Four hands, two sides, one debate. A Tale of 0% commissions on the Cosmos Network
What could be better to raise the temperature of this hot summer than a healthy debate?
Here is the chronicle of the conversation between me and Riccardo a few minutes after the publication of the Aurel (@awrelllRo) tweet about a way to guarantee the safety of validators in cosmos, which has inevitably brought both back to the current “problem” of 0% commissions.
The debate
D - Ricky, why are you so determined to adopt a system of minimum commission percentage? What would you like to avoid by doing this?
R - If you keep 0% there will be a race to the bottom, where everyone will decrease their commissions in order to have more delegators. The problem is that only companies with large capital will be able to do so. The others will simply see their delegators go away in search of a higher rewarding node.
D - You know, I think that a race to the bottom is statistically possible, but I don’t think we will see it happen in the near future. Diving deeper, we can examine two different aspects: the economic one and the social one.
As far as the economic sphere is concerned, commissions will never go below the minimum threshold of sustainability of each individual validator. And this does not necessarily translate into 0%. Very often this value is actually identified in a significantly larger amount. There are very few validators in the top 20 — three to be exact — who have managed to identify and effectively implement a policy of monetization at least in part alternative, and honestly I have every reason to believe that it is not in the ability of many to emulate them.
Speaking about the social sphere, instead, do we really want to create a precedent like that in an ecosystem totally devoted to decentralization? Arbitrarily forcing microcosms to change their balance could create tensions and dynamics absolutely harmful that could bring more negative consequences than the situations they want to purge are.
Will only companies with a large capital be able to adopt such a policy? Once again, no. Data in hand, in the top 20 there are only 3 with 0% commissions and these are Sikka, SparkPool and Forbole. And as much as I personally have a lot of respect for Kwun and Terence, we can’t honestly compare their independent startup to many other companies in Cosmos in terms of capital. As I said before, it’s all a game of balance. And these three realities are proving to be quite skillful.
As for the delegators themselves, of course, there will always be a natural trend that leads to those who manage to offer the lowest commissions. But let’s think about it for a moment: would this change if a minimum compulsory percentage were included? I don’t think so.
It should also be remembered that the commissions are only part of the factors to be evaluated at the time of delegation. In fact, I would be more than happy to pay a higher percentage if this allowed me to support a project that I think is particularly valuable for the growth of Cosmos.
R - Ok, I see your point. But how do you think validators will provide their services safely without a capital? Security audits costs money, as do secure hardware and facilities in wich to put them. If you cannot have a way to earn money outside of commissions, and you are forced to lower your percentage due to other validators doing so, how can you afford to take the precautions that a system like this requires?
D - You know, the idea that a higher commission percentage gets delegators more security about the validator itself is quite interesting. Let me explain what I think about it with an example.
How many times have you gone to a renowned restaurant to eat spending a lot of money and later thought that the take away pizza place on the corner offers dishes prepared with ingredients of better quality at less than half the price? It is simply not possible to guarantee that quality and safety are proportional to our expenses.
On the other hand, if we want to say it all, the fact that we have very limited revenues means that validators will have to put in extra work to monetize. This could be done through complementary activities that involves been active and collaborative with the community of which they are part, de facto bringing more value to the community itself.
However, I really liked Aurel’s proposal that aimed to assign a total of 125 on-chain badges to validators whose services were part of a proven quality. In my opinion this would really be a turning point towards an increasingly secure network and would really be a great achievement for everyone. What do you think about it?
R - I really love this idea, and I’ve been one of the first supporter as soon as it has been brought up on the Cosmos Network VIP chat on Telegram. The only questions that arise in my mind are: how can we decide who is going to perform the security audit?
If we let top validators decide, they might create a “cabala” and elect those who are more interesting to them. This could lead to cheating auditors that assign badges to the validators that does not pass the checks just because they have been elected from them (and thus making money from the job they are doing). A sort of bribe let’s say.
What I have proposed inside the chat is to discern the current voting power from the voting power of this kind of election. I think that if all validators had the same voting power this could come out as a very strong voting system. Let’s say, for example, that each validator will have 1/N voting power, with N being the number of currently active validators during the vote. This will mean that in order to cheat the system and elect a corrupted auditor, validators should come together in a “cabala” of at least 51 nodes. This is much harder than coming together as 5 nodes (which currently own more than 50% of the staked ATOMs).
I really think this system will incentives validators to put more effort into the security of their setup. Not having a badge will mean that delegators will be less prone to delegate to you, even with lower commissions. This could then lead to increased commission percentage in order to perform better and better audits and buy more secure hardware. Maybe we could even see a sort of ranking of security, who knows.
The most difficult point is however going to be the education part. We as validators, developers and Cosmos zone owners should teach delegators to read those badges, and help them understand what their presence (and more important, their absence) will mean. If they won’t, then badges will just be a shilling icon next to validators’ names, and nothing more.
Final thoughts
As we’ve seen, we think that there can never be a conclusion to this debate. Both positions are largely debatable and supported by concrete data that cannot be reconciled with each other.
So where is the point of all of this?
Growth. Comparison is the thing that helps a community the most. It is useful to unite, understand and give birth to new ideas that meet the needs of each participant. But all of this cannot exist without respect. As members of this ecosystem we are obliged to accept the decisions of the majority, but also the majority can not forget that we are all in our own way actively contributing to a single goal that is the growth of Cosmos.
We at CommercioNetwork think that confrontation is the best thing, and discussions like the one we’ve seen above and inside other chats are the ones that signal that Cosmos is an active project, full of people that contribute and are ready to expose themselves in order to defend what they believe. We really hope that this never changes, as it is the fuel that keeps pushing the rocket to the sky. 🚀🌟
