Give your proposal a title:
[Proposal] Increase Validator Commission From 11.7% to 20%
Proposed by lovali (www.lovali.xyz)
We propose to increase the validator commission on delegators’ share of staking rewards from its current value of 11.7% to 20%. We believe that this change is in the best interest of the Vega network and community.
There are a number of justifications for this:
In the short term, now and immediately following the launch of Alpha Mainnet, rewards paid to smaller validators (by stake) are unlikely to cover operating costs, let alone provide any significant return.
- Currently the smallest validator is making considerably less than $500 a month in staking rewards.
- It is very likely this will remain below $1000 a month for some time after launch, even as fees begin to grow with trading volume.
- The hosting costs alone of running a performant validator node and data node in mainnet likely exceed this amount for at least some validators.
- These figures are based on 13 validators. As the expectation over the next 6-12 months is for the network to grow to 20–25 or more validators, there will be further downward pressure on the rewards available per validator.
In the medium term, the project team have signaled their intention to iterate rapidly to add features and improve the protocol. We strongly support this, however it requires ongoing and responsive engagement from all validators, which we believe will be more forthcoming if incentives are properly aligned.
- Currently, validators operate both a testnet and a mainnet.
- There are regular releases requiring deployments and other activities, both to prepare to launch new code on mainnet, and to deploy to mainnet itself.
- Incidents and issues also require validators to be engaged and responsive.
- This represents a significant time and effort commitment compared with majority of token holders who receive staking income passively and are dependent on validators for the future success of the network and continuation of such income
Increasing the commission share would therefore:
- Increase the chance of rewards covering validator costs in the first 6-12 months after launch
- Ensure that serious professional operators want to validate the Vega network
- Increase validator engagement and responsiveness to incidents and upgrades
- Reduce the susceptibility of validators to corruption from malicious parties looking to exploit the network
- Ensure competition to validate the Vega chain
For these reasons, we believe an increase from 11.7% to 20% is justified now given the current token price, reward amounts, and phase of the project.
We do not necessarily believe the commission level should remain at 20% indefinitely and would welcome future proposals to reduce the commission again if appropriate, once there is significant fee revenue on the network.
We welcome feedback, comments and questions below, and look forward to discussing this proposal openly with the community to increase the likelihood of a successful vote.
For reference, details of the current share and the schedule for staking reward payments can be found in this blog post: Vega Staking Rewards & Inflation. Staking rewards on Vega are paid to all… | by Vega Protocol | Vega Protocol.