[PROPOSAL #76][REJECTED] Require a minimum 5% commission for all validator nodes

[hxrts]

Retroactive post to discuss prop 76 as the original proposer did not go to the forum first.

If the original author is reading this, please comment with more detail on how you believe this should enacted. Are you suggesting validators set a 5% minimum informally, or that devs add this as a parameter in the software?

Also please use the forum prior to posting in the future so we have a chance to ask some of these basic questions before the post goes up. I anticipate some validators may vote no simply because they didn’t have a chance to discuss on the forum first, which I’m sure was not your intention.

Mintscan link to proposal

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Require a minimum 5% commission for all validator nodes.

Reasoning: Competition drives innovation. Innovation drives sustainability and token value.

We should build a community where validators truly innovate and create value for delegators, rather than relying on their 0% commission to attract delegators. Allowing unsustainably low commission rates promotes spam and will not motivate validators to create innovative solutions for delegators, potentially stagnating the development of the Cosmos Network.

Having a 5% minimum commission ensures that validators are incentivized to innovate to acquire delegators. This will also encourage greater decentralization on the Cosmos Network as validators compete for delegators based on merit (rather than 0% commissions). Additionally, it is necessary to provide proper incentives to validators for their work running and securing the Cosmos Network, especially during crypto winters.

If this proposal is approved, the Cosmos Network would be updated so that:

1. Existing validator nodes with commission rates set to less than 5% will have their commission automatically updated to 5%
2. New validator nodes will have a floor commission rate of 5%

[anon21388996]

Most top validators have a low commission fee and does not contributes. This is an easy way to enrich them, without really incentivizing people to re-delegate (Can someone point me to a massive re-delegation that happened), as it is not clear what validators contributes to what (expect notional, sikka or sg-1).

I voted No.

[kay]

I’m really against it. Some of my notes/thoughts on it:

1. The proposal has no preliminary discussion. The forum post was created only after the proposal went live but it already has some “for” votes. It’s a bad practice itself.

2. Proposal is anonymous and has the TEXT type, and it has no actor to implement it. Like, who will modify the chain in a proper way? How will it be made? What should we do to those who have <5% commission? Does it have any other corner cases? Once again, there was no discussion.

3. Validators with >=5% commission are incentivized to vote “for” just because it will place them in a better position than competitors.

4. At the same time, validators with <5% commission have nearly 36% of voting power, which makes them able to reject the proposal by themselves (not all of them vote though).

5. Stake is imbalanced already. Small validators are able to engage delegators at least by setting a low commission and without this stake will be more concentrated on big players that seem more reliable to users.

6. Even with a “minimum 5%” commission validators are able to distribute the rewards by airdrops and stuff, it doesn’t force them to take rewards to themselves. And of course, it doesn’t stop them from the non-fair competition, just makes them richer as @anon21388996 already highlighted.

7. Making it technically impossible to set commission lower than 5% is just wrong. Some validators might want to have such a possibility to compensate the losses of users after slashing or something. (I’m not quite sure but we have to take a look at the cases of lowering the commission and their reasons for them).

8. The proposal has no impact on custodial services with 100% commission that distributes rewards by themselves. What I mean is that the proposal is all about the on-chain stuff but barely touches the meatspace (see point 6).

Wrapping up: I think it’s just a technical solution for a non-technical problem. And the solution itself isn’t formed well.

I might be wrong on some points and I’m happy to change my mind based on a valid argumentation but that is why we need a discussion before voting.

[lexa]

For reference, Proposal #12 posed a relevant question: Are Validators Charging 0% Commission Harmful to the Success of the Cosmos Hub?

There was quite a rich conversation about it on the forum here: [PROPOSAL #12][ACCEPTED] Are validators charging 0% commission harmful to the success of the Cosmos Hub?

[Tran_Duy_Hien]

Just a question, why not require low down maximum com (sample 95%) to avoid validators cheating their client to get all rewards?
And 5% is just like theft way. I voted NO on this.

