[IDEA] Improve the Nakamoto Coefficient

Hub Proposals Proposal Ideas
5

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:

:one: 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.

:two: 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.

:three: 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.

:four: 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.

:five: 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.

:light_bulb: 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
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