[IDEA] Improve the Nakamoto Coefficient

[Guinch_Roze]

1. Context

The Nakamoto coefficient is a key indicator of the Hub’s decentralization. Unfortunately, it has been trending downward, which creates risks both for consensus security and for the resilience of the network against capture by a small number of validators. Today, some validators particularly centralized exchanges and a few large incumbents concentrate a disproportionate share of the voting power, mechanically reducing the Nakamoto coefficient.
The community broadly agrees that we need to rebalance distribution, while still preserving:

• the attractiveness of staking for delegators,

• the economic sustainability of validators,

• the simplicity of the governance and incentive model.

2. Problem Statement

Without safeguards, large validators will continue to accumulate stake. Rational delegators usually favor the most visible or well-known validators, or those offering slightly higher yields, regardless of decentralization. Strict voting power caps are not seen as a solution, since they can be bypassed (for example, through duplicate validators like Coinbase1, Coinbase2, etc.).

3. Proposal for Discussion

I propose combining two complementary mechanisms:

• Redistribution via a Nakamoto Bonus, inspired by the AtomOne model.

• A proportional self-stake requirement, based on a 1/250 rule.
  Together, these mechanisms aim to support smaller validators, raise the cost of Sybil behavior, and improve the Nakamoto coefficient in a balanced and sustainable way.

4. Mechanism 1 – Nakamoto Bonus (AtomOne Model)

In the current Cosmos Hub model, inflation (about 7–10% annually) is distributed entirely in proportion to voting power. This means that a validator with 10% VP receives 10% of rewards, reinforcing a snowball effect where large validators grow larger and the Nakamoto coefficient shrinks.

AtomOne changes this dynamic by decoupling part of the rewards from voting power. A fixed fraction of inflation (e.g. 10%) is redirected to a Nakamoto Pool, which is then distributed equally among all active validators. For example:

• Inflation = 1,000 ATOM.

• Nakamoto Pool = 10% = 100 ATOM.

• With 180 validators, each receives ≈ 0.57 ATOM per block.

• The remaining 900 ATOM are distributed proportionally by VP as usual.

Effects of this model:

• Small validators: gain a stable income, higher APR, and better survival chances.

• Large validators: see their relative rewards reduced slightly.

• Delegators: yields become more balanced, which creates an incentive to stake beyond the top 10.

This mechanism strengthens decentralization and avoids artificial caps or complex formulas. The main risk is Sybil farming, which can be addressed by combining it with a self-stake requirement.

5. Mechanism 2 – Proportional Self-Stake Requirement

The principle is simple: each validator must maintain a self-stake equal to at least 1/250 of the delegated stake (≈0.4%). For example, with 1 million ATOM delegated, the validator would need to self-bond 4,000 ATOM.

Why this matters:

• Without such a rule, a large actor (e.g. a CEX) could easily split 10 million ATOM across 10 validators with negligible cost, inflating the Nakamoto coefficient without real decentralization.

• With the rule, the same actor would need to commit 40,000 ATOM in self-bond at slashing risk, making duplication far more costly and risky.

Case study – Cosmostation (July 2025):

• Stake: 12.51M ATOM

• Current self-bond: 33,140 ATOM

• Required under 1/250 rule: 50,040 ATOM

• Gap: ~16,900 ATOM

This shows that even strong validators would need to adjust, while small validators remain unaffected since the requirement is minimal.

Expected impacts:

• Stronger security from greater validator commitment.

• Higher costs for Sybil farming.

• No negative impact on delegator APR.

6. Quantitative Impact (Mintscan data)

Nakamoto Bonus (10% of inflation redirected to the pool):

The pool would total around 4.695M ATOM per year, resulting in a bonus of about 26,086 ATOM for each of the ~180 active validators.

For small validators, the APR would increase from 17.22% to 37.61%, representing an improvement of more than 118%.

For large validators (top two-thirds by voting power), the APR would drop from 17.22% to 9.23%, a reduction of around 46.5%.

In practice, this means that smaller validators become much more sustainable, while large validators see their rewards reduced, slowing the snowball effect.