[jacobgadikian]

Hey first of all I just want to say thanks for making this.

All right let’s roll friends.

So I actually support this proposal and it’s basically because I think that 0% validators are genuinely harmful.

The only reason that I’ve been able to contribute to the hub, to Juno, to the SDK, and so many other things in Cosmos is in fact the Osmosis standard for minimum commissions. When osmosis launched, I began getting paid, and I quit my other work. Those minimum commissions literally funded notional. Other than that, we were funded on one single uniswap airdrop. That’s it.

I strongly agree with the critique of this proposal that it was not discussed beforehand. That is why I intend to create a proposal on the hub that mandates the usage of this forum before making governance proposals.

I also just really want to highlight the Twitter is not the best place to discuss governance. It is very easy to spread inaccurate information on Twitter, as @Thyborg , and employee of informal systems, which is a company funded by the interchain foundation, has recently done about this proposal.

The reality of the situation on the cosmos hub with respect to minimum commissions, is that support for this feature, which has been planned for a very long time on the hub and by the cosmos SDK team, is already fully implemented on the Cosmos hub. Those with objections to this proposal should be raising objections to the use of cosmos SDK version 46 on the cosmos hub.

Numerous individuals and groups have mentioned that they feel that a 5% minimum commission will destroy the hubs free market in validation. They are absolutely not entirely incorrect. In the present state there is a 100% range. In the future state, there would be a 95% range. So, if they are genuinely free market activists, and that is what they care about, they absolutely must create a governance proposal that stops the usage of Cosmos SDK 46, or their claims look suspiciously hollow.

[jacobgadikian]

You raise a very interesting point of view here. I’m not certain that you’re right but it doesn’t feel wrong.

[bilbdubabdu]

The concerns seem to be incentives, security and fairness. A secure system requires incentivizing validators to enact proper security protocols and having enough incentives left over for convincing delegators (investors) to lock up a portion of their wealth for an extended period of time. Validator and developer seem somewhat synonymous at times.

As a Staker I love 0% commission. I feel extremely incentivized to keep all my atoms locked away securing the network. I feel my staked portion is as valuable as the validator. I feel I am adding real value to the network by compounding, leaving my funds staked to the network, and knowing that I may never remove them. I feel I am helping out pace the constant selling pressure.

As a non developing validator with low commission I feel proud to have so many tokens staked to me securing the network. I’m even more proud at the extremely low churn rate of my delegators funds. I again feel I am adding real value to the network by keeping my delegators incentivized. I indeed make just enough to pay my electricity and other means of security If I were to sell. But I don’t want to sell.

I believe 5% as a Staker would make me lose my sense of value, the feeling I am helping secure the network just as much as the validator it’s self, the sense that I am helping out pace the constant selling pressure and adding real value to the network. I would be very discouraged, not defeated.

As a validator I believe 5% would over incentivize me. I’m not a corporation with a ton of employees I need to pay. I’m simply a power user who takes the path of least resistance and learns along the way. Instead of spending hours in forums and discord to learn about how to fix my problems. I would be more prone to paying some one else to figure it out for me.

When gold is exposed on a hillside everyone is a gold miner.

This being said 0% is not sustainable for validators and 5% seems too discouraging for Stakers.
If we set a minimum, why wouldn’t we want to set a maximum?
Are we afraid of what Binance and others would do if we did set a maximum?
Are larger validators more valuable and secure than smaller ones?

If the problem is spreading out delegations for security and incentives. Maybe what we should be voting on is a rework of the networks fee structure to ensure even the smallest validators are more equally incentivized. Possibly create a validator demerit point system that is viewable to all users, keeping track of the less desirable validators in real time on every delegation page. Missed blocks, not voting, poor security measures, not participating in discussions.
A needed band-aid to the current problem would be setting a commission minimum of 2%.

[jacobgadikian]

im down with 2%.

It’s not zero.

But I wouldn’t change my current yes vote and I don’t think that @thyborg should endorse individuals spreading non-factual information with ulterieor motives as he is employed at informal systems which is ultimately funded by the interchain foundation.

standards, friends.

