Set a minimum commission of 5% when we upgrade to sdk 47 [fully rewritten, abandoned]

Hub Proposals
21

I think setting to 5 is a good start because business have to make money all for it.

To explain, the race to zero is not a race we want. If you are trying to win delegations by lowering your fees, you can’t sustain a business that way. For some odd reason in the space people don’t want service providers making money or running at a loss. Eventually they have to make up for the loss, which is why Sunflower as well as many others have done this. It’s not sustainable, I’m pro enterprise and winning on service not a lower fee.

2 Likes
22
  1. They lose a minimum of 5% of their staking rewards to the validators.
  2. Validators can still increase their commission to 100%, regardless of their minimum commission.
  3. New validators have no way to offer a lower commission rate to gain an advantage over existing legacy validators, stifling competition and growth.

To claim you care about your delegators losing 5% of their rewards is disingenuous at best. It’s about you gaining voting power using a cancerous strategy. 0% commission is the bait dishonest node operators use across all networks.

Delegators don’t lose rewards through commission, they pay for a service. Being up front with delegators by educating them creates loyalty. They take pride in knowing we’ll respond promptly to emails and produce educational content they value. Giving them 0% as a promotion they don’t know is a promotion is lying. That’s why it’s bait and switch. If not, show us all your marketing content that clearly tells your delegators about your plans to raise your commission as you grow.

If 5% minimum commission passes, you’re going to start making money, so good for you my friend.

Setting a maximum commission rate makes sense too. We’d support that as well.

Taxing 0% validators is another strategy that makes great sense and should be explored if this minimum commission fails.

23

To claim you care about your delegators losing 5% of their rewards is disingenuous at best.

I care about validators fleecing the users for a minimum of 5% without their consent. Open and free market, let the users decide instead of forcing them to pay you. If you’re a good validator, people will stake with you, independent of your commission. Trying to force other validators to charge the same commission as you is unethical and unwanted. Some validators will gladly run at a lower commission, and some delegators will choose to stake with them.

I understand why some validators want to force a maximum commission on the users. They don’t want competition and have an entitlement mentality that they should be rewarded independent of their contributions. Everyone gets paid, classic politicians voting themselves a pay raise.

1 Like
24

If you feel charging commission is fleecing delegators, then you don’t even value the service you provide. There are many validators that charge 10%, so a 5% floor isn’t forcing others to charge the same. They charge 10% because they have 24/7 teams and tech support, and infrastructure redundancies. They have overhead and charge for their reliability. It’s a business.

2 Likes
25

Totally agree. That’s why we need to allow for 0% commission so that smaller validators like myself can compete with the large ones. Let the free and open market decide. They can pay a higher commission for 24/7 teams and tech support, infrastructure redundancies, etc. or they can go with a lower commission validator who runs things out of his barn by himself.

Risk vs reward, let the delegators decide in an open and free market.

Furthermore, if you want the chain to grow and become further decentralized and more secure, you should allow for as many options as possible for new validators to get established. Putting restrictions that hinder growth is a bad thing.

2 Likes
26

We are a small team too, 2 people. 2 lifelong friends, one from tech and one from traditional finance.

I fully appreciate your position, but disagree. We run infra for four chains, 2 in Cosmos, one in Polkadot and Polygon. 0% validators are problematic in all of them, causing centralization of voting power and opening the door for scammers who run nodes.

0% validators accumulate stake quickly from fickle yield chasers and then dominate voting power without having worked for it. Those who work for it, care. They contribute, they vote, they educate. They show up.

A 5% floor puts the large 0% validators in a position where they have to actually go to work for their delegators, like we do. They have to show up and when they don’t, they’ll be exposed and lose delegators, which is what they deserve.

You yourself said that when you become large enough you’ll start charging commission. So, if you’re not advertising 0% as a promotion you are deceiving your delegators. What’s the name of your validator?

No more gimmicks to quickly accumulate stake to then dominate voting power, which is bad for the network.

Fickle yield chasers will then simply choose between 5% validators and avoid those who charge more than 5%, and the network will be healthier for it. All validators (including you) can then be profitable and run better equipment, and add redundancy. The network will be healthier for it.

A 5% floor also makes it much more difficult for dishonest validators to attract stake. They’ll fleece delegators on other networks instead. We deeply care about the Cosmos Hub and feel quite passionately about this topic.

A minimum and even a maximum commission is better for the network in every way. I’m sorry the competitive advantage you’re relying on is at risk, but what’s best for the network is at stake.

4 Likes
27

A global minimum commission will allow even those newest validators to earn some form of income and allow them to reinvest into their infra.

For me security and the Sustainability of validators needs to be the high priority for the Hub.

With the onboarding of all these consumer chains, the infrastructural need and demands are growing and even those who charge like 10% can at times not even break even (depending where you are in the set).

How can a validator that has 0% commission run highly secure infrastructure without incurring a heavy heavy loss? And how is that model sustainable?

