[PROPOSAL][DRAFT] (Delaying until 1/2023 after implementation of ICS) Increase the Cosmos Hub Active Validator Set to 200 Validators (from 175)

Hub Proposals
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Summary

Cosmos Hub is, as its name implies, the “hub” of the IBC community. Since its creation, the IBC has grown tremendously. Numerous proposals have been created to determine the direction the Hub will evolve as the growing IBC evolves. These proposals and the impassioned discussions surrounding them have highlighted the critical importance of the community governance system.

A significant portion of the votes cast come from the validators. At the time of this proposal, there are 488 total Cosmos Hub validators – 175 in the active set and 313 inactive validators who do not have enough delegated Atom tokens to take part in the active set. Typically, validators that are not part of the active set are less active in community governance.

Increasing the number of validators in the active set would create additional opportunities for individuals and organizations to support the network as active validators, increase the options available to investors choosing to support the network by staking their Atom tokens, and increase participation in community governance, among other benefits.

At the time of this proposal, a minimum of 68,253 Atom (currently valued at 671,063 USD – 635,563 Euro at today’s price of 9.83 USD/Atom) is required for a validator to be part of the active set, creating a significant barrier to entry. Previous discussions within the community have indicated that Cosmos Hub can support up to 300 validators in the active set before performance issues may occur, and future engineering solutions may allow for larger expansions.

Additional Options for Delegators

Validators are not interchangeable computers. Every validator uses different equipment at different locations, has a different history of validator activities and performance, a different voting record for various proposals, a different social presence in the community, and many other differences.

It is beneficial to provide delegators with as many options as possible (to the extent possible without harming the network) to enable delegators to weigh each of these factors and feel well-represented as a part of the Cosmos Hub network.

Many validators are building within the community, have communities of their own within the larger Cosmos community, and so forth. These communities within the larger Cosmos community encourage activity and interest among community members who may otherwise be less active, involved, and invested in Cosmos. A strong and active community may drive additional interest and investment to Cosmos Hub.

However, very few delegators are willing to delegate Atom to an inactive validator, which requires foregoing staking benefits. Accumulating nearly 70,000 Atom to enable a validator to enter the active set would require multiple thousands of delegates to be willing to forego these benefits, or for a validator to have significant preexisting wealth.

Additional Opportunities for Validators

As the hub of the IBC community, a larger number of validators (when compared to other IBC chains) have been created to seek one of the very limited spots within the Cosmos Hub active set. Some validators run multiple nodes. For example, Binance operates two nodes within the top 15 validators. It is unknown how many other entities may occupy multiple spots within the limited active set.

It is beneficial that, to the extent that validators may be added without harming the network, community governance remain as accessible as possible to individuals and groups that may lack the preexisting wealth necessary to surmount the very large barrier to entry.

A new validator that is active in the community, building, competent, and hard-working may attract a significant amount of delegator interest (which may include a combination of new investment in the community as well as redelegation from other validators that may promote decentralization of the network). However, given the current cost to reach the active set for Cosmos Hub, most delegators would be deterred from delegating to a new validator that is in the inactive set due to the small likelihood of the new validator accumulating nearly 70,000 Atom (which as noted above would likely require thousands of delegates to be willing to forego their staking benefits).

Decentralization

At the time of this writing, over 33% of the voting power for the network resides with the top 7 validators. Two of the validators in these top 7 are operated by centralized exchanges. As noted above, Binance operates multiple validators, and it is possible that other entities may also do so.

If a new validator were to accrue, for example, 60,000 Atom, this would be 60,000 Atom that is not delegated to the top 7 validators, which would at least slightly help to decentralize the network. (If 25 new validators were to each put in a similar showing, this may be significant.) However, with the current active set limited to 175 validators, 60,000 Atom (most likely contributed by multiple thousands of interested delegates) would still be an insufficient delegation to reach the active set.

Voting

By voting YES on this proposal, you indicate support for increasing the active validator set for Cosmos Hub from 175 validators to 200 validators (adding 25 new validators to the active set).