[xjupitar]

@jacobgadikian , did you noticed you’re becoming a pinhead every single day?. I found that your sole purpose nowadays is to FUD interchain member without actually doing any good for the chain. I saw your debate with twitter guy ROB and after watching all those things I think you’re playing a victim card which is too much scary for the ecosystem. That twitter guy really raised some good claims along with Ticojonny and Wickex2. While I read the counter argument from notional, I saw Some of Notional’s counter argument is baseless and misleading. While you should respect every opinion, you and Notional actively tried to shut down every claims with hundreds of tweets without even solving the issue. There’s no solid bases that shows a 5% commission can decentralize the network. Furthermore, how the system will combat with cashbacks, NFT airdrops and token airdrops and other similar activities. Then the proposal itself is written in a poor way. I don’t know, how you voted Yes on such a poor proposal with so much experience. I saw you voted NWV on some non spammy proposals but in this case you voted for the proposal. I know why you voted YES. That’s your choice, I will not interfere that. But actively shaming other opinions, bashing someone for their opinion and bringing Interchain everywhere is bad, I mean really bad.

You should stop this nonsense right here. More and more people are started hating you because your irritating character. You brought a twitter conversation into the forum just to shame @Thyborg because he works with Interchain which is really sad.

Be a gentleman, not a CLOWN.

[jacobgadikian]

Thank you for contributing to an excellent and positive discourse in the cosmos ← sarcasm

Unlike yourself I prefer to discuss issues and not people but unfortunately, people who like to discuss people and find that useful, because they’re the root cause of the issue, well you know they don’t mind if you call me a pinhead or what no worries bro I got you.

I think that we can do far, far better on civility.

[xjupitar]

You could really do some civil conversation without shaming others. The way you express your issues makes it more complex and complicated. I guarantee, this will not solve your issues. It will rather create a big mess. Hope you understand and try to be civil instead of throwing screenshots and bashing them everywhere.

[jacobgadikian]

Screenshots are very important context to the situation I’m sorry that you don’t like them here’s another

Thank you @Thyborg

[hxrts]

Let’s keep this discussion on-topic. Also please try to avoid any ad hominem aspersions. Save it for twitter.

[Tiago_Dos_Santos]

0% is needed in order to mantain the core principles of the Cosmos ecosystem, in particular I’m refering to the low entry barrier. Indeed, as we have seen in the past year or so, that low entry barrier is perceived as freedom. Airdrops, bridges, fees, interchain security for big or small projects. Almost everything is free and customisable and there is no differentiation of indivuals, like there is in other chains where just VCs can participate to the party. We indivudals had our free entry in the cosmos ecosystem and validators deserve the same opportunity. 0% fees is the most important feature for any new unknown validator to stand out from the competition. The more validators the better, because competition within validators is good for the security of the chain!

If we want to make validators engaging in the building process, we need to enhance our community awareness on what validators have done and their roadmap. It’s like acting in the demand side, or better in the delegation process. To implement your idea, which is good Jacob, individuals should be able to choose validators according to their past performance and roadmap for the community. The selection process of validators needs to be improved. That’s how we can completely make Cosmos stand out from any other chain. The governance is still very old school with low engagement and almost no awareness. We can do a lot better. F.ex : Why not putting a link to the validator website, social etc. in the selection process. A validator could show off to the delegators what he did and its roadmap as well.
This would for sure improve cosmos democracy, particularly the delegation process in the cosmos ecosystem.
For sure there is a better idea that incentivizes validators to work harder for their bags and puts delegators in a better position to choose. I’m just throwing some of them out of my mind.

[jacobgadikian]

Well I don’t really like it on Twitter either, and when that becomes a part of a governance discussion on Twitter I think it’s appropriate to make sure that people are able to see and understand what’s being said outside of this forum. I’m sorry it’s distasteful, I agree strongly on that matter. However, I think that this is important information surrounding the proposal.

