That should be very obvious, because the moment independent validators can compete for validator slots these instantly become sitting ducks.
Well for whom and how? Subsidized validators, all validators, the network?
I imagine network performance indicators must be mediocre given that competition among validators is artificially constrained.
It benefits the network, the independent validators, and the nominators, because:
If you look at other PoS networks, validators with a 0% or 1% fee often attract the highest number of delegators/nominators. With the hard-coded fee in Moonbeam, attracting delegators through fees is no longer an option. Because of this, delegators primarily focus on APY, with APY being a direct function of the number of blocks validators make over a period of time, like 1 era, 7 eras, or longer. Although an important factor of making many blocks is luck, a constantly low APY suggests low quality hardware, poor configuration and poor or no monitoring.
Validators on Moonbeam know of the importance of a good APY to remain in the active set and invested significantly in good hardware and have a good monitoring system in place, which overall benefits the performance of the network.
Investing in good and performant hardware and a good monitoring system is costly and time consuming. However, the revenue stream from being in the active set is significant due to the 20% fixed fee. So validators are doing anything they can to remain in the set. Not doing anything they can will put them at risk losing the seat in the set and access to that revenue stream.
Moonbeam just fully launched a few weeks ago and is thus still very young. Although the focus of delegators currently is on APY, I foresee that a good APY will not be sufficient to attract many delegations long term. I believe that other contributions will be required, like the development of tools, community outreach and education, etc, to stand out and receive delegations, which will ultimately benefit the entire ecosystem.
So the point Iâm making is, as it was statistically determined by the xx team that a 18% fee benefits the validator community, why not hard-code this fee to make it accessible to all, not only TM recipients, thereby cancelling the race to the bottom?
As the example of Moonbeam has shown, hard-coding the fee does not necessarily result in degraded performance, as the focus of delegators shifted to APY. While APY is a performance metric, fee is not.
I argue that a general low fee is bad for a network, as a validator community that operates on low or no fees does not run their clients on high-performance hardware to save on costs, or are out-competed by VC-backed validators, who tend to run several validators, which is ultimately bad for decentralisation.
I admit, however, that the conditions are different in xx, as there are stricter hardware requirements (especially GPU) as in most other PoS networks (maybe excluding Solana), the xx team also targets an increasingly large validator set, and did a great job to develop a committed and decentralised validator community.
Thanks for taking time to make your points, they will be helpful to the xx Team and I hope they answer questions meant for them.
Iâll just add my own views.
Itâs always a race to the bottom, though. I imagine the first ones to drop are âamateur validatorsâ (by this I mean a validator who has a day job and runs one residential node), so itâs the same effect as POW.
Guess whoâll make it in the Moonbeam system:
I think having a fixed minimum commission only ensures that a chunk of every validatorâs earn goes to a cloud provider.
Maybe it doesnât because amateur validators are getting replaced by professional validators and pool validators.
We donât have such analytics available for xx network and the number of slots is limited, so I canât say I notice any trends yet, but once such statistics become available I think weâll see that high minimal commissions encourage centralization in both pools and hyperscaler environments which increases long-term risks of losing significant capacity at once or getting Parlerâd.
Those risks are hard to estimate and measure, so itâs anyoneâs guess whether this concern is misplaced or real.