Minimum Validator Requirements

Another way to do this would be to give a delegation “reward” for meeting certain requirements. As a rough example, ideally each validator would have:

  1. Alerts in case their node goes down
  2. Alerts setup to a channel specific for secret validators (in case another emergency arises again, or even just a basic network upgrade)
  3. Sentry Nodes

If you, as a Validator, show you have done each step you “earn” a certain amount of delegations. Say, you set up a prometheus server with grafana and alerts, you receive 50k delegations (from where?).

This would also have the benefit of ensuring a certain level of stability/expectations for each Validator.

5 Likes

Just to offer clarity concerning the Secret Foundation and delegating in your post:
The Secret Foundation as an entity does not delegate SCRT with any validator.

Thank you, I didn’t think it was the Foundation, but wasn’t certain what to say. Is it from the Enigma team?

Yeah - I would like to see some form of redistribution of delegations by Enigma. They’ve got a sizeable chunk of SCRT staked to nodes that are not active.

There should be some form of criteria across these nodes to be eligible. I presume we could get some understanding as to what already exists from @Brendan and @moonstash on this front.

I could potentially see a world where validators that meet the basic criteria get [XXX] amount of SCRT to bootstrap their node and help it become more affordable for them. This could then be reduced as the nodes’ delegations grow and they become less reliant on Enigma, allowing these SCRT to be redistributed to new parties.

On top of this, I think Enigma should look to may a conscious effort to delegate additional SCRT to those validators that are actively supporting the community. The Secret Code Podcast duo for example require funding for their podcast and it would seem like a logical step for a delegation to support them make their overall operations more reasonable for them.

2 Likes

@orageux101 I basically agree with all of your points.

I suppose one follow up question would be is, if it requires certain criteria to be met to receive delegations, should there be a walk-through for how to achieve said criteria? Ideally the purpose of this is to make the chain as resilient as possible, so while it’d take a non-insignificant amount of effort to create those documents, it seems worth it.

Yeah, I think it would definitely have to be codified.

Items such as run-time and requiring to have a set fee (maybe 5%) would be stuff I would include.

I think this proposal has the heart in the right place but I dont see much point in such discussion if Guy doesnt come out in support of this.

I dont think its Enigma’s job to offset peoples cost of running nodes and delegating to everyone becomes an unnecessary burden for them as they have to follow up that everyone is fulfilling expectations.

The point is that there’s over 2m SCRT currently staked with inactive validators that need to be redistributed. How would you allocate these?

If I were Guy I would redelegate to those people that contribute and help grow the ecosystem.

They dont need to. Its their money. They can do what they want.

Sure, they can do what they want but there has been no signs to show that they no longer wish to delegate to people that contribute to the ecosystem (as they have done previously).

It just needs refreshing.

Agreed.

While I think the entire discussion I posted is worth having, the more pertinent point is that there are 2M SCRT sitting undelegated.

1 Like

@guy @reuven what do you think about re-delegating some of Enigma’s SCRT from the inactive validators?

FWIW, here’s the list I’ve compiled but may be incomplete:

Enigma-burn-A: secret | Secret 3 | secret1f2mf5xusm28a2pvzu5ztu58c5w89kdqjcy4sfw
Enigma-testnet: secret | Secret 3 | secret1ql99k6yxg7yfxcuyen5jvd4c49fzdun0tnhrdd
Protofire: secret | Secret 3 | Protofire - secretvaloper1yww5ejscshr0y5eflcx8tjpmzqv493qt4krcpp | Voting Power and Event History
DokiaCapital: secret | Secret 3 | DokiaCapital - secretvaloper1v5hrqlv8dqgzvy0pwzqzg0gxy899rm4kc40xnq | Voting Power and Event History
SwissSecretNodes: secret | Secret 3 | secret1f2mf5xusm28a2pvzu5ztu58c5w89kdqjcy4sfw
FATS: secret | Secret 3 | FATS - secretvaloper1msnh9grlsyxgucld8qg6z2d4wrtueqy35k7g3f | Voting Power and Event History

from to amount
Enigma-burn-A FATS 500K
Enigma-burn-A DokiaCapital 500k
Enigma-burn-A SwissSecretNodes 500k
Enigma-testnet DokiaCapital 500k
Enigma-testnet Protofire 500k
1 Like

There’s a few more even that can be added to this list as well.

I support asking the Enigma team taking a look at some of these and delegating to active participants in the ecosystem. There are a number of nodes I’d like to see receive delegations. The criteria COULD be completely transparent, but even if we just require a form to be submitted and ask people to list contributions I think that may be sufficient as I’ve seen this on other chains. Contributions could include anything from as little as being active in discord/telegram and helping others & voting on proposals to leading committees, projects, and building things. Connections to other ecosystems/teams/partnerships could also be considered.

@guy @reuven tagging you guys here. I believe we should do this after IBC upgrade, but it’s worth thinking about now. We’d brought this up in the early days and it will be a good time to revisit. There’s at minimum $2-3M SCRT that’s sitting idle on dead nodes that could really help support new(er) validators.

1 Like

I struggle with this topic because at the end of the day validating is a business. If you run a loss that’s your investment in the business. With that said I think for people who are active and contribute in meaningful ways I’d like to see them supported by Enigma and the community. Right now we do have a top heavy set up.

TLDR: Validators who contribute should be supported, but not every validator should be profitable just because they spin up a node

2 Likes

I concur.

What I was trying to communicate was there might be a way to help a validator at least break even, by meeting certain criteria. Having (provably**) reliable nodes, active community involvement (how do you define that?) that sort of thing.

At this point, it might be worth splitting the conversation into 2 parts:

  1. is the topic of incentivizing new validators worth pursuing
  2. is Enigma open to re-delegating their “dead” SCRT, as 2.5M is sitting unused right now (by my count, and I likely missed some.

The topic had been raised enough with people that I felt a new topic would be worth bringing to light. Personally, I started validating on the side as a vector for contributing to the community. Would I like to at least break even? Absolutely! Do I expect to?.. Well no, probably not. @pmuecke is super involved with the community and he hasn’t broken even.