There are 100 validators in Cosmos Network, and they work as the maintaining pillars of the Cosmos Network. For Cosmos Network to be secured in a healthy manner, validator node opeartion business must be sustainable, and maintaining business by making up for the costs of node operation does not seem like the right way.
There are 12 teams that charge 0% commission fee to operate validator node. Each of them might have different reasons for charging 0% commission fee but this can be a a negative factor in making Cosmos a healthy network.
Some information regarding 0% commission fee are as below (as of 2019.05.26)
- Among 100 validator nodes, 12 nodes are charging 0% commission fee.
- Approximately 1.9M (14% of all bonded Atoms) are charged 0% commission fee.
- Currently, Sikka and Sparkpool are the two big validators who are charging 0% commission fee and they each hold 548 and 1,112 delegators. Considering that top 10 teams’ average number of delegators is 340 people, 0% commission fee could be seen as a valid factor in attracting more delegators.
Cosmos Network is designed so that each validator is incentivized for the costs they spent on infrastructure, salary and other possible costs. Each validator has different cost structure based on their size and node architecture. But what we can all agree on is that every validator is paying a certain “cost”. Also, most validators are expecting to pay for these costs by the revenue generated by node operation.
Therefore, Node A-Team suggests a proposal to limit validators from charging 0% commission fee through governance.
1. Weakening of Cosmos Network due to weakning of validator nodes’ financial health
If profit is not guaranteed by validator node operation, continuous maintenance and investment on infrastructure and employees becomes impossible, causing validator node to become less reliable. When validator node is not healthy, security of Cosmos Network becomes vulnerable, and long-term sustainability of network will also become impossible.
2. Centralization to large validators who hold their own stakes.
Of course if a validator holds large amount of stakes on their own can earn operation costs just by inflation on their own stakes. But, if owning large amount of self-bonded Atom becomes a requirement for sustainable validator business, it will limit the opportunity for validators to participate in Cosmos Network and the network will centralize towards validators who hold large self-bonded stakes. This clearly goes against the idea of “decentralization” which blockchain promotes.
3. The wrong idea about choosing the right validator intensifies.
“Price” is an important factor for customers to choose a service they would spend money for. But “Price” becoming the only factor of decision is unhealthy for the market. 0% commission fee is an attractive feature for delegators. But, if delegators are constantly exposed to low commission fee, it would prevent delegators from choosing the validators who are actually actively making the network stronger. What delegators really need is not a cheap validator, but a healthy validator.
Concerns on limiting 0% commission fee
We are only suggesting to limit 0% commission fee, not suggesting to agree on minimum fee. If Atom price goes up to $10k, 0.1% commission fee wuld be enough for node opeartion. But, 0% commission fee, regardless of Atom price, only means no profit. Thus, 0% commission fee should not be allowed.
Node A-Team is trying to contribute in making a strong Cosmos Network, so we suggested the issue above. We want to hear others’ opinion on this issue, and we hope Cosmos goes through a healthy growth through this discussion.