The hub is going to secure multiple high worth networks so the network needs to be secured by the highesr quality of infrastructure.

I also don’t think that having a global commission will hurt the competitiveness that much, but will help with the secureness and longer term Sustainability.

(My own personal opinion)

4 Likes
28

I understand your position, I just wholeheartedly disagree with it.

I’m old. In my lifetime I’ve taken the time to educate myself on philosophical matters such as free trade, and I love that the Cosmos ecosystem reflects many elements of true free trade as well as free speech and “We the People” governance.

I don’t want to change that. I don’t want government interference in our free trade in the form of taxing end users via a forced minimum validator commission mechanism.

I suppose it comes down to your own personal opinion on the matter of “Protection or Free Trade” (Henry George is one of my favorite authors).

I obviously support the “free trade” stance, and some such as yourself support the “protectionism” stance.

2 Likes
29

Thank you for weighing in, I think it’s vitally important to have feedback from smaller validators.
Not every validator will be setting their commission at 5% so there will still be space forsmaller vals to be competitive. The other goal here is to try and ease concentrated VP, Plenty of bigger validators also have 0% or low commissions so goes against your theory that it only helps small validators. IMO the concept of a free market becomes somewhat illusory when voting power becomes concentrated. I am actually in favour of a dynamic min fee.

3 Likes
30

What about enforcing a sliding scale for validator commission, where it is increased or decreased based off of your current voting power?

This actually addresses a different problem with chain health, where the top voting power is held by too few validators, a common problem on Cosmos chains.

After some back and forth with the validator set, I wrote a proposal for the Decentr chain that was of course vetoed by the top voting power, because they didn’t want to go along with it and enjoyed their stranglehold on the chain. Here is the proposal (It’s governance proposal 8 on the Decentr chain, won’t let me link it):

Title Validator Commission Guidelines
Description Summary:
This is a signaling proposal to gauge community sentiment on setting guidelines for validators to follow regarding commission rates.

Validators are responsible for providing a stable and functional chain and are expected to work together towards decentralizing the stake and consensus as much as possible. Currently, three validators control 33% of the total delegated stake. If all three validators are down simultaneously, the chain will halt until one returns online. It is a security risk.

Validator Commission Guidelines::

  1. If you are a validator in the top 33% of voting power, you will set your commission to a minimum of 6%
  2. If you are a validator in the top 67% of voting power, you will set your commission to a minimum of 5%
  3. All other validators must set a minimum commission rate of 3%

The goal is that delegators will be motivated and incentivized to distribute the voting power and redelegate accordingly to decentralize the network better.

Voting Guidance:
By voting YES, you signal your support for having all validators adhere to the above guidelines.
By voting NO, you signal your dissent for having all validators adhere to the above guidelines.

Upon passing, validators are expected to change their commission rates according to the above guidelines. Suppose validators choose not to adhere to these guidelines. They may not be eligible for future foundation delegations or rewards and will violate chain governance. These guidelines will remain in place until another governance proposal repeals or amends them.

Proposers:
Jason Sopko | :chicken: The Chicken Coop :raccoon: | Decentr Validator
Julius Hellen | DECALIio | Decentr Validator|

2 Likes
31

Thank you for raising the topic, I think small and big validators should partake in the discussion. As mentioned earlier, the expansion of Interchain security requires additional resources, so implementing a min fee could serve as a form of insurance for validators to cover the increasing infrastructure costs. While the space for a fee competition still remains, stakers probably would pay more attention to the quality of provided services which is eventually beneficial for the Hub.

To hardcode the fee change by 1% per day appears to be a less controversial suggestion and IMO it should be accepted no matter the min fee setting.

1 Like
32

I do not think setting up a minimal commission for a validator is a good idea, mostly with the same reasoning as @jasonsopko mentioned above.

Firstly, there are some nice validators who are resorting to 0% commission, or some small commission like 0.25% (especially at the bottom of the active set) to attract new delegators, and that’s completely fine, in my opinion.

Second, it limits the % of the commission a validator can set, and also limits the % a delegator can get for their staking.

Third, we are all discussing it regarding to what Sunflower did, but how many cases we had of similar things compared to 0% validators who actually did their jobs nice and did not abuse it? I do not think raising the minimal commission would actually solve the problem, nothing stops a validator with 5% commission to raise their commission to 99.35% overnight, given they have big enough max-commission-change-rate.

This all seems like an unnecessary and harmful limitation which doesn’t solve the main issue at all and gives nothing but a guarantee that a validator would actually profit from being a validator (which IMO should not be a guarantee, but a choice a validator is making by themselves).

To state my personal opinion, I am personally disliking these 0% validators and tend to stake to those validator who actually gained their trust by contributing to ecosystem, and I treat the commission their charge as kinda the price I pay and the donation I make willingly to support them, but forcing it doesn’t seem like a good idea.

