Set a 5% Minimum Validator Commission Fee for Polkadot

Wish For Change
1mo ago
20 Comments
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51.8%Aye
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48.2%Nay
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25.78MDOT
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Hi @🌐 decentraDOT.com 🌐 ,

I fully agree with all the facts you've mentioned in the proposal and how being an independent validator becomes really challenging in the current market environment and spec requirement.

It's also a chicken-egg problem because in order to attract nominations, you need to have attractive fees, however it's nearly impossible to survive with low fees (<3% let's say) unless you have deep pockets.

Having said that, I'm not sure that setting a minimum fee is the solution. I think that the big elephant in the room that many prefer not to talk about is DOT price. If it was 3-4x from the current levels I believe this proposal wouldn't be proposed at all. Therefore, I believe the solution should come naturally from DOT price which hopefully return in the future to the place it belongs to.

We can still set a minimum fee, and when the price recovers we can reduce the threshold - it's a possibility. But again, I think that once DOT will recover, everything will be ok so we should let the market do its thing and less interfere.

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We voted Nay the last time this topic came up on Kusama, and will be doing the same this time around. Our reasoning remains the same.

No one is forcing people to run validators at a loss – we believe that this is something the free market should decide. Having a fixed minimum commission is opposite to the crypto ethos and weakens ecomonic incentives while making it harder to find their natural economic equilibrium.

A minimum commission does not allow for free market competition, at least not directly on-chain – it will, however, lead to a lack of transparency through off-chain deals that simply result in more 100% commission validators. It is up to each validator to show what they bring to the table for the commission that they charge.

This proposal (and the previous ones) solely attempts to treat a symptom of the current market conditions, which come with economic implications for all validator operators. In the end, it would allow charging nominators more without having to deal with those economic implications, but it would also act as a gatekeeper and prevent competition from potential new players that could offer it more cheaply.

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The recent reduction in inflation has already forced nominators to endure a drastic cut in staking rewards. This proposal would lead to an even further reduction in rewards within a short period. Inevitably, this would decrease the staking rate as staking becomes less attractive for nominators, ultimately compromising network security.

I am strongly opposed to imposing additional cuts on nominators in such a short timeframe.

NAY

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Instead of setting up a mandatory validator commission the community should think about reducing the fixed rate going to treasury from 15 to 10% as it relieves validators and nominators after decreasing the inflation rate. Some marketing treasury spendings didn’t turn out very useful in the past and as Open Gov is still dominated by big bags I guess these bags need to proof first that they act in order to support the Polkadot vision and not their personal preferences. When it comes down to Open Gov it’s definitely not less trust and more truth as the big bags decide which way to go. Especially in this case when DOT price rises a 5% commission is ridiculous and feels like another rip off for a small nominator bag. Furthermore as a nominator staking APR gets less and less attractive. Checking the data the number of nominators already started to reduce. I also think about unstaking as there are products offered by Hydration bringing way bigger returns.

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This approach runs counter to the principles of a truly free market, which our network should strive to uphold. Validators should compete based on their performance and value, allowing the best to justify higher commissions. Meanwhile, low-quality validators will naturally be filtered out as they fail to attract delegations, fostering a healthier and more competitive ecosystem.

Additionally, 0% fee validators play a critical role in this dynamic. They provide established and trusted validators with a powerful tool to attract buy-in from nominators, helping to secure support and expand the validator set. Without this flexibility, it would become even more challenging for established validators to set up new nominators, stifling the growth and diversification of the network. By encouraging competition and innovation, we can create an environment where all participants are incentivized to contribute to the network's long-term success.

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