Self-Stake Requirement (1/250 rule):

For the top validator, the self-stake requirement would amount to 153,800 ATOM.
Across the whole active set, the network would require around 1.07M ATOM in self-bonded stake, representing roughly 0.23% of the total supply.

This also makes Sybil attacks significantly more expensive. To control one-third of the voting power, an attacker would need to put around 35.2 ATOM at risk in the event of a 0.01% downtime slash, or approximately 17,630 ATOM at risk in the event of a 5% double-signing slash.

In practical terms, this rule ensures that large validators must commit more of their own capital, while Sybil splitting becomes far more costly and risky. For example, Cosmostation would need to add around 16,900 ATOM to meet the requirement.

7. Combining Both Mechanisms

Individually, each mechanism has limitations:

• The Nakamoto Bonus sustains smaller validators but exposes the network to Sybil farming.

• The self-stake requirement deters Sybil validators but does not improve smaller validators’ APR.

Combined, however, they are complementary:

• The self-stake rule prevents abuse of the bonus.

• The bonus ensures small validators remain viable.

• The result is a higher Nakamoto coefficient, balanced incentives, and more sustainable security.

8. Risks and Limitations

There are still challenges. Large validators may attempt Sybil splits, requiring community vigilance. Parameters such as the self-stake ratio and the fraction of inflation reserved for the Nakamoto Pool will need careful calibration. On the technical side, implementing these mechanisms requires modifications to the staking module and thorough audits.

9. Conclusion

This framework is not a rigid proposal but a starting point for debate. A combination of proportional self-stake (1/250) and AtomOne-style redistribution appears practical, balanced, and effective. It supports small validators without punishing delegators, strengthens decentralization, and raises the Nakamoto coefficient.
The community is invited to provide feedback on parameter tuning, possible risks or unintended effects, and alternative or complementary mechanisms.

[Salim]

Seems like a legit discussion, I have to little knowledge to give any meaninfull input but the idea of limiting “whale validators” and giving smaller validators a better chance and a small “bonus” sounds good!

[David_Crosnest]

Hi,
Your proposal is missing some numbers to showcase the change

Nakamoto Bonus Impact

With the data from Mintscan, a 10% Nakamoto pool of the inflation :

• Pool total : 4.695M ATOM per years
• Bonus per validator : 26,086 ATOM
• APR for small validators : 17.22% → 37.61% (improve by +118%)
• **APR for big validators (top 66%) ** : 17.22% → 9.23% (reduce by -46.5%)

Self-Stake Requirement

With the rule of 1/250 self-stake :

• top validator self-stake requirement : 153,800 ATOM
• Total self-stake : 1.07M ATOM (0.23% du supply)
• Sybil cost (33% VP) : 35.2 ATOM at risk (0.01% slash) **1,763 ATOM at risk (0.5% slash)

[Guinch_Roze]

Thank you a lot, I already added it into my 6th section.

[onemachinefarms]

This is fully possible in theory, because Cosmos Hub uses a flexible staking and reward distribution module
that can be adjusted via inflation parameters, rewards, and self-bond requirements.

The core idea — Nakamoto Bonus + 1/250 self-stake rule — is already solid, but it can be improved and made
more precise without significantly changing the structure:

Adjustments to the Nakamoto Bonus

• Tiered distribution instead of fixed:
  Instead of distributing 10% equally to all validators, give more to validators with lower VP
  and less to medium/large ones.
  This still prevents the snowball effect, but rewards small validators who contribute to consensus.

• Dynamic pool based on performance:
  Only validators with uptime ≥ 99% and no slashing receive the bonus.
  This reinforces responsibility and reliability.

Adjustments to the self-stake rule

• Instead of a fixed 1/250 for everyone:
  Make it progressive: large validators require a slightly higher self-stake (e.g., 1/200),
  while small validators keep 1/250.
  This prevents large actors from creating multiple ghost validators with minimal risk.