By voting NO on this proposal, you do not support increasing the active validator set to 200.

Additional Information/Discussion

Forum thread: (Cosmos Hub Forum)

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I do not see any valid arguments that would make increasing the amount of validators a good idea/solution to current governance/centralization ‘issues’.

Decentralization: Will not improve by adding extra validators. People will keep delegating to top X validators because they do not fully understand how delagation works/implies. Either you add validators at the bottom of the list or not, they will never even see them.

My thought on this would be to add an extra tax/fee for delegators of top X validators to force people into understand first then acting for better decentralization until X% of total delagation is reached on that top X validators set.

Security: Tho adding more validators would mean more variety of infra, in reality most of validators are using the same cloud technologies. There only is a limited amount of possibilities for validators to make things runnable long term (cost). I do not see how 25 extra validators on the bottom of the list would bring any more variety while competing to stay in the active set, they’d already be fighting to stay active, perhaps investing more on delegated tokens than bringing new costy infra.

Additional Options for Delegators: Definitely agree, tho not sure where adding validators will have any impact on that.

Additional Opportunities for Validators: I do not see how the barrier of entry is a problem. In think you should reverse the problem.
As validators why would you be in the active set? What are your contributions? What did you build? What is your vision for ATOM?
Perhaps sharing it with the community would get some people delegating to you thus easing your entry in the active set.

I would have also like some numbers, if you add 25 validators, what would then be the minimum amount to be in the active set with current data?

TLDR: You said it all in your first couple sentences:

Typically, validators that are not part of the active set are less active in community governance.

Feel free to challenge my opinion, in am very new to this and very open to discussion :wink:

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I completely agree with you, moreover it would have been wise, in proposal 88, to adjust the tax from 2% to 10% according to the number of atoms at the delegator, in order to discourage the of atoms in the validators who have the most atoms, in favor of a deposit in the smallest validator, which would therefore have a better return…
Perhaps a proposal to that effect should be considered.

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The way I see it, if anybody - anybody at all - delegates to their buddy in the 176th spot once he becomes active, or really likes the philosophy of validator #174 but is unwilling to delegate that far down the list for fear that validator ends up out of the active set and the delegator is stuck until he can redelegate again - any little bit helps.

I’m not in love with the idea of taxing or penalizing people, investors or top of the list validators, or trying to restrict people’s options. If somebody really likes the #1 validator and that’s their top choice to delegate, and the #1 validator does a really good job as a validator, we don’t want to punish that.

Admittedly, security issues are minor. The odds of a catastrophic event knocking out a lot of validators are pretty small. But if there’s a natural disaster, war, government actions, or big technical failure, having even more data centers spread around the world can’t hurt.

I’ve noticed in the crypto world that perceptions about money are all over the place. There are countries where you can live on 10 USD per day and parts of the world where a month’s rent in a tiny apartment is 5000 USD. There are crypto investors who spend 10,000 USD on a single investment and that’s just a normal investment for them, and there are crypto investors for whom 50 USD is a lot of money.

Opinions will vary, but I consider a minimum delegation of over 700,000 USD worth of Atom to be a pretty huge barrier to entry. If you have a community of 100 supporters, they would each need to delegate 7000 USD of Atom on the average to break that barrier for you. If your community is 1000-strong, they’d each need to delegate 700 USD of Atom. There are a lot of non-western, non-first-world people in crypto, and a lot of people for whom 50 USD is real money. It’s a pretty large barrier that’s not easily overcome by just building something and being social and active in the commuinty.

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If a delegator really wants to delegate to a top-of-the-list validator – they’re a big fan of that validator’s validation history and performance, voting record, presence in the community, etc. – we don’t want to penalize that delegator for picking their preferred validator. And if that validator is a really good validator and a really good presence in the community who has attracted a lot of delegates, we don’t want to punish that. We want good validators.

