Minimum Validator Commission Rate Parameter Signal

Background

The topic of a minimum validator commission has been discussed on several previous occasions [1-3]. In these discussions, both on the forums and during governance calls, no clear consensus was reached. Several questions related to a minimum validator commission were included in the 2022-Q2 Validator Survey [4]. Twenty (65%) respondents supported a minimum validator commission in principle, with five (16%) neutral, and six (19%) opposing respondents. The median ideal minimum validator commission was 5%, with the median supported minimum and maximum being 3% and 5% respectively. (Figure 1) This signal proposal aims to determine community sentiment regarding the implementation of a minimum validator commission rate parameter that can be changed through on-chain governance.

Technical Implementation

Implement a parameter to set a minimum validator commission through on-chain governance in a future software upgrade. The value should be set to 0 in the upgrade itself, with a separate proposal to increase the minimum validator commission parameter following a successful upgrade. Currently it seems that 5% is viewed as the ideal minimum validator commission. A recent Pull Request for Terra to implement a similar functionality can be found here: https://github.com/terra-money/core/pull/47 Other cosmos chains with a similar parameter are amongst others: Juno, Chihuahua, Kujira (on its way), and Terra2. Additionally, in Cosmos SDK 0.46 a minimum commission will be baked in, however we will most likely not be upgrading to that version in the foreseeable future.

Voting Guidance

Yes - You (strongly) agree with the implementation of a minimum validator commission parameter. AND You think this should be implemented in the near future. No - You (strongly) disagree with the implementation of any minimum validator commission. OR You think a minimum validator commission can wait until a future upgrade to a Cosmos SDK version that features this parameter natively. Abstain - You do not have a strong opinion on the implementation of a minimum validator commission.

Why this approach?

Separating the process into multiple proposals: should there be a parameter to set a minimum validator commission, and what should the value of that parameter be, enables voters to vote on one issue at a time. This also prevents cases where someone would like to see a minimum validator commission parameter implemented but disagrees with the proposed value.

Arguments in favor:

• Prevent a race to the bottom (0%).
• Shift competition on pricing to competition on contributions.
• Makes uptime even more important as that will be the main way to increase rewards.

Arguments against

• Any value other than 0% when 100% is possible is an arbitrary number.
• Validators should not be limited in their methods to compete for delegations.

References

[1] https://forum.scrt.network/t/minimum-validator-commision-discussion/5233 [2] https://forum.scrt.network/t/commission-rates-the-race-to-the-bottom-floor-proposal/2078 [3] https://forum.scrt.network/t/governance-meeting-notes-mega-thread/3946 [4] https://forum.scrt.network/t/2022-q2-validator-survey-report/6167 Figure 1 & Forum discussion: https://forum.scrt.network/t/minimum-validator-commission-rate-parameter-signal/6257