Tendermint & Decentralization

Hi 2 all

I like to start a discussion, put the spotlight on something I believe is very important.

Introduction
The basic design of the excellent sdk tendermint leaves one important implementation topic over to the projects themselves.

Now a couple of years down the road it shows that all projects where so busy building their dream and never seen before technology that all of them are struggling with the force of mass movement. I’m talking about decentralization, indeed the lack of it.

Explanation

As a node operator of several tendermint based projects it became clear that the balance of delegator / validator ratio is off in all of them. Thinking about it and while reaching out to the teams, some root causes came to light.

1, force of the masses
2, companies running nodes (later more)
3, the lack of incentives to decentralize
4, the lack of measures to decentralize
5, conclusion

  1. Force if the masses

The masses tend to look for peace of mind and max profit.
Peace of mind brings them to biggest and recognizing names on the list. Max profit looks for the one with the lowest commission.
So any validator with a million+ and 1% or even 0%! Commission is undeniable the biggest magnet.

I Wil come to the lack of measures in tendermint later

  1. Companies running nodes

Companies running nodes is a good thing in itself. We need reliable and large enough validators, close to team (?) to keep the chains secure and up.
There is a danger also, nowadays we see the larger wallets offer staking solutions and they either run a node themselves or form a partnership with a big node provider. In all of this the fast majority of the stakers aren’t aware anymore of the whole validator / delegator principle of tendermint. It’s hidden inside the wallet.
Wallet users simply push a stake button and hare happy with whatever % they recieve.

The danger here will be that a small group will acquire the majority of the voting power to the projects. They will be able to have a huge influence on decisions made by the projects. Not yet maybe, but for sure in a couple of years time. I even feel like the projects will over time lose their independent autonomous state to the big nodes. Which will hinder innovation.

  1. The lack of incentives

Tendermint has no incentive measures build in to give guidence to masses.

An incentive could be that larger nodes, % wise, get slashed on their rewards. Even to the limit that they have to pay for new delegators. (negative rewards) Incentivising them to disable the delegate button up until other nodes have picked up %wise and grow further together

Wallets and companies
The lack of incentives for wallets to decentralize and the lack of possible measures has lead to the fact that wallets actively refuse to talk to validators out of top 10… There is no need for them.

  1. The lack of measures

Decentralization is the first principle of pow. (yes finally that reference) everyone with a computer or graphics card can join and play a proud and equal part in the security of the chain. It’s designed that way. Now tendermint seems to lack design techniques to prevent centralisation.

Like, delegating as to equally splitting the delagation to all (proven good performing) validators. Base for a good formula can be the selfstake.

Oh yeah. Selfstake, a mostly overlooked topic. Even among the biggest validators the selfstake is often nothing more then a tex-mex meal… No measures in place to prevent validators to start with 1 coin and delegate a million to themselves. This behavior completely undermines the whole validator-delegator principle. Why not just put a measure in that a validator can never grow bigger as 100x selfstake? (Nr is example)

There is no minimum commission rule. Being large with 0 or 1 % commission and sucking all the live and opportunity out of your fellow colleagues is possible and a known technique. One can raise the % as soon as smaller validators give up. Filling the newly open slots themselves with a node by outbidding newcomers.

  1. Conclusion

I probably missed a few facts and being an outsider I have no insight in future features. I am willing to put the spotlight on a probably overlooked part in the root design of tendermint though.
Human behavior and greed. There is no reason to blame anyone here but I would like this to get proper attention and the transparent discussion it deserves.

The current implementation shows signs of traditional finance. Power and wealth is drawn to the richest few like poles steer a compass.

I see this as a huge danger for the projects based on tendermint and ask the team to give a solution priority while we are still in the early phases of the industry.

I also call out to the larger validators as you can make a huge impact while cosmos tendermint is not (yet) forcing measures.

Centralization should not be a issue in any crypto project.

Thanks for reading to the end!

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