Independent validators that only have a small amount of coins (e.g. 10k) struggle to get into the Active set often enough to make it worth while to run a node. If it is desired to keep such validators onboard it should become easier for those validators to make it into the Active set.
Lets consider 2 validators:
Validator 1: no TM, 10k self stake, 18% commission
Validator 2: TM, 50k self stake, 18% commission
When on the Waiting list, Validator 1 will show up on the Targets list with a return of ~1000%. This attracts nominators that are not aware of the dynamics yet. Let’s say both validators get elected for the next era. The TM node will get elected relatively easy, the non-TM node needs a lot more nominations:
Validator 1: 10k self stake, 320k from nominators
Validator 2: 50k self stake, 200k TM, 80k from nominators
If both validators have similar performance, they will have a similar amount of points, and a similar amount of xx rewards, lets say 300xx. The actual return for the nominators for this era will be:
Validator 1: 82% of 300xx = 246xx. Annual ROI for all nominators (330k): ~27%
Validator 2: 82% of 300xx = 246xx. Annual ROI for all nominators (130k): ~69%
Actual numbers will vary of course, but the nominators on a non-TM node typically receive a smaller return than nominators on a TM node. When nominators realise this, they will stop nominating the non-TM node and move to TM nodes. The. non-TM node will sooner or later end up on the Waiting list again for a couple of days, and the cycle repeats. More and more nominators currently are aware of this mechanism, and the time spent on the Waiting list gets longer and longer.
In the calculations above, TM is taken into account when determining the stake for getting elected, but it is not taken into account when distributing rewards. Question: would it be possible to take the TM into account also when distributing rewards? in the example above: instead of distributing the 246xx over 130k of nominations, it would be distributed over (130k + 200k). This would make the difference in ROI between TM nodes and non-TM nodes much smaller, and will make it hopefully worth while for non-TM nodes to run a node.
p.s. This solution has been proposed by various community members on Discord - I have repeated it here but I did not come up with it
p.p.s. A non-TM node with a large self stake (e.g. 200k) won’t have too many problem getting elected. It is only problematic for non-TM nodes with a small self-stake (and even for TM nodes with low TM and low self-stake).