Is it reasonable to set min commission rate for Cosmos Hub?

Is it reasonable to set min commission rate for Cosmos Hub?

Hello, Cosmos community. I’m a Cosmos geek, being a community member for the past 2 years, and I have an optimistic view of the Cosmos future. Let me share my thoughts regarding the commission rate.

In this post I want to:

- Highlight the issue of the commission rate for validators in Cosmos Hub;

- Reveal the community’s attitude to the hypothetical setting of min commission rate to 3%.

The fact is that many validators contribute to the Hub by developing tools, dashboards, explorers, and other products, covering most of such expenses by themselves. Besides, qualitative maintenance of validating nodes also needs decent resources, which probably can’t be generated by many staking providers now in full due to low commission and the bear market. It seems reasonable that validators should have more incentive to participate in the Cosmos development rather than relying on dumping their commission to attract more stakers.

There are some numbers:

38 validators from the active set (21%) charge a commission lower than 3%, having 48.8M ATOM in stake (~ 25% of total stake), including six validators with 0% having ~7M.

And if all this stake will be covered with at least a 3% fee, it would power up the whole Hub with a big part of validators operating in equal conditions. And the only thing to compete about will be providing better services and contributing to the ecosystem, having more resources for that. While delegators will share with 3% of validators just 0.6% of earned APR (20%).

Such change could be considered as an additional step to make Hub healthier in a row with the recent Tax proposal #88, which increased the chain’s tax to 10% to fund the Community Pool and led to an APR decrease of 1,7%. However, this proposal passed, supported by 99% of voters due to the obvious value for the Hub’s health.

Expected outcomes are:

*** Validators are more focused on the quality of provided services;**
*** Validators pay less attention to dump actions in order to attract more delegators;**
*** Validators involve deeper in contributing to Cosmos as a means of competition and have enough funds for that;**
*** More even delegations distribution would lead to more fair governance;**
*** The quality of validating services rises, leading to better Hub performance.**

In this context, we can see how it works in Juno and Osmosis chains with min 5% of commission rate, where this fee is charged by 86 and 84% of validators, respectively.

Dear Cosmonauts, please share your opinion on the above, and if there will be a significant group of supporters, maybe some validator would like to submit such a proposal? If you think that smth can be added to the topic, please do it. Thank you in advance!

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Interesting thought.

I do have to spoil the fun a bit though, since a couple of things have to be taken into consideration;

  • a lot of delegators delegating to 0% validators are APR-chasers. They delegate once, only to return a loooooooong time after again. They will most likely miss this proposal and the effects coming out of it.
  • on Juno and Osmosis we see that even though we have a minimum commission % a lot of validators are running at a loss even when delivering support or tech. Voting power centralisation is a huge topic which needs to be tackled to make sure validators can run a proper business and add proper value. I am not so sure whether upping the commission % will do that for us…

If you would combine this together with a limit on the amount a voting power a validator can have (maybe even removing the rewards from funds delegated above this limit) we might see real movements towards decentralisation.

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Hey, thanks for feedback, here are my thoughts:

  • Apart from chasers there are many who care about quality and don’t want to be slashed, not speaking about the impact on the overall Hub’s performance.

  • While setting min fee doesn’t guarantee the instant quality rise but make it more probable by vanishing dumpers seeking instant benefits.

  • Regarding Juno & Osmosis I’d say they would be in a far worse condition without min commission.

  • Limit of voting power is interesting point and was sounded couple of times in this forum either. As for me it is more reasonable to consider setting limits only for governance but not for total stake as it could harm the Tokenomics.

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I agree 3% would make more sense than 5% elsewhere. Cosmos Hub validators won’t have higher expenses than validators in other chains and most of the bottom validators would be able to cover expenses with 3% already.

It’s already been seen in too many chains that no min fee directs people to 0% and 1% fee validators and always has lead to quite a disaster.

When everyone has at least 3%-5% fees, it allows the active / productive validators to grow as others can’t compete against them with lower fees.

ICF delegations and min fee would allow every decent validator to at least cover the expenses.

2 Likes

I agree with these points and absolutely agree that a 3% fee floor would be reasonable.

We’ve tried running both 1% fees, and 5% (current). @ 1%, we saw pretty decent growth, however we ran our node in the negative (in terms of time + money) for quite a while.

5%, we’re able to cover our costs and time, but we’re losing delegations (to other 1% nodes, naturally).

Meeting in the middle @ 3% and establishing it as the floor would absolutely get our support.

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We are trying to enforce rules again? Why?

Is having no rules the ideal situation?

Sadly a certain amount of rules will always be needed imo. Being norms and values or more hardcoded rules.

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This is one of the biggest misconceptions and deceptions that the modern educational system created for you. having no rules means anarchy or some other silly things like that.

Any society of even somewhat intelligent species (intelligence = the ability to receive and to send back an electromagnetic impulse = communication), form what you refer to as rules up there.

There is a very big difference between enforcement and natural involvement, and enforcement and support.

Yes, that is also why I see “norms and values” also a being rules of some sorts.
They are either decided for you or created together what we as a group find reasonable.

I rather go for the second option, because that gives some sort of control over what everyone finds reasonable.

BUT, if this goes on chain and the community supports having a 3% commission then we are ok, right? Because the majority agrees with having the minimum commission? So then there is no rule enforced, but agreed upon by voters?

I have a hard time comprehending the scenario where everyone wants to be right. The world simply can’t work that way. The best scenario is where everybody loses a bit, because that is the best compromise in the end (sounds controversial, but believe me. Been there, done that, works like a charm)

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Precisely. The world doesn’t need to be right. In fact, it cannot be right. As the world doesn’t answer to the creatures living on it. One of the biggest caveats that web3 brings, is responsibility. The final frontier that humans do not wish to tackle.

You are right, IMO. We act as a community to agree on what we want to agree on. i.e. Consensus. Participating in a scam voluntary and involuntary or unknowingly is the key here. What I mean is: if I told you I was a scammer, and you choose to follow, then there is only one person to be blamed.

What rings my bells in this story is this:

You Can Get Much Further with a Kind Word and a Gun than with a Kind Word Alone

i.e. Why are we trying to find a solution by enforcing (hard-coding mins and max for min commission), rather than allowing free market and competition take its toll?

Hmmmm, allowing a free-for-all is not necessarily what the majority wants. So if the majority wants a more healthy environment for validators by setting a minimum commission, then that should be ok.

But it should be signalled by the community.
Which brings the difficulty how we want to bring this to voting. Because in the current scenario the majority of VP on validators needs to approve, which is not necessarily the majority in terms of people :stuck_out_tongue:

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Free in free for all is the keyword. Freedom is a much larger value than anything else. Free for all is how normal markets gain the ability to function. Of course, that might not be what the majority wants. That’s why governance, the institute that shouldn’t be an institute, and the institute that helps to organize things for those who elect governance - should always remain neutral and allow those who elected the governance to decide. It is the citizens that decide. Neutral means that the job of governance is to deliver the message to those who vote. In all the possible ways and sides of the story.

IMO, long term, validators should NOT be allowed to participate in governance by default. Hence, allowing the citizens to reach consensus. In other words, a decentralized protocol would strive towards stripping governance from validators. Centralized, biased entities with self-interest.

Ah yes, an overhaul to governance where it is less dependent on validators, but more on delegators would be a cool thing imo.

But nonetheless; even in that system if the majority decides we need a minimum commission rate for the Hub, then that is a rule set by the majority. And thus answers your question from a while ago:

We are trying to enforce rules again? Why?

If passed through governance, the rule is imposed by the majority and thus acceptible I would say?