This proposal draft addresses a potential solution to the problem of Validator centralization.
Any feedbacks/suggestions/discussions are welcomed.
- Re-code the rewards algorithm so that a Gini coefficient is calculated to see if each accounts’ staked Atoms are suitably diversified across [TBD] number of separate Validators. If the account meets, or is less than, the agreed upon threshold Gini coefficient then the account receives XY% “extra diversification rewards” in addition to the normal rate of staking rewards.
- Decentralization of Validators is a good thing for Cosmos’ current and future security.
- Decentralization is also a good thing for the greatest amount of Validators, both present and future.
- As evidenced by Chorus One’s recent data pull (https://blog.chorus.one/stake-distribution-diversification-cosmos) there is very little Validator diversification by most accounts.
- So far there has been little to no economic reason for Delegators to diversify across multiple Validators.
- With most Validators having experienced very good uptime so far and the penalty for lack of uptime and liveness being relatively minimal there is little economic reason to diversify.
- Centralization of Validators now will lead to larger and fewer Validators in the future.
This proposal would reward adequately diversified staked accounts with XY% (TBD) more Atoms per block if they are staked evenly enough across multiple Validators to show true diversification as measured by the accounts’ staked Atoms’ Gini coefficient.
- Large Validators might divide their operations down across multiple smaller Validator positions in order to allow Delegators to achieve artificial diversification by choosing multiple Validators who are in fact run and managed by the same Validator.
- The extra reward has to be large enough to make it economically stimulative to entice already-staked Delegators to change their Validator mix to being able to achieve diversified levels.
- Changing the rewards algorithm to be able to calculate a Gini coefficient for each account might not be possible (frankly I’m not a coder and have no idea if this is even possible).
- Large current Validators are economically-incentivized to oppose this proposal as it potentially takes away from their total staked commissions and instead gives it to smaller Validators.
- This would increase the emission of Atoms and therefore the inflation rate of Atoms.
Please add any feedbacks or suggestions in the comment section