I see a move like this more as an indirect way to get there by expanding the options available. Letting newer validators compete, make their case, build, be a social presence, be active in the community – without having to ask delegators to forego their staking benefits by delegating to an inactive validator, or requiring every new validator to have 700,000 USD worth of Atom to become active in order to attract delegates.

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  • About the tax, it definitely is another topic (out of context there). Validators are getting slashed/jailed for bad job, I do not see why delegators could not bear some responsibilities for the chain healthiness. It definitely it just the grand schema of things but the way I see it it would not need to be permanent and could be gradually adjusted, let’s say a target of 55% out of the actual 57.07% for the top 20. Tax runs for the delegators of top 20 validators until the target is reached. That tax could go to the community pool or help low ranked validator to offer extra incentive (temporally) until they get out of the ‘danger zone’.
    It would act as a safety net, helping those validators building without worrying to much about getting those rewards cut (being inactive) and projects stopped.

  • About security, I don’t see any valid arguments. No individual (perhaps masses/whales), can choose who’s gonna part of those extra 25 in fact nobody can pick what there infra is gonna be/if they have their own datacenter/where are they gonna be located.

  • I definitely agree with you about perception of money. I totally acknowledge that there is a barrier higher for some lower for others.

My biggest concern has to do with tendermint and it’s ability to run with many validators. Perhaps someone with more technical background should bring his knowledge there.
Referring to that post (prop10 going over the current number of validators would (noticeably?) harm the performance of the chain, increasing the blocktime.

Being in the active list should not be easy and should not just require some tokens, most of top validators really did have a great impact on the chain.

This is why we all have to option to contribute as delegators, vote governance and split our staking wherever we want.

My experience so far is that we do have enough validators, I can’t count the hours it took me to find the ones matching my criterias in the current 175 set. And it still takes me time to follow them on social media/governance to then adjust where my staking is happening.

IMHO The main Security issue we could have has more to do with concentration of staking in top X validators.
IMHO Adding validators won’t help decentralization. If they currently are in the top of the list of inactive validators it’s simply because people do not want to delegate.
IMHO We already have jailing for bad actors which then opens gate to new validators.

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That is a very good idea. It would feed the community pool and promote decentralisation at the same time.

Not that it will not be a magic pill, since a lot of people just stake their funds only to return a year later or so to see how it went.

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To add to this discussion; any expansion of validator set does not contribute to decentralisation of voting power. Fun thing is that we have had this discussion on Osmosiszone as well (Commonwealth) where it already became clear that the decentralisation trump card simply does not fly.

Read more about the analysis here:

The only upside of adding validator spots is that more people have the chance to validate, but they will compete with the already long tail of validators struggling to run at break-even. So the net result is that you will have more validators struggling to survive. And choosing to run on crappy hardware to save costs.

So if you want to expand the set, it has to be combined with another initiative to disincentivize staking at the top and reward staking at the lower rankings. Otherwise we can simply forget that we will ever reach a bit more decentralisation.

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so what could we put in place to try to best distribute the atoms among the validators?
Because sincerely, apart from a financial reward, to encourage them to go stake with smaller validators, I see no solutions…

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I see expanding the validator set as the middle ground between the status quo and some heavy-handed set of restrictions and disincentives. It is definitely not a magic pill to fix decentralization, just a potential baby step.

Adding new validators to the active set has no guarantee of causing any delegator to the top 7 validators to redelegate, or driving new delegations to those new validators instead of the top 7.

But while there’s no guarantee, newer validators would at least have a chance to be present, let the community know who they are, what they stand for, what they’re working on, and maybe interest at least a small number of delegates – and here’s the important part – without having to ask delegates to redelegate to an inactive validator and miss out on their staking benefits (potentially indefinitely if the validator never makes it into the active set).

Under the status quo, there is practically zero chance that any validator other than a person or group with pre-existing wealth would ever attract 700,000 USD worth of Atom from the multiple thousands of delegates that would likely require, who are all willing to forego their staking benefits.