Delegator considerations

• Clearly inform delegators that choosing small validators increases decentralization
  and may improve their APR.
• Possible extra incentives for delegators who choose validators with low VP,
  preventing them from only chasing nominal yield.

Security and Sybil

• Keep the self-stake rule combined with the bonus, but add periodic verification:
  • Detect sudden VP changes to prevent Sybil attacks.
  • If a validator increases VP too fast without complying with rules, limit bonus access until regularized.

Visualization / Metrics

• Include real-time metrics in explorers and dashboards:
  • “Current vs target Nakamoto coefficient”
  • “Bonus impact per validator”
• This ensures transparency and community-audited policy.

Summary of improvements without changing the structure:

• Tiered bonus based on performance
• Progressive self-stake according to validator size
• Clear delegator incentives to support decentralization
• Monitoring sudden changes & Sybil mitigation
• Metrics dashboard and full transparency

[Guinch_Roze]

I really appreciate your input and the spirit of trying to refine the idea. However, I think there is a fundamental concern of fairness and equality in what you are suggesting.

With the current design, an equal distribution of the Nakamoto Bonus already acts as a redistributive mechanism. Every validator receives the same amount, but in relative terms this has a much stronger effect on smaller validators than on larger ones. In other words, equality at the rule level already creates redistribution in practice. Introducing tiers that give more to the smallest and less to the medium or large validators risks distorting this natural effect. It could also create perverse incentives, for example encouraging validators to deliberately remain “small” in order to capture a higher share of the bonus.

Another important point is simplicity. The Cosmos Hub community generally prefers mechanisms that are easy to understand, audit, and implement. A flat equal distribution is transparent: everyone knows that a fixed percentage of inflation is redirected to a pool and shared equally among active validators. Adding layers such as tiered distribution, progressive self-stake ratios, or conditional access makes the model more complex, harder to follow, and easier to debate endlessly. Complexity also increases the risk of misaligned incentives or loopholes.

On the question of self-stake, a fixed ratio like 1/250 is clear, predictable, and applies to everyone equally. It is very hard to game, and every validator immediately knows what is required. A progressive rule that scales differently depending on validator size might look fair at first sight, but it quickly becomes both more complicated and more vulnerable to circumvention, for example by splitting large operators into multiple “smaller” validators.

I do agree with you on one aspect: delegators need to be better informed about how their choices impact decentralization. But I think this can be addressed through communication and transparency, not by adding extra layers of incentives. Once the APR difference between large and small validators becomes more balanced, delegators will naturally shift some of their stake, and the message will reinforce that behavior

An equal bonus distribution combined with a fixed self-stake requirement is already a powerful, fair, and simple mechanism. It strengthens small validators without creating artificial distinctions, it raises the cost of Sybil attacks, and it is easy for the whole community to understand. I believe this simplicity and neutrality is exactly what makes the proposal practical and credible.

[Quentin]

First, thank you for starting this discussion, which could in fact be described as a reform of the staking module one that is closely tied to a potential governance reform I still need to address here.
My first point is this: everything here comes down to compromise, deliberate choices, and political will. The current staking module does have the shortcomings you outline, but it also provides a major advantage: it requires no political intervention and self-regulates, with no harmful risk of validator duplication splitting their stake to chase extra yield.

Let’s be clear: diverting part of the inflation for such a political reform carries obvious risks. While I fully support 1/250 self stake, the Nakamoto bonus could, in my view, only be implemented in two scenarios:

1. In small doses (certainly not 10 % of total inflation). Otherwise, the APR gap between the top and bottom of the validator set would directly encourage validator duplication and drive out less professional operators, who would be undercut by more sophisticated arbitrageurs. Self-stake alone wouldn’t restrain large capital holders.

2. By redefining validator access. One option would be to freeze the current set: remove the open-competition mechanism and allow new validators only through governance decisions. This would buy time for a deeper reform that precisely defines validator quality and quantity requirements, imposes clear obligations transparent accounting, mandatory self-stake, non transfer guarantees with slashing penalties and establishes a supervisory committee. In that context, higher APRs for lower-rank validators would simply rebalance voting power between large and small players, because validators would become not just economic actors but public actors explicitly validated by governance and bound to its principles.

