We propose implementing a behavior which would limit further delegations to any validator that has greater than 10% of voting power. This would allow the chain to begin working towards a higher Nakamoto Coefficient. Too high VP concentrated at only one or two validators poses a significant threat for chain halts or short term chain upgrades with the upcoming express governance votes.
This proposal is meant as a signaling proposal for SCRTLabs to implement such a feature starting at 10% and additionally add an on-chain parameter for modifying the max. voting power per validator in the future via a governance vote.
As new delegations to validators that have too much voting power are blocked, the voting power distribution across the chain will eventually become more evenly-distributed. This is because new delegations will be made to validators that have less voting power than the specified maximum.
Delegators whose delegation attempts are blocked will receive a message that states ‘This validator’s voting power is x%. Delegations not allowed to a validator whose post-delegation voting power is more than 10%. Please delegate to a validator with less bonded tokens.’ This is necessary to avoid any confusion as to why the transaction has failed. The max voting power threshold will be publicly displayed for all users, so they can decide which validators are eligible for delegations. Further improvements to the UX should be considered in future proposals.
Discussions in the past (see e.g. Gov Agenda/Notes 2022/08/17 - Google Docs) have brought up reasonable doubts about the success of such a cap in voting power. Especially the danger of having extra sybil validators are a valid concern. However, we think that this approach is still the best considering current market conditions. We also hope for SCRTLabs to discourage such Sybil validators by delegating their SCRT appropriately.
This of course does not block any extra measures that we want to do (such as introducing a random ranking for choosing a validator), it’s meant as one building block of ensuring more decentralization for the future.
Something must happen to maybe “judge” validators on their contributions? I do not want to limit any of them because let’s say some might be super extra reliable hard working validator while the others are not. Maybe set this percentage higher in a senario that it’s almost impossible to happen but if it did the network would indeed face a serious centralization problem(for example 20%?)
@mumuse Other approaches such as changing the commission based on VP ranking (either forced or voluntarily ) could mean that the validators somewhere at the top or middle lose too much of their current income just based on commission rate changes. Also smaller validators then practically have almost no income (without a min. validator commission which has been rejected). With current market prices this could push more validators over the financial edge so this is not really a good option.
@AdonisRGKC Yes we also thought about it, that’s a good point .But in case we get a validator to have 20% VP it’s in a territory where probably just 2 validator outages (so 20% and someone with like 13-15%) can bring down the whole chain. That’s just too risky. 10% ensures that at least 4 validators need to fail before we get a chain halt at worst. It’s also designed such that bigger validators who are on the chain rn (and have a commission) are not influenced by it. Only the biggest one with 0% commission is slightly bigger and since he does not have a commission it’s not gonna impact him practically. It’s also planned to have an on chain parameter to change that value in the future in case we see that this value is too small.
Judging validators is also quite hard though, because: who is there to judge and what consequences can they enforce? I see tons of potential conflict in this.
We also got confirmation by SCRTLabs (thanks @Cashmaney) that they can implement this in case the signaling proposal passes.
Limiting voting power to max of 10% would not improve current situation, since there is only one node that would be above this limit. 3-5% would make more sense.
A small update on the prop: We talked with SCRT Labs and they agreed to implementing such a max VP prop with the next upgrade (not the one in approx. 2 weeks) in case this proposal passes.
This taxation could then serve as an incentive for smaller validators to increase their APR, which will encourage delegators to delegate SCRTs to smaller validators.
Thanks everyone for voting on this proposal !
We had a huge turnout of 85.1%, which is as far as I know the biggest turnout on a governance proposal ever.
The proposal was ultimately rejected by a slim margin (43.91 % YES vs 45.34% NO).
In the coming days the community will prepare a new proposal for implementing a progressive tax at a certain voting power percentage.
It was mostly the big validators that voted against, I think it needs to be more of a discussion from the not so involved community, most people don’t even know there was a voting.
.But in case we get a validator to have 20% VP it’s in a territory where probably just 2 validator outages (so 20% and someone with like 13-15%) can bring down the whole chain. That’s just too risky. 10% ensures that at least 4 validators need to fail before we get a chain halt at worst. It’s also designed such that bigger validators who are on the chain rn (and have a commission) are not influenced by it. Only the biggest one with 0% commission is slightly bigger and since he does not have a commission it’s not gonna impact him practically. It’s also planned to have an on chain parameter to change that value in the future in case we see that this value is too small.