Reduction of Validator Delegation Self-Stake Multiplier from 15x

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.

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As well the minimun stake is very high in comparason with other chains and is a big factor that will make a big change in the number of validators as well.
Minimum stake to become validator in diferent chains:
500k fantom ~ 162k$
32 eth ~ 53k$ ~ x3 less than fantom
2000 Avax ~ 34k$ ~ x5 less than fantom
1 matic ~ 3$ ~ it’s over 9000

In general I agree, the problem is we have no idea how the network will perform with 1000s of nodes, a conservative method like proposed would make the increase in node numbers more gradual and would allow time for the assessment of the effect on the network with more nodes. We don’t want to see then network get slower, which may be one possible consequence.

Some other ideas that have been proposed in other discussions:

  1. Set the max self-stake to a percentage of the overall stake and leave the multiplier as is
  2. Set the