The way that validators and groups affiliated with the community conduct themselves let’s say on Twitter, unfortunately should likely be mentioned here because this is a place where people come for information about validators.

I don’t like getting dudleyed and you wont find me dudleying anyone-- no matter what anyone says, I don’t talk to people like that.

I hope that you will take this in the respectful manner it is intended in.

I am using the Dudley case as an example but I do intend to continue to bring governance discussion content to this forum.

Just for example, if a validator or another community actor were to behave on in a certain manner on Twitter, or post nonfactual information, that would reflect badly on the entire community, and I think it’s a good thing to make that information more discoverable so that people can make better governance decisions.

@xjupitar I don’t think that this is the appropriate place to run around calling people clowns. But I don’t think that’s appropriate on Twitter either and that’s my point. You’re helping my case here, with that.

@ghanzi the crappy part about this is that you’re right. This proposal is difficult to enforce. Like you I don’t want to see us form a cosmos Police department, the way that I think that there should work is that community members would make posts here on the forum, and then there would be most likely a governance proposal that tombstones a validator who is violating these rules. This should be possible with the changes to governance that are coming in version 46.

Really important to note that you’re fundamentally correct. I assume that you were being darkly sarcastic about the cosmos Police department and frankly I think this is appropriate dark sarcasm.

Do you have any solutions better than the one that I just mentioned?

[hxrts]

@jacobgadikian The discussion about Vulcanize’s contract with the ICF is fair game on the forum. I’d just ask that you make new thread if you want to have that conversation. It does a disservice to the important topic of validator commissions if we get into that here.

[jacobgadikian]

I think that’s fair and when I get to the office I’ll jiggle around content as described, should be an hour or two and thanks for the feedback

I also plan to continue to bring Twitter here, but not only the negative stuff, but the brilliant stuff as well. To do proper discussion we’re going to need both.

@hxrts just wanna let you know I’ve taken all unrelated screenshots out. Screenshots directly related to 76, there are going to be more of those, I’m afraid, and if that is an issue, please opine. Accuracy matters for governance discussions, and what I don’t want to see happen is gov discussions get mired w/ inaccurate information distributed on twitter – or anywhere.

Jacob Gadikian

Finally, I just need to say that I’m posting this all here, to ensure that no validators abstain based on false information. Hopefully other validators use the forum.

I also want to thank @anon21388996 for participating in governance, and thank Cephalapod Equipment for their participation, as well.

[Orageux101]

Hey guys - wrote up my thoughts and sharing it along for the wider Cosmos community in case it helps decision-making.

Cosmos Hub - State of the Ecosystem

Anon #418 {S = S}

[chris-chainflow]

As someone above pointed out, this conversation has been going for a while. In my experience, we often forget that everything changes and is changeable, i.e. nothing is permanent. When we forget this the ability to experiment and innovate suffers.

I generally feel that 0% commission is at best neutral, if not harmful. It would be interesting to see an analysis of how stake shifts around once formerly 0% commission validators raise their rates. We’ve seen over the years that stake is sticky, i.e. it doesn’t get redelegated much. Delegators tend to “set it and forget it”, so I can understand the allure of setting a 0% commission to gain attention. Yet over the long term, I don’t feel this is a healthy or sustainable approach for the validator, network and delegator, who relies on the network’s security to protect their interest.

Many smaller, independent, yet very capable operators are operating on tight margins. I know this because I started Chainflow with zero capital and have bootstrapped it into existence over the past 5 years (since the earliest Cosmos testnet days). We haven’t taken any outside investment.

These operators need to be compensated for the value they provide for securing the network and other contributions, in order for them to survive. We need them to survive and thrive if we’re to ever achieve true decentralization. (FWIW the Nakamoto Coefficient for the Cosmos Hub has been hanging out at 7 for quite some time.)

We feel ideally, maybe a 2% floor would be appropriate. However, in support of smaller, independent validator operators and in the spirit of healthy experimentation, we will vote “Yes” for this proposal.