Of course these are only ideas, but at present the unrestricted freedom to enter the validator set seems to be the main obstacle to any reform aimed at greater decentralization and professionalization. Validators represent the community, and as such they should not be able to join the set arbitrarily, without a defined process.

[onemachinefarms]

I develop with the Cosmos SDK, CometBFT, and my own wallet, and I have the ability to create plug-and-play modules. I can program, but my question is: how can it actually be possible to achieve the changes you mention? I understand your points: I will prioritize simplicity and neutrality of the mechanism. We can strengthen delegator education and transparency instead of adding complexity to the distribution."

[Guinch_Roze]

Thank you for your thoughtful response. I think you raise important points, especially regarding the risks of APR gaps and validator duplication.

On the Nakamoto Bonus, I agree that starting with 10% might be too aggressive. It could create too strong an APR disparity between small and large validators, which might lead to unintended behaviors such as validator splitting. I am open to adjusting this parameter and think a smaller initial allocation, for example around 5% of inflation, would be a more balanced starting point. We could then monitor the effects on APR distribution, validator sustainability, and the Nakamoto coefficient before considering any further adjustments.

On the self-stake requirement, I am glad we are aligned. It is a simple, fair, and effective mechanism to ensure skin in the game and to make Sybil attacks more costly.

Where I would respectfully disagree is the idea of ending permissionless validator entry. I believe this would undermine one of the Hub’s core principles: openness. If governance had to approve every new validator, it would introduce politicization, lobbying, and the risk of validator cartels. Validators would no longer simply be economic actors in a free and open system, but rather political candidates subject to subjective decisions. That would shift Cosmos Hub toward a semi-permissioned model, which I think is contrary to the spirit of decentralization we want to protect.

The challenge we are addressing is fundamentally technical and incentive-based. I believe we can solve it through mechanisms like a modest Nakamoto Bonus, a proportional self-stake requirement, and careful parameter tuning, without resorting to governance gatekeeping. The Hub should remain permissionless, transparent, and accessible with rules that apply equally to all participants.

[Quentin]

I think that closing entry to new validators and maintaining a list of professional validators however un permissionless that may seem would help legitimize the creation of a Nakamoto bonus or any other reform aimed at improving the Hub’s decentralization.

You can check the response I shared here, where I explain how this approach could greatly enhance decentralization while turning validators into administrative agents of the Hub, validated by governance. Of course, this remains just one point of view and could face certain limitations.

[Guinch_Roze]

Introducing a self-stake requirement is essential to strengthen the Hub’s security and ensure that validators truly have skin in the game. Without it, large actors can operate with minimal risk, while smaller validators carry proportionally more responsibility. However, enforcing this rule strictly from day one through slashing and jailing would create major disruption: several large validators are currently far from the target and would either need to exit suddenly or find significant capital on short notice. This could destabilize the active set and negatively impact delegators.

To address this, the self-stake rule should not be implemented overnight, but rather through a phased approach. A gradual timeline gives validators enough time to adapt, while steadily reinforcing the credibility of the requirement. The goal is to reach full enforcement in a way that is both fair and predictable, maintaining network stability throughout the transition.

Self-Stake Enforcement: 24-Month Progressive Implementation

The self-stake requirement is essential to ensure validators have skin in the game. However, applying it instantly with slash and jail would destabilize the active set, since many large validators are currently far from the target. A 24-month phased approach balances fairness, stability, and credibility.

Phase 1 – Incentive Only (Months 0–12)

During the first year, validators who fail to meet the self-stake requirement are not eligible for the Nakamoto Bonus.

This creates a strong financial incentive without forcing sudden exits.

Smaller validators, who usually self-bond proportionally more, remain unaffected.

Phase 2 – Progressive Penalties (Months 12–24)

From the second year, non-compliant validators begin to face automatic progressive penalties:

A small recurring slash, for example 0.1% per month, is applied to their rewards while they remain below the threshold.

