Are validator rewards too damn low?

MainNet
1

Summary of a recent Discord comment regarding validator compensation:

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One highlight is that when considering validator compensation people commonly assume that validator rewards come from two sources: commission and dividend. The aforementioned member made a very interesting point that these must be considered separately. This didn’t occur to me before, as I also thought of it in very simple terms (“how much you make per day?”). But we shouldn’t look at it that way.

  • Reward for running a node is reward for running a node. It’s very easy to explain to all who’ve ran a Beta/Proto/Canary node. You don’t invest (nominate), you just run a node and get rewarded
  • Dividends come from capital investment i.e. nomination

At this time it’s impossible to say whether “x amount of xx” is too damn low. As validators we don’t know whether that can cover our expenses. But assuming 1 xx = US$1.5, a 5% commission and 200xx in node revenue per day, reward for running a node would be $15 per day or $450 per month.

For those who simply can’t run their node from home this can barely cover their expenses. So you must go with a higher commission, say 8%. But then the next problem is how to get elected as you don’t have “supplemental income” from staking (dividend) to rely on.

One detail interesting to me that I haven’t seen mentioned anywhere is that at present it’s not possible to analyze this because several markets aren’t yet functioning: the coin isn’t traded and wallet owners can’t invest surplus of their coins, the supply of validator slots is carefully managed, etc. Because of that there’s no way to make valid conclusions at this time.

My current thinking

  • validator rewards: given current estimates and situation, validator rewards are sustainable for residential nodes, mediocre for ISP-hosted, and unsustainable for hyperscaler-hosted nodes
  • old validator nodes with plenty of coins earned on BetaNet and ProtoNet don’t need to care about validator commission - they get a nice income from dividends and are unlikely to be interested in this topic
  • pools also primarily rely on dividend income: once you stack your node, commission isn’t that much of a deal as economies of scale make the cost of running a farm affordable

Tranche 4 and small independent validators may do fine if they run home-based nodes. Colo or cloud may or may not work, depending on variables which aren’t clear yet. But from other NPOS experiences we know it’s more likely to be challenging than not.

2

Things got worse since I wrote that. Reward economics is now distorted to the point there are barely any independent validators left.

It doesn’t make economic sense to nominate independent nodes. Take a look at Explorer and find a validator without Team Multiplier you’d like to nominate. You won’t find any.

3

So please stop with that :confused:
I not read/write anymore on Discord but stop to complain !

If everyone have the TM and a tax at 18% it’s most easy to obtain a slot with a lower commission even 15% can be good because some nominators are happy to pay less fee. Yes TM help betanet node runner because are here before on this project. The gift is great yes but it’s normal they have an advantage due to experience for running a node. Number of slots is still limited but more nodes, no more coins give less reward to everyone so should be locked else another people will complains :smiley:

For me I prefer have a network with 1000 good nodes with low timeout/realtime issues for have a huge and strong network day 1 but not the opinion of everyone and reward drop by a factor of 3…

Most comm are set at 18% it’s a pretty good reward and coins supply is limited so you received a part of the comm with your own stake. Actually it’s not sustainable but it’s an invest so you take a risk. Tomorrow the project can stop and you coin have a value of 0. Or this project can replace Ethereum and tomorrow your coin have a value of 3000 and it’s change all. Just stop and wait please.
It’s not the exchange time yet so just wait and be happy about your reward. If you can’t sustain to run a node stop and come later.

4

Completely wrong.

“Most”? Yes, because “most” validators are Team Multiplier-backed. And why that is, I’ll leave for the readers to brainstorm about.

Have you ever thought why are “most” commissions set at the maximum? What does that tell you about competition among TM-backed nodes?

What are the commissions of “not most” validators - those who validate without the subsidy?

Here’s from “robvd” on XX Discord minutes ago:

I guess this makes it nearly impossible to run a node without TM (which I don’t have). Because to enter the active set again I had to attract a lot of stake. Now that I’m in the active set the returns are low due to the large stake. So nominators leave on day 2. On day 3 chances are I will drop out of the active set again. On day 4 I’m listed on top of the targets page again (not active) with hundreds of % return. And the cycle starts again.

5

I have a node running without TM with a tax at 18% and I found nominators because my node performing good so it’s no so difficult. And I have margin to decrease my comm if I lost my nominators some have higher comm and keep their nominators too without TM.

