Validator Commission - A competitive marketplace for staking

Hello Everyone!

I have yet to have a fruitful conversation and discussion about the future Validator ecosystem and what the marketplace will look like to attract delegators.

After fiddling with the Reward calculator and the information provided in the recent hashout I have come to a few conclusions

  • Delegation and total staked pool values are extremely important for the validator to increase their earning potential. This is quite obvious because the increased pool size has more chances of being selected. Therefore the competition for delegators will be fierce indeed.

  • Single digit increases to commission rate have a drastic effect on the total validator earnings. I believe the Validator ecosystem will boil down to sub percentage point commission rate comparisons. The question is what is fair? I am curious about how the market for this will change over time especially as the starting rate suggestions are at 1% (taken from the hashout). Could we see commission rates as high as 10%? Does anyone have any experience from validator commission rates with other projects? It would be a great reference point.

  • Self compounding rewards will have a large impact on total earnings. This is also obvious because in any compound interest rate system there is a extreme advantage to increasing total initial principle. I believe this should lead to a healthy increase of total supply of coin but also allow for more diffusion into the wider marketplace as delegators and validators take profits from earnings.

These are just some of the thoughts I have had in consideration of the coming mainnet and would love to begin a thoughtful discussion.

Cheers!

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In addition to my post made in the Governance thread I wanted to follow up with my previous post here to stimulate further discussion.

With phase 1 of the mainnet launch we are going to be using company Validators with a base commission rate of 1%

My question as a followup is on how we will evolve into the later phases moving to community validators and the commission rate competitiveness that will surely take place.

Company validators.

  • Will they be taken offline as a validator density is achieved? If so what would the thresholds for such an event occur?

  • With the base commission rate of 1% that will set the standard across all of the ecosystem. Will validators be able to set fractional commission rates IE 1.25%?

  • Will there be a process for a validator to shift a commission rate without taking their node offline (this has been answered in the past No, but I bring it up again in relation to this question)

  • Will validators have any reason to ever increase their commission rate above 1%? This is especially the case if there is company validators running forcing a base commission rate at this 1% value.

Looking forward to more discussion!

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As we open up validators to the public, it’s will be healthy for the market to decide on the commission rate. If the rate goes higher (validator earns more) it will encourage more validators to be created and hence healthier for the ecosystem. I certainly hope we can have healthy and fair rate for both delegators and validators to thrive.

You are right that initially company validator will only charge a symbolic 1%.

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Glad to hear. I do believe the market can create some interesting incentives to attract delegators even with potentially higher commission rates.

I am very excited to see how all of this evolves!

Thats one of leading validators as an example
there are multiple stuff majorly costs of running,node 24/7 without any slash occuring

So comes to point of balancing quality and performance, some validators will choose running there nodes via rental from functionx foundation others choose do it locally, of course costs of each will be different. As well as the choice of validator and calculation.

How far along is the Cosmos blockchain? I havent done much research into them.

My concern about the validator nodes is that being stuck at whatever commission rate you initially assign could harm things as time progresses. Being required to shut the validator Off to adjust commission rates to better reflect the changing inflation value would be detrimental because delegators might not recommit or would be unaware of the node restarting.

One proposal I thought about would be to create a system for a validator to set up a notice of commission increase that pushes or sends a warning to delegators with plenty of time for them to choose to stay delegated or not. Perhaps a 15 day window or like wise? If I was delegating I certainly wouldnt want to wake up to a sudden 3% commission increase without notice.

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https://link.medium.com/JDoJYmwlzhb this is an article made by the validator on early days.
Btw the fx ecosystem is inspired from cosmos as strucutre and model. So looking into cosmos will show how fx pos will workout. Of course it might vary because of generation difference but its good example

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Thanks for the heads up on the structure similarities. Lot of reading to do!