The current system allows a delegation amount per validator of up to 15x the self-stake of the validator, for example:
Self-stake = 500,000 FTM (min stake)
Delegation maximum = 500,000 FTM x 15 = 7,500,000 FTM
Unfortunately having such a large multiplier has ended up concentrating a large amount of delegated stake into just a few very large validators who have been around for a long time and have concentrated power in the form of:
- DAO voting - because when a validator votes, they by default vote with all of their staking power, self-staked and delegated, and though it is possible for individual delegators to also vote as they like, voter apathy in the wider world is just as apparent in the Fantom DAO, if not more so.
- Staking rewards:
- the reduction of the staking rewards DAO proposal that passed and effectively halved the staking rewards (a positive development (imho) to make the ecosystem sustainable without relying on fees for a few more years), coupled with the low trade price of FTM vs fiat, has effectively meant that for many min stake validators (500k) running a node is a loss making activity if performed without financial help in the form of increased delegation (every validator receives 15% of the rewards of their delegators in addition to their share of the tx fees after fee burning).
- The kind of hardware required to ensure that the node is stable is available with the support of the FDN at AWS, however, this means that the network may become clustered onto one network which concentrates risks to the security of the blockchain. Already a large percentage of validator nodes are annecdotally on AWS.
- If the validator operator chooses to operate outside AWS and without the support of the FDN, then they are taking all the cost themselves and are incentivised to reduce their running costs by running their validator on the minimum viable hardware.
Additionally, this concentration of stake into just a few validators has actually reduced the security of the Fantom blockchain according to the so-called Nakamoto Coefficient which is the number of validators required to fail before the network halts due to security mechanisms implemented to solve the BFT issue on PoS networks and this calculation is purely dependent on the total represented stake of the validators.
This is not an arbitrary argument, the Fantom chain has halted before, precisely because of the largest validator nodes going offline and indeed the team acknowledged that the issue is because of the concentration of power into just a few hands, however even with the reduction in self-stake, it has not meaningfully changed the distribution because the multiplier remained.
To sum up the argument, the current 15x multiplier has both directly and indirectly concentrated both implied DAO power and real chain security issues into the hands of just a few validators on the Fantom Opera blockchain and while we are very fortunate to have very dedicated validators, that does not make any practical difference in the event of another severe and sustained outage of our largest validators.
In practical terms, if passed, I would suggest that it should be implemented such that existing delegations remain, however, once it is time to redelegate, the new multiplier comes into effect and if the current delegation is above the new multiplier limit, it would not be possible to extend the delegation with the same validator.
I will raise a new DAO proposal to reduce the multiplier and I hope that the above explanation of the reason for why this has to be done is sufficient to get a positive result.
Note: this change may still not be enough to significantly reduce risk, a cap on max self-stake may have to be considered as a follow-up proposal to further ameliorate the concentration of delegation risks.