Minimum Validator Commission Rate Parameter Signal

Background
The topic of a minimum validator commission has been discussed on several previous occasions [1-3]. In these discussions, both on the forums and during governance calls, no clear consensus was reached. Several questions related to a minimum validator commission were included in the 2022-Q2 Validator Survey [4]. Twenty (65%) respondents supported a minimum validator commission in principle, with five (16%) neutral, and six (19%) opposing respondents. The median ideal minimum validator commission was 5%, with the median supported minimum and maximum being 3% and 5% respectively. (Figure 1) This signal proposal aims to determine community sentiment regarding the implementation of a minimum validator commission rate parameter that can be changed through on-chain governance.

(a)
(b)
(c)
Figure 1: The minimum (a), ideal (b), and maximum (c) percentages for a ‘minimum validator commission’ according to 31 respondents in the 2022-Q2 Secret Network Validator Survey.

Technical implementation
Implement a parameter to set a ‘minimum validator commission’ through governance in a future software upgrade. The value should be set to 0 in the upgrade itself, with a separate proposal to increase the ‘minimum validator commission’ parameter following a successful upgrade. Currently it seems that 5% is viewed as the ideal ‘minimum validator commission’.

A recent Pull Request for Terra to implement a similar functionality can be found here: [Feature] minimum commission rate upgrade by YunSuk-Yeo · Pull Request #47 · terra-money/core · GitHub

Other cosmos chains with a similar parameter are amongst others: Juno, Chihuahua, Kujira (on its way), and Terra2. Additionally, in Cosmos SDK 0.46 a minimum commission will be baked in, however we will most likely not be upgrading to that version in the foreseeable future.

Voting Guidance
Yes - You (strongly) agree with the implementation of a ‘minimum validator commission’ parameter. AND You think this should be implemented in the near future.
No - You (strongly) disagree with the implementation of any ‘minimum validator commission’. OR You think a minimum validator commission can wait until a future upgrade to a Cosmos SDK version that features this parameter natively.
Abstain - You do not have a strong opinion on the implementation of a ‘minimum validator commission’.

Why this approach?
Separating the process into multiple proposals: should there be a parameter to set a ‘minimum validator commission’, and what should the value of that parameter be, enables voters to vote on one issue at a time. This also prevents cases where someone would like to see a ‘minimum validator commission’ parameter implemented but disagrees with the proposed value.

Arguments in favor:

  • Prevent a race to the bottom (0%).
  • Shift competition on pricing to competition on contributions.
  • Makes uptime even more important as that will be the main way to increase rewards.

Arguments against:

  • Any value other than 0% when 100% is possible is an arbitrary number.
  • Validators should not be limited in their methods to compete for delegations.

Missing good arguments for or against? Please share them below!

References
[1] Minimum Validator Commision - Discussion
[2] Commission Rates - The Race To The Bottom (Floor Proposal)
[3] Governance Meeting Notes Mega-Thread
[4] 2022-Q2 Validator Survey Report

4 Likes

Not sure a minimum can be strictly enforced, as mentioned when Cosmos discussed this too, a validator can still send their commission to delegators periodically, and we’d have to rely on educating delegators and flagging the validators as bad actors somehow. And if that’s possible, we may as well do that now with 0% validators.

Just wondering how Cosmos did it in the end, there’s only 1 validator in the top 20 with 0%, the next one is 36th, and then 73rd.
So without enforcing it they’ve got a floor of about 2%, there aren’t many in the top 100 with 1%

Perhaps airdrops and such schemes excluded 0% validators, would love to know from folks more involved there.

Overall I’m still in favour of a minimum of some sort, maybe 3 to 5%, just don’t know how we get there. Voting yes to the first for now.

1 Like

This is an extremely hypocritical proposal by validators who want to ensure they can kill competition and ensure their stake won’t reduce, under the guise of trying to fight centralization when there’s only one relevant node with 0%/ It is basically a proposal to establish a cartel. It will kill any competitive advantage that small validators have, and it will show this chain is nothing but extremely centralized and controlled by a cartel of validators.

I’m copying my thoughts from the telegram chat. I will preface by saying that I have never delegated to a 0% commission node and I have no intention of ever doing so.

03:48 PM

validators getting together to implement a floor so they can stop getting undercut by other people and guarantee a steady stream of income

03:48 PM

so the floor will be 5% or whatever

03:48 PM

and then 90% of ppl will drop it to 5%

03:48 PM

and people will start cheering for decentralization of stake bla bls

03:48 PM

while laughing all the way to the bank because they basically ensured they will be the cheapest option

edited 03:48 PM

i hope that the people voting in favor of a commission floor arent the same people up in arms about “conflict of interests” and similar other topics

edited 03:49 PM

0% validators arent an issue. There is only one node with 0% commission with a sizeable stake. C1 is the largest node and it has a 5% commission.