One nice thing that might actually solve this issue would be introducing an upper limit on max-commission-change-rate, so any validator would not be able to set the commission from 0% to 100% overnight, to something like 20% or 30%, so it would take them at least 3 days, then the delegators would have a better chance to see that their validator is breaking their trust and redelegate from them.
Another thing we as a community should and must do is educating existing and potential delegators on why do validators have a commission, that the commission is not the only factor that should be considered when deciding who to stake with, which factors should be taken into account when choosing a validator to stake, how to see whether a validator brings a value to ecosystem etc.

4 Likes
33

would love to explore dynamic min commission.

1 Like
34

Minimum commission makes sense. It has worked quite perfectly in every chain that has added it.

Though no-one is really forced to keep very low fees anymore, if the contribute enough to get ICF and Stride delegations.

2 Likes
35

For me, there are far better options than forcing a minimum commission. Like mentioned here only allowing a commission increase about a certain amount in specific time. Raising minimum is bad for all delegators and does not add any kind of protection.

2 Likes
36

big validator = small commission
small validator = big commission

limit high
limit low

dynamic rate between those limits

2 Likes
38

I completely disagree with this proposal. increasing the commission does not prevent any validator from doing the same thing again. moreover, it penalizes all stakers who spent time looking for a trustworthy validator with a low commission. my suggestion is therefore to solve the real problem and introduce a kind of validator score that helps newcomers to recognize trustworthy validators.

1 Like
39

0% commission validators are bait and switch and shouldnt be allowed. There are legitimate ways to increase delegations.

Two problems right now:

  1. No minimum commissions.
  2. No max_daily_rate_change set network wide.

For commission, my argument against having no minim is that having 0 commission is unsustainable and there is no reason for a validator to be running on 0% besides marketing to get delegations and then raise it. There are other avenues to get delegations that have to be explored and manipulating commissions shouldn’t be part of it. 3%-5% sounds a reasonable amount. To the ones saying that 100% of the staking rewards should go to stakers, that makes no sense unless they are running their own infrastructure and footing that bill.

Don’t think anyone would oppose the max_daily_rate_change and setting it to 5%, big enough to change commission fast but it would take 20 days to go from 0 to 100% commission.

6 Likes
40

I love this idea. To add:

  1. Validators with high VP should have a low maximum commission of 30%
  2. Validators with high VP should have a high minimum commission of 7.5%
  3. Validators with low VP should have a higher maximum voting power like 51%
  4. Validators with low VP should have a low minimum commission like 3%
  5. All validators have a commission-maximum-change-rate = 0.1 per 24 hours
  • it would take 37 days to get to 100%
Day Commission
0 3%
1 3.300%
2 3.630%
3 3.993%
4 4.392%
5 4.832%
6 5.315%
7 5.846%
8 6.431%
9 7.074%
10 7.781%
11 8.559%
12 9.415%
13 10.357%
14 11.392%
15 12.532%
16 13.785%
17 15.163%
18 16.680%
19 18.348%
20 20.182%
21 22.201%
22 24.421%
23 26.863%
24 29.549%
25 32.504%
26 35.755%
27 39.330%
28 43.263%
29 47.589%
30 52.348%
31 57.583%
32 63.341%
33 69.675%
34 76.643%
35 84.307%
36 92.738%
37 102.012%
3 Likes
41

Yes, this is precisely the reason that I have a problem with forcing a minimum commission rate.

There are some of us who make contributions to the network by footing our own infrastructure bills and paying the costs while offering a 0% commission.

I am willing to pay for the initial infrastructure costs by myself, at the risk of not making any money in the long run. My hope is that my delegators will stay with me when I do increase my commission rates eventually.

When a validator increases his commission, he runs the risk of losing existing delegations. This is the mechanism that keeps validators hovering around 5%. Increase it more, and they’ll likely jump ship to another 5% validator.

My goal is to run validators on chains at the lowest fee possible. My delegators keep 100% of their rewards. I will eventually increase my fees as time goes on and the project becomes more mature, stable and (hopefully) profitable. My hope is that some of my delegators stay with me, so long as my new commission is reasonable.

I’ve done this successfully on several chains, starting at 0% commission and eventually ending up at 1.99% to 5% commission after gaining a reasonable amount of delegations.

By forcing a minimum commission, you are removing this element from the ecosystem, discouraging new risk takers and entrepreneurs from joining and contributing to the project.

On a similar note, I’m also running my IBC relayer at a loss, footing the entire bill for the infrastructure in order to help strengthen the Cosmos IBC relayer network. I’m okay with this. Do you want to institute a minimum commission there, too, since it’s a necessary part of every Cosmos project?

I think that a much better way to prevent validators from increasing to 100% commission overnight would be to publicly show the potential risky validators and expose them before users staked with them.

Contact the wallet builders and have them display some common validator settings that could be problematic, such as 100% daily change rate and 100% max commission.

Raise user awareness and let them make their own decisions, instead of limiting freedoms.

3 Likes