Proposal: Quadratic rewards for validators

disclaimer: I currently run a validator, and this proposal benefits me.

One of the important roles in a cosmos blockchain is the role of the validator. They need to be stable, fast, and as decentralized as possible.

Others are proposing to use validators to ‘reward’ protocols for their work. Which I believe is tangential to both this and the number of validator proposal.

The challenge as I see it, is that the current validators on the list are not able to generate enough income to pay the hosting bills. Which can lead to good validators exiting, or taking shortcuts to make ends meet, as well as having a few key individuals able to control the governance of the network.

The other challenge we currently have is that the 5 validators currently make up 33% of the staked luna, (50% is controlled by the top 9).

What I am proposing is to use a quadratic style approach. In this example, I have used the square root of luna.

What this does is spread the load differently than regular, making larger amounts count a bit less than just the straight number.
so if we use the SQRT() approach, now we get the top 11 people controlling 33% of the vote (up from 5), and the top 20 validators controlling 50% of the voting.

This mechanism can also be used when it comes to validator rewards. In a nutshell, instead of getting rewarded on the percentage of votes you have in the pool of staked votes, you will be rewarded on the
percentage of votes you have in the SQRT() pool. This changes it so that the smaller validators get more $, and the larger validators get less (like 50% less for the top ranked validator).

I estimate it takes 800 luna to run a validator a year. (maybe more after today) … I’ve highlighted that line in the spreadsheet below.

The other adjustment I thought of was not including the ‘self-delegated’ amount in the SQRT() calculations, so validators could always self-stake their own funds to enhance their rewards/voting ability… but I thought I’d leave the simpler version up for now, and see how people feel.

disclaimer: I currently run a validator, and this proposal benefits me.

10 Likes

Initial reaction: I support this proposal. It’s just the thing to improve decentralization of power & rewards, without needing to regularly campaign on ideals in order to do so.

3 Likes

I support this; it’s important to promote decentralization in governance decisions; as the system matures it will be ever more important.

1 Like

It may be difficult to get to pass with the larger validators voting against it but it seems like a good idea. Improves decentralization. Makes it that much harder for a wealthy entity or government to take over Terra. With that thought I think it’s best to not exclude the self delegated amount. Or allow full rewards but sqrt for governance…?

Thinking about this some more. If this were to affect governance it would have to apply to everyone. If I remember correctly an individual can vote their staked luna and override what their validator voted. It would be strange for the vote to count more if it came from the individual vs the validator…maybe that’s okay… or maybe we want to to apply to all and prevent whales from having an outsized control of the ecosystem.

good stuff

yes. an individual is better served by voting themselves. (and it would be a way to ‘game’ the system, by having lots of little accounts instead of a single large account.

I’m hoping someone from TFL will weigh in on the technical ability to do this… I plan on putting this up as a ‘proposal’ to vote for in 2-3 weeks if TFL is able to actually code this kind of thing in their voting Smart contract.