The penalty escalates gradually (e.g. up to 0.3% per month by month 24) to steadily increase the pressure.

This mechanism ensures that staying non-compliant becomes economically unsustainable over time.

Phase 3 – Full Enforcement (After 24 months)

At the end of the 24-month transition, the rule becomes strict.

Any validator below the self-stake requirement is subject to normal consensus penalties (slash and jail).

By this point, all validators have had sufficient time to adjust, ensuring the rule is credible and enforceable.

Benefits

Predictability: Clear timeline for validators to adapt.

Stability: No sudden mass exits disrupting delegators.

Fairness: Small validators are not penalized; large ones must align gradually.

Credibility: After 24 months, the rule has full enforcement and becomes a cornerstone of Hub security.

Implications for Large Validators and Centralized Exchanges

A key concern often raised is what happens if a large validator, such as a centralized exchange, cannot secure enough self-stake to meet the requirement. In such a case, once the rule reaches full enforcement, the validator would become ineligible to participate in the active set and would be jailed until compliance is achieved. This means delegators would stop earning rewards and would naturally redelegate their stake to other validators.

From the validator’s perspective, there are several possible outcomes. They may decide to commit their own capital and meet the self-stake target, they may exit the active set and continue as a delegator, or they could sell ATOM to raise the necessary funds. While such a situation might create some short-term market volatility or a wave of redelegations, the long-term effect would actually be positive for the Hub. The Nakamoto coefficient would increase, delegations would spread more evenly across the set, and only validators willing to put their own capital at risk would remain.

In other words, the requirement may force difficult choices for some large actors, but it ultimately strengthens the network by reducing dependency on centralized exchanges and ensuring that all validators have real skin in the game.

[Guinch_Roze]

UPDATE

Proposal: Improve the Nakamoto Coefficient through a 5% Bonus and Progressive Self-Stake

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1. Context

The Nakamoto coefficient is a key indicator of the Hub’s decentralization. Unfortunately, it has been declining, which increases the risks for consensus security and reduces the network’s resilience against capture by a small number of validators.

Today, some validators, notably centralized exchanges and a few large incumbents, concentrate a disproportionate share of the voting power, mechanically reducing the Nakamoto coefficient.

The community agrees on the need to rebalance this distribution, while still preserving:

• the attractiveness of staking for delegators,

• the economic sustainability of validators,

• the simplicity of the governance and incentive model.

---

2. Problem Statement

Without safeguards, large validators will continue to accumulate ever more stake. Delegators, acting rationally, often favor the most visible or best-known validators, or those offering slightly higher yields, without considering decentralization.

Strict voting power caps are not a solution: they can be circumvented through duplicate validators (for example: Exchange1, Exchange2, etc.), which artificially inflate the Nakamoto coefficient without improving real security.

---

3. Proposal

I propose to combine two complementary mechanisms:

1. Redistribution via a Nakamoto Bonus, inspired by the AtomOne model, set here at 5% of inflation.

2. A proportional self-stake requirement, based on the 1/250 rule (≈ 0.4%), but introduced progressively over 24 months.

Together, these two mechanisms support smaller validators, raise the cost of Sybil behavior, and improve the Nakamoto coefficient in a balanced and sustainable way.

---

4. Mechanism 1 – Nakamoto Bonus (5%)

Today, Hub inflation (around 7–10% annually) is distributed entirely in proportion to voting power. A validator with 10% VP receives 10% of rewards, fueling a snowball effect in favor of the largest.

The Nakamoto Bonus changes this dynamic: a fixed fraction of inflation, here 5%, is redirected to a Nakamoto Pool. This pool is then distributed equally among all active and compliant validators.

Example with 100 units of annual rewards:

• 95 units are distributed proportionally by VP.

• 5 units fund the pool, shared equally among validators (≈ 0.0278 unit each if 180 validators).

Expected effects:

• Small validators gain a stable additional income.

• Large validators see their relative rewards slightly reduced.

• Delegators perceive more balanced yields, creating an incentive to stake outside the top 10.

