Thanks for clarifying!
Honestly, I’m not that knowledgeable about the way liquid staking chains might work so it’s possible that my generalized thoughts on replicated security as a whole don’t map perfectly onto how it works for LSDs in particular.
Relying a bit on your response to @ala.tusz.am here,
sure, this is an adequate approximation of what I mean.
My main response is just that if something doesn’t make sense to ‘take up a slot’ on the Hub, I think we have to trust the community and validators to not let it take up a slot.
I’m definitely not here to argue that there’s a way for every kind of consumer chain to be profitable and should be given a chance regardless of demand or accounting!
The cost per validator per chain is the real thing that’s hard to nail down here, and it’s also the thing that will wildly swing the back-of-napkin cost from ‘reasonable’ to ‘what the heck’.
I haven’t been directly involved in many conversations about this parameter but I’ve heard $300-450 quoted, but that’s not an accusation that your quotes are wrong. The Hub has 175 validators, but inevitably many of them have very different per-chain costs.
Just to break your math into a few more steps (particular the fee split part, because it took me a few reads to understand what you’re saying):
- $600 x 175 validators = $105,000 per month
- $105,000 per month x 12 months = $1,260,000 per year
And then, assuming that the validators’ additional revenue from Replicated Security comes in the form of a revenue split where the consumer chain takes 90% and the Hub validators take 10%:
- Total revenue = ($1,260,000 per year)/(10% fee split)
- Total revenue = $12.6 million
My conclusion here is that I can’t really get behind any napkin math at all, even if nothing jumps out as glaringly wrong. It’s just too complex to model like this - the variation in validator costs, the unidentified fee split, not knowing how each chain will actually generate revenue, whether there are additional compensation agreements or subsidies.
So while I agree that the figures are extraordinary, I also can’t really say that they’re ‘correct’ or even that you’re “missing something” beyond what you already know you’re missing: The enormous variation and unknowability of a complex situation.
My hope is that I’ve laid out a broad enough exploration of that complexity that upcoming consumer chains will come to the table with clear, coherent answers for some of these big questions.
Further, I’m wondering whether or not there is a normal investment risk for validators and the Hub (so if the project goes badly, the validators just lose money and vice versa) or if there are any requirements about what a consumer chain should provide in terms of value to the Hub in order to join Replicated Security?
There are no requirements beyond the what the Hub agrees to uphold together. I might be a bit biased, but my personal requirement would be that a new chain has read my essay and has a sensible business plan and contract structure to start off the conversation. I don’t think it makes sense (or that it’s enforceable) to be strict and quantitative in an initial requirement.