03:54 PM

ironically enough if anything it will show how centralized this chain is

min-commission = group of validators voting for the % they are comfortable doing 0 effort (will be cheapest) and ensure no competition

03:59 PM

its an economic cartel

i will stop taking seriously any validator who votes for this and then tries to talk about the foundation’s resource allocation and conflicts of interest

Absolutely support. Previously took the position alluded to above, but I was wrong in how things played out. It’s harmful to the chain period to have 0% commissions.

At most you get an extremely uninvolved Validator, at best you get a Nate and switch by someone trying to climb the ranks (which I’m not super opposed to, but fact of the matter is they always switch).

1 Like

there’s a back and forth when it comes to the antitrust perspective on this
on the one hand this is 100% attempted price cartelization of a network
on the other hand you could argue that 0% commissions are predatory pricing
not sure which way i lean

Just going to repost what I said on the other post.

Ultimately, I will vote No if this goes on chain, just like I would oppose a ceiling on the minimum-gas-price parameter. Price controls (assuming they are effective) distort the market and create deadweight loss.

I’d rather see any negative externalities associated with 0% nodes (e.g., higher downtime) punished more directly.

I’ve stated this numerous times in the past, but I’m completely against a minimum commission rate.

There’s only 1 0% node that’s relevant, and is not even the largest node. The largest node in fact has a 5% commission.

Ideological principals aside (where validators supporting this dont have much of a leg to stand on), it is nowhere close to being an issue in practice either, so not sure where you see this harm, aside from the fact other people are feeling entitled thinking that they deserve their node making a profit.

It has worked well in practice in other networks and was a mistake not implementing sooner. There is no logical reason to have 0% commission other than bait and switching people and creating mercenary delegators.

The argument I made long ago, and you are making now is that 0% helps lower ranked Validators move up and compete. This has not played out in practice or helped any Validator I’ve seen. It’s only helped large Validators secure high ranking spots, then bait and switch delegators. In our network it’s caused us to have a huge Validator with zero involvement.

2 Likes

I get that some people might not like having something enforced upon them but a 3% - 5% commission rate shouldn’t be too extreme. I’m not saying if it’s good or bad, I’m just giving my thoughts.

I agree more with what winston had mentioned about having more direct punishments for those who under-achieve what is being asked of them. I know quite a few validators from chains that got tombstoned for these reasons.

How is success measured? For instance, the largest Evmos validator appears to be an entity called OrbitalApes.com who is sidestepping the 5% commission floor with a 50% profit rebate.

To be clear, this profit rebate is via an NFT. It is not a direct/automatic rebate (which is indeed also possible). The user still needs to buy an NFT, plus they don’t need to stake to receive the rebate. So it is not a staking rebate for the lower fees - it is an extra incentive. I’m not going to comment whether that is appropriate or not, it’d be another discussion.

On the majority of networks where a min fee has been implemented, this is AFAIK the only example of an indirect rebate. Whereas real rebates could happen, they haven’t been seen, and would be frowned upon, as they are a way to circumvent a socially established consensus. Much like giving rewards to those voting YES on a proposal has been not only frowned upon, but reputation damaged beyond repair.

Secret carries one of the highest costs validator infrastructure costs, and IMO needs to have a commission floor.

2 Likes

Seems to be unique to cosmos. No commission floor in Solana. If costs are too high, validators should simply raise their commissions rather than pursue forced regulatory capture.

If by “well” you mean solidying stake around the existing nodes and ensuring new nodes have a much smaller chance to enter and grow, yes absolutely.

People aren’t stupid. They know the commission will go up eventually. Why do you assume it will catch people by surprise? And if it did, why would it be an issue?

Also lol @ “mercenary” delegators. Nobody owes you any loyalty when they delegate their stake.

This is extremely contradictory to what you state above. You say 0% doesnt work, and yet ironically enough you confirm it worked for Melea.

Cryptodog also had 0% before raising it, and so did Paul’s node at some point. All these nodes eventually increased in delegations substantially.

The job of a validator is to validate, everything else is extra, so it’s not really an issue. Delegators can vote on their own if they wish, they dont need Melea to cast a vote.

If anything lack of engagement is a positive as people delegating to these nodes are incentivized to actually vote instead of being lazy and following whatever the node votes.

After discussing this topic some more with @assafmo it seems feasible to include this as a parameter in the Shockwave Omega upgrade, assuming the community is interested in it.

The signal proposal is intended to go on-chain shortly after the Shockwave Delta upgrade.

Please respond below if you think inclusion in the omega upgrade would take too long or have any other feedback for this signal proposal.

1 Like

This signal proposal is currently in the on-chain voting period as proposal #113.

1 Like