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5. Mechanism 2 – Proportional Self-Stake Requirement (1/250) and Progressive

Each validator must maintain a self-delegation equivalent to 1/250 of their total stake (≈ 0.4%).

Example: a validator with 1 million ATOM delegated must self-bond 4,000 ATOM.

Without this rule, an actor holding 10 million ATOM could split them across 10 validators with negligible self-stake, artificially inflating the Nakamoto coefficient. With the rule, the same actor would need to put 40,000 ATOM at slashing risk, making the maneuver far more costly and risky.

Progressive implementation (24 months)

• Phase 1 (0–12 months): non-compliant validators do not receive the Nakamoto Bonus but face no further sanction.

• Phase 2 (12–24 months): non-compliant validators are subject to progressive penalties on their rewards (e.g. 0.1% → 0.3%/month).

• Phase 3 (after 24 months): compliance becomes mandatory, with strict enforcement (slashing, exclusion, jail for non-compliance).

Example Cosmostation (July 2025):

• Stake: ~12.51 M ATOM

• Current self-bond: ~33,140 ATOM (≈ 0.26%)

• Requirement under the rule: ~50,040 ATOM (0.4%)

• Gap to cover: ~16,900 ATOM

This example shows that even a strong validator must adjust, while the constraint remains manageable.

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6. Quantitative Impact: Comparative Study of Three Validators

To evaluate the mechanism’s effect concretely, let us compare:

• Cosmostation: large validator, ~5% VP

• Keplr : small/medium validator, ~1% VP

• Cosmosrescue : very small validator, ~0.2% VP (below the set average of 0.555%)

Projected revenues (base: 100 reward units)

Validator	VP (s)	Old regime (100·s)	New regime (95·s + 5/V)	Absolute change	Relative change
Cosmostation	5.0 %	5.0000	4.7778	−0.2222	−4.44 %
Keplr	1.0 %	1.0000	0.9778	−0.0222	−2.22 %
Cosmosrescue	0.2 %	0.2000	0.2178	+0.0178	+8.89 %

Translation into APR (if network APR = 14%)

• Cosmostation : 13.38% (−4.4%)

• Keplr : 13.69% (−2.2%)

• Cosmosrescue : 15.24% (+8.9%)

Interpretation

• Validators above the average lose slightly (Cosmostation more, Keplr little).

• Very small validators (cosmosrescue) gain net thanks to the relative weight of the fixed bonus.

• At equal compliance, APR therefore becomes Cosmosrescue > Keplr > Cosmostation, which incentivizes delegators to diversify.

Temporal evolution (N0 → N+1 → N+2)

• N0 (0–12 months): non-compliant Cosmostation loses the bonus (4.75 vs 4.78), while Keplr and Cosmosrescue already receive it.

• N+1 (12–24 months): non-compliant validators additionally face penalties. Compliant validators keep bonus + proportional share.

• N+2 (after 24 months): all must be compliant. Structural values are restored, with Cosmosrescue outperforming, Keplr slightly above Cosmostation.

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7. Combined Effects

The Nakamoto Bonus sustains small validators, improving their viability and limiting the snowball effect of large ones.

The progressive self-stake requirement prevents Sybil farming and ensures every validator has capital at risk.

Together, these mechanisms increase the Nakamoto coefficient while keeping the model simple, gradual, and permissionless.

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8. Risks and Limitations

The self-stake level (0.4%) must be calibrated: too low and splitting remains possible; too high and some small validators may struggle.

Large validators may feel pressure on their yields, though the loss remains moderate.

Opportunistic behaviors (splitting “just below the threshold”) must be monitored.

Technical implementation will require modifications to the staking module and audits.

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9. Technical Implementation

The implementation of such a mechanism cannot be limited to simple parameter adjustments via governance. Certain aspects can indeed be handled by parameter variables, such as the fraction of inflation allocated to the Nakamoto Bonus (5%), the self-stake ratio (1/250), or the 24-month transition period with penalty thresholds. These elements should be defined clearly in the initial proposal and remain adjustable by governance if needed in the future.