Yes it’s easy no market no more coin so all stay like that until exchange is open and without money flow to be staked. No need any competition actually team help TM node to stay validators but come in a near future. 50, 70 or even more for some validators and other with less stake lower. Look the average of the network is above 18% and TM node can’t push higher without be penalized.

Yes and what ? I have attract until more than 400k nominator stake without TM at 18% what is the issue ? You just need to have a good hardware and performing well on the long time. You are a safe invest even if pay a little more commission.
If most validators leave it’s good because let more space for other who want validate :slight_smile:
(this latest point is the team I have asked since long time to increase number of slot and eject bad performing nodes but if they do that less reward at each era and another people will come to whining because not win enough people are never happy…)

6

:rofl:

No issue, I didn’t say it’s impossible, I said show me one validator without TM which is worthy of investing.

You have nominators (at any commission rate you set) simply because they haven’t yet figured out they shouldn’t nominate your node.

Let’s take these two nodes as an example. I’ll round the numbers:

  • node 1 - 400K stake, 200K by validator and external nominators; return rate >50%.
  • node 2 - 330K stake, 327K by the validator and external nominators; return rate <25%

Nominators in the second are getting 50% less and even so, the node is barely getting elected.

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Why would anyone who can understand these numbers nominate the second node? The moment your nominators figure this out or read this post, you’ll be out.

7

You seem have not understand something.
First node have something like 5k and 190k nominator so retrieve 2.5% on reward +18% tax.
Second node seem have something like 120k and 200k nominator so retrieve 30% on reward +18% tax so the second one without TM received much more XX at each era than the first with TM…

TM is an help only for be selected change nothing about reward.

8

This proposal is for the Team to start collecting rewards for Team Multiplier stakes.

Earnings obtained this way are to be burned at an increasing rate after each era in order to limit duration and scope of the TM program.

The remainder from TM earnings would to the Foundation until burn rate hits 100%, after which such contributions would cease.

This proposal aims to ensure the following:

(1) Continue providing election assistance to TM-backed nodes

(2) Create fair environment for TM-backed and independent validators

(3) Address lack of competition among TM-backed validators

(4) Address the network’s inability to unelect TM-backed validators with consistently poor performance

(5) Restore proper network performance and quality of service for XX Messenger and other applications that depend on it, and provide better infrastructure support the network and coin

(6) Put an end on unnecessary and increasing monetary handouts that have resulted in steadily decreasing performance and hurt competition among within both TM-backed and independent validators

Implementation details are up for discussion. An example is provided below.

== Implementation Example ==

Earnings obtained this way are to be burned after each era in order to limit duration and scope of the TM program, with:

  • 50% burned on Day 1
  • an additional 0.15% percent burned each subsequent day

This ensures 100% of daily rewards is burned within approximately 1 year of this proposal taking effect).

TM program is terminated through a community vote or other decision making, or TM multiplier funds exhausted (which would start happening at burn rate > 100% and go on for less than 2 years given the increasing rate of burn).

9

You just can’t like the team already explain. We are in a freeze state so nothing is important right now.
The team give gift on gift on gift for stop complaints everywhere but you still continue to do and this is useless.
Why change something who look good for some months and remove all for put that back. TM comm percentage will decrease overtime because no one nominate you with too high percentage so it’s just due to freeze what you write but it’s not an issue at all. Let the team manage that and do their job complaint when the coin run and it’s listed if it’s not work.

10

???

Says who?

It doesn’t work well at all.

  • cMix success rate is below 85% and it’s been 82% in recent days - between 15% and 20% of all messages fail
  • network is doing less transactions for much more money - TM tokens are not wisely used and existing coin holders are being diluted
  • there’s no solution for the poor performance of network, as long as things stay the way there are, networks who’ve dealt with this problem will provide a better service
  • there’s no chance that independent validators will come on board, so any validator expansion will depend on continued TM giveaways

First, there’s no schedule for TM wind-down.

Second, why would they not continue to nominate me (as long as I have TM)? As long as there are no changes to the program (such as those suggested above), there is no risk of any independent validators coming on board to compete with me. And even if they tried, they’d just leave money on the table.