I don’t think a good validator who’s in the top 20 and does great work and is a great presence in the community should be penalized with disincentives. I see more validator spots as a baby step than a magic pill that just fixes decentralization.

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And that is where we disagree in the end. You see, the current centralization of VP on chains, but also between chains is a serious threat for the survival rate for the ecosystem on the long run. We already see political votes everywhere, where people with a team delegate on chain X vote differently on chain Y if it involves a bit of risk for chain X…

Decentralisation should be at the very core of every step we take; and expanding the validator set under the pretense of decentralisation is just a false narrative (sorry to put it that blunt). Analysis has shown that it only adds to the competition in the tail and puts more validators at a loss running their service. At this rate adding new validators is more a risk to the security of the chain than adding any value.

And if we are not willing to take other steps, then we can also leave these expansions behind us. All the arguments are time and time again that we are not willing to “hurt” the top ranked validators at this point, but in the end this is contra-productive. Having a better decentralised ecosystem is worth more in the long run than the “punishment” large validators might experience. So we have to start looking beyond the coming week and look to the effect on the long run. And if we do so, then the only route to take is to make sure the APR for lower ranked validators is better than the APR at the top. Because people only are really moved by yield.

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There are a couple points that are totally missing.

  • Why do delegators choose top validators ?
    – Cause they are on the top of the list displayed on the interface
    – Cause delegators are getting staking rewards for 2 reasons: 1. Securing the chain (sure!) 2. Because they are taking a RISK

Being a validator, your cost aren’t exponential, in fact the more delegated the more you scale.
A top validator is a validator that has enough means to tackle down the most possible issues.

If you only are farming as delegator, you definitely want to minimise your risk thus delegating to top validators.

Adding more validators won’t change that paradigm.

  • Where are metrics in your proposal? Did you do your homeworks?

If we allow the 200th validators the ‘barrier’ would be down to 1,666 $ATOM which is exceptionally low to run a proper infra and have some people dedicated to maintenance/problem solving.

  • Why adding 25 validators ?

This one is for you to answer. Is it because we historically worked that way and took for granted the number?
Can you justify that number? Can you tell me which impact it will have on the blocktime?
Why should we not go back on track with the numbers mentionned on the whitepaper?

With that said, I definitely agree with all other comments. It would not help Decentralization nor Security nor bring any valuable options to any entity of the chain.

I am totally fine with it being a draft but moving forward I really thing we should professionalize and stop having to vote on proposals that are backed by statement without metrics.

@MaxZrt @LeonoorsCryptoman Please do not hesitate to dm/ping me if the ‘tax’ topic is brought up again. There are a couple risks to be accessed that I have in mind but I feel like here is not the place :wink:

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It’s worth noting that the current amount of Atom delegated to validators #176-200 (or any other validators up to #488) aren’t good metrics to rely on, because those are inactive numbers. Atom holders typically do not delegate to inactive validators because they forego staking rewards to do so.

Any validator has the potential to draw a significant number of delegates, depending on their activity in the community, if they can do it without having to ask enough delegates to reach 700,000 USD worth of Atom (likely thousands of people) to delegate to an inactive validator and give up their staking benefits.

Atom has a theoretical maximum of 300 validators before the network begins becoming noticeably slower. (I’m a little concerned that Tendermint has a 300 validator limit – 10 years from now if/when Atom is a significant and enormous player in the cryptocurrency world, a mere 300 entities controlling the chain is tiny and makes it look like Cosmos isn’t scaleable.)

Honestly, I think, given the size of the chain, the activity of the community, the relative market cap of Atom compared to every other IBC coin, and the fact that there are 488 total validators would probably warrant increasing the active set to 300. But historically, this has been done in small increments, so rather than a radical out of the blue proposal to add 125 validators, I just erred on the side of what’s been done in the past.

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Can you also share your thoughts on this one @Tritador? Because it seems you are evading this point imo… especially relevant for me to have your view on this because we have had the exact same discussion on Osmosis Commonwealth when expanding from 135 to 150 validators. And over there it did not do anything towards decentralisation… so why make the same mistake over and over again believing this time will be different?