Other aspects, however, require specific code developments. The staking and distribution modules of the Cosmos SDK must be modified to integrate a new logic of reward distribution. Concretely, a Nakamoto Pool must be created to automatically take 5% of inflation and redistribute it equally among eligible validators. Eligibility must be conditioned on meeting several criteria: sufficient uptime, no slashing, and above all, compliance with the progressive self-stake schedule.

It is also necessary to develop a time-tracking mechanism to handle the three planned phases: an initial incentive phase where only compliant validators receive the bonus, a second phase with progressive penalties for non-compliance, and a final phase where the rule becomes mandatory and strictly enforced. These checks must be applied automatically and visible to the community.

Finally, for transparency, clear metrics should be exposed in the API and relayed by explorers: for example, each validator’s current self-stake level, compliance status, and eligibility for the Nakamoto Bonus. This will enable both community monitoring and positive social pressure.

In terms of steps, the process should include a detailed specification phase, followed by development and integration into the Cosmos SDK, then a security audit and testing on a testnet. Only after this validation can a governance proposal activate the functionality on mainnet with defined parameters.

In summary, part of the implementation relies on parameter choices via governance, but the logic of equal redistribution and progressive self-stake does indeed require dedicated development within the Hub’s modules.

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10. Conclusion

This proposal combines two complementary levers:

• a 5% Nakamoto Bonus, redistributed equally among all compliant validators,

• a proportional self-stake requirement, introduced progressively over 24 months.

The comparative study shows that:

• large validators lose slightly,

• medium validators remain viable,

• very small validators gain,

• and the overall set becomes more balanced, mechanically improving the Nakamoto coefficient.

By strengthening validator diversity without excluding anyone, we improve the security, credibility, and resilience of Cosmos Hub.

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I invite all community members, and in particular validators, engineering teams and Cosmos Labs, to share their feedback on this proposal in the coming weeks. My goal is primarily to assess technical feasibility and the resources required (time and development). Depending on these responses and on the confirmed viability of the mechanism, I will then consider moving this proposal on-chain as a signaling proposal.

[Abaddon_The_Despoile]

I just want to say I agree with this proposal and I think it hits the right balance. The way things are going right now, the biggest validators keep pulling in more and more stake, and it makes it harder for smaller ones to survive. That’s not healthy for the Hub long term.

What I like about this idea is that it doesn’t try to punish anyone, it just gives smaller validators a fairer shot while still keeping larger ones profitable. The progressive self-stake requirement also makes sense to me, because it means everyone has real skin in the game instead of just spinning up multiple validators.

That said, I’m expecting pushback. Some of the larger validators will probably either vote “no,” abstain, or try to drag things out to avoid quorum. That’s their interest, to keep the current system as it is. But delegators need to realize they don’t have to just sit back. Every one of us who stakes ATOM has the ability to vote, and if we want real decentralization, we can’t just leave it up to the top validators to decide for us.

As a delegator, I care about yield, but I care just as much about security and resilience. If this goes through, it makes me more confident the Hub won’t end up captured by a handful of players. That’s a win for everybody holding ATOM.

[Govmos]

Thank you for sharing this idea. We agree that improving the Nakamoto coefficient is an important discussion, but we believe that many in the ecosystem tend to misunderstand the distinction between decentralization in governance and decentralization in execution. Both are critical, but their implications differ — and in our view, one carries slightly more weight than the other.

Governance vs. Execution

Take the example of a chain with 100 validators, each holding 1% of voting power. In a Cosmos BFT consensus, the Nakamoto coefficient would be 33, meaning it would take 34 colluding validators to halt block production. Importantly, such an attack could only stop the chain’s operation — it could not censor individual transactions or unilaterally alter the state without reaching 66% consensus power.

Now, imagine in this same chain that a single entity owns 50% of the token supply. Even if those tokens are distributed across many validators, this actor would control governance outright. In this scenario, the chain would look decentralized from a consensus standpoint but would be entirely centralized from a governance perspective. That entity could unilaterally push through malicious upgrades, alter balances, or force protocol changes.