Validator economics already doesn’t work, it should be fixed for a successful coin launch.

11

Says who?

From me :slight_smile:
Team planned that when transactions can occur and money come to the network so not the good moment for change all.

It doesn’t work well at all.

It’s true about network but not really the team fault.
Yes the team can increase the number of validators slots and let other people join but it’s over no one will received anymore TM now if not change their mind.

First, there’s no schedule for TM wind-down.

Second, why would they not continue to nominate me (as long as I have TM)? As long as there are no changes to the program (such as those suggested above), there is no risk of any independent validators coming on board to compete with me. And even if they tried, they’d just leave money on the table.

  1. It’s the new idea keep TM forever for say thank you to the betanet runner but people will stop to run a computer or withdraw their coins so the number of people will probably decrease over time “naturally”.

  2. Someone ask for 1% have a good node I will remove nominator stake to the TM nodes at 18% for win a best reward. Some people will stay for keep stability but another will move.
    TM node will be probably forced over time to decrease their comm percentage for stay competitive.

Validator economics work nicely right now. Validators win money and I’m happy with my rewards even if have no value at all actually. Validator rewards will increase with the number of staked coin but for that we need to wait unfreeze and next batch of coins sale from the team reserve if they do that no one know right now :slight_smile:

12

No they won’t, and that’s been the main point of my recent comments.

Very astute.

Which is also why I don’t want to bother arguing about this in Discord where fellow xx candlemakers use the same sophisticated criteria to support network improvement proposals. So I’ve posted it here, as a warning for potential independent nominators.

13

No they won’t, and that’s been the main point of my recent comments.

I have a friend with TM but very low TM due to very low stake and put at 5%. My friend can found nominators without issue. These nominators have switched their stake from 18% TM node to lower comm percentage node. It’s normal because win more XX at each era so that part work.
One day when listing is open TM node will not have the choice to decrease their com but look Polkadot a lot have very low fee because there is competition.

We need to wait we can change some things but later when the coin have a market value. Actually nothing have value so can’t change anything when you have no price.
Even the reward has been choose by the team because have staked more coins on boot nodes. All actual economics are fake based and we need to wait for have true economic data since November we are in waiting mode.

14

Why would they decrease their commission when there’s no competition in validator fees? And why would competition happen when it doesn’t make economic sense to run a node unless the validator has a TM?

And until that magically happens cMix will have a lousy success rate and xx Messenger and xx coin price will suffer.

No, they have a low fee because there is no Team Multiplier, so there can be competition.

That’s the same as saying anything can be changed any way we want because it doesn’t matter since there’s no price. Why not allow TM-backed nodes to set commission to 88%? How does it matter?

Inter-validator competition isn’t fake and has nothing to do with the price of xx coin. It’s relative. One makes 100, another makes 90. As long as the coin value is more than 0, the first one is better off. The same goes for commission rate competition.

15

Unfreeze will probably add competition just wait about 10 days :slight_smile:
I run without TM actually and I’m happy.

No one can know on the success rate until it’s listed somewhere.

The team have do a paper for explain why they choose 18% and why add some coins on bootnode on for increase reward at each era.

Yes I have win a lot during some months because now have huge nominators stake and now I win less because lose my TM and what is the problem ?
I’m still happy even if I win 50% less. I stay validator and some nominators trust me so I’m happy to give them some XX at each era for that. I need nominators for later so it’s ok.

Now things will change in some days so please wait and look what happen :slight_smile:

16

I’d propose a bet, but it’s probably against some stupid US law, so I won’t do it. I’m sure you won’t do better.

I’d like this to change, so that you can get your rightful rewards and the network can run better. I don’t care if somebody drops out or has to change their commission to 17% (oh, the horrors!) because they can’t check if their node is up and running more than once a week. (They’re too busy, and you aren’t!)

But it seems the Team is busy with other high priority things and the ethically challenged majority of TM-backed validators doesn’t want to complain about this situation.
“Oh, there’s a post about the problems with TM? Sorry, I didn’t notice, I was busy”. Yeah right…

17

As far as I am concerned, after the changes in Team Multiplier, this has now been fixed (and before that, the problem has been recognized by the Team).

Validators with Team Multiplier retain their advantages, but validators who don’t have it can compete with a lower commission.

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