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Also on Akash there was a similar discussion and similar results.

There was a proposal to increase the validator set size from 85 to 100 raised about a year ago.

Since then, the 15 validators that have entered the set hold 1.34% of total voting power.

@Tritador, I agree that decentralization of the network should be very high priority. But, there are higher leverage ways to work toward this goal than increasing the size of the validator set.

Adding onto this point: with ICS coming up, validators will need a lot of educational and operational support. Adding 25 additional validators to the Hub has a definitively higher cost (supporting them) than it does return (no significant improvement in network decentralization).

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Increasing the size of the active set is not a fix, just a baby step. I’m comfortable leaving complex plans regarding education, taxes, and incentives to the experts.

If 25 new validators are added, this will not cause a significant number of delegates to the top 7 to rush to redelegate to bottom-of-the-list validators.

If 25 new validators are added, this will most likely not cause a significant number of new Atom entering the ecosystem to delegate to those bottom-of-the-list validators. Some, but not a huge number (though any amount helps at least a little bit).

Where increasing the active set has a chance to shine is new validators who are serious about the task and work hard in the ecosystem. For example, if you are validator #176, you’re serious about validation, you’re building in the ecosystem, you even have a community who follows what you’re working on, and you have real potential to get your name out there – you might actually end up with, let’s say 50,000 delegated Atom if you get promoted into the active set by expansion and work hard at it.

That doesn’t fix everything, but that’s 50,000 Atom not delegated to the #1 validator on the list. Every bit helps. (And if multiple new validators were to put in a similar showing, those bits help more as well.) It’s worth noting that 50,000 Atom – a huge amount in the eyes of most normal investors – currently worth about 480,000 USD at today’s price (and that’s an under $10 bear-market price), is still not enough for a validator to reach the active set today.

Without expanding the active set to lower the bar to entry, there is a practically-zero chance of the above happening – of any new validator getting multiple thousands of delegates to delegate over 68,253 Atom (currently worth about 655,000 USD at this minute’s price of 9.6/Atom) to an inactive validator and forego staking benefits. There just aren’t thousands of people with that much money to spare willing to give up staking rewards. The 175 validators we have currently are a pretty much a permanent and unchanging active set with the entry cost being so large. Only a wealthy entity (likely from validating on other chains) would have enough Atom to buy its way into the active set.

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That is a different reasons for expansion than decentralisation.

Time has shown that the 50k ATOM you are talking about is in general not coming from the top ranked validators… but from the tail of validators already. So in terms of decentralisation it does not add any value to expand.

If you want more validators to take part in the validating business of the Hub in general, then we have a different discussion. There I am more keen on following your line of reasoning… but please keep the text for decentralisation out of the proposals, since it hurts more than it does good in the discussions around that specific subject.

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Tritador

1m

I appreciate the feedback. I assumed some amount of the Atom that ends up delegated to a new validator would come from the top of the list, just because statistically that’s where a lot of Atom is. But maybe that’s not the case and the top of the list is mostly stake-and-forget Atom that never moves.

I’ll make some edits to soften the decentralization language and make some adds bring out the other advantages once the workday permits.

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Yeah, I really hoped in the past that an expansion would work that way… but it sadly doesn’t…

I think your statement “stake-and-forget Atom” is true. People delegating in the top are often also not people very much engaged, but rather wanting to stake their coins safely and return after a loooooooooong time seeing rewards on their coins. Active people are more keen to redelegate, because they understand the value of decentralisation.
But that is also why some sort of bonus for delegating to lower ranked validators is needed. Because APR chasers will then take a bit more risk with a slightly higher APR >> and we will get more decentralisation of VP.

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Thanks again for all of your feedback. I made some edits to focus more heavily on some of the other advantages of expanding the active set, softened the parts about decentralization, and tweaked some things per other comments in this thread.