On the other side, a decentralized governance structure with a relatively centralized validator set does carry risks as well, but these are mostly technical risks around liveness and performance. Validators must deliver on their responsibilities, or they face slashing and reputational penalties. Governance, by contrast, has far broader power over the protocol itself.

Where We See Priority

For this reason, we believe that governance decentralization is slightly more fundamental than execution decentralization. Cosmos governance is further complicated by the delegated voting system, where validators cast votes on behalf of delegators who do not actively participate. This introduces the risk of concentrated influence that may not accurately reflect token-holder intent.

To summarize, while the Nakamoto bonus is a valuable avenue to explore, we think it is crucial to first address the foundational risk of centralized governance through delegations. Once this baseline issue is mitigated, complementary mechanisms like the Nakamoto bonus can be meaningfully discussed and adopted.

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For context, we have initiated a separate discussion on vote delegation caps, which we invite readers to have a look at: [LAST CALL] CHIPs signaling phase : Validator Vote Power Cap

[Guinch_Roze]

Yes, I agree with you on this point. That’s why the proposal you made in your other post is important, and I will vote in favor of it. I also believe that combining the reform of governance decentralization with the reform of execution makes sense as part of a broader, comprehensive reform.

[Guinch_Roze]

Indeed, there is certainly a conflict of interest on the part of the validators. Their reputation and their alignment with the network’s overall health depend on not focusing solely on their own revenues. I believe they need to make an effort, and this combination of mechanisms aims not to hit them too hard. The goal is to gradually move toward a more decentralized and fairer system, while giving smaller validators a boost and preserving larger ones as much as possible.

This would not only make smaller validators more sustainable over time, but also incentivize delegations toward them thanks to increased APR visibility in the lower part of the set.

[Govmos]

We fully agree on the importance of improving execution decentralization, and the Nakamoto coefficient provides a useful line of defense in this regard. However, it faces the same limitation we encounter with governance vote-power caps: validator duplication as a bypass mechanism.

This is why we believe governance must be addressed first. Additionally, we need to clarify that mitigating duplication requires a clear governance constitution that explicitly defines such infringements and establishes the associated penalties. This is another crucial intermediate step that needs to be cleared before proceeding with a solution like the Nakamoto Bonus or other methods that could be evaded through validator duplication or any similar tactics.

[Abaddon_The_Despoile]

First off, thank you for taking the time to lay this out so clearly. I do agree with your distinction between execution decentralization and governance decentralization, both of these matter, but governance carries the heavier weight because of the power it has over protocol rules. You’re absolutely right that delegator passivity and concentrated influence are a fundamental risk that needs to be addressed.

At the same time, I see the Nakamoto bonus and progressive self-stake as tools that can work alongside governance reforms rather than only after them. The snowball effect we’re seeing with the largest validators doesn’t just threaten execution decentralization; it also reinforces governance concentration by channeling ever more delegator voting power to the top. Breaking that cycle, even if it’s done modestly, that alone helps to reduce governance centralization risk at the same time.

I also want to emphasize that my support here comes from the same place as yours: wanting what’s best for the Hub’s long-term health and credibility. I don’t see this proposal as the final word, but I do see it as an important piece of the bigger puzzle.

IF we can combine steps like this with broader improvements to delegator participation and governance transparency, I think the Hub will come out stronger, more resilient, and more trusted.

[Abaddon_The_Despoile]

Precisely, what’s being discussed doesn’t punish large validators outright, but it CREATES a space for smaller ones to breathe and be sustainable, which in turn strengthens the Hub as a whole.

I also like your point about APR visibility in the lower part of the set, that’s an underrated benefit. If delegators can see that supporting smaller validators isn’t just “good for decentralization” but also good for their own yield, that could shift behavior in a meaningful way.

The real test, though, is whether delegators step up. Validators will naturally have conflicts of interest, but at the end of the day delegators are the ones with the ability to vote and redirect stake. If they use that power, this proposal could actually deliver the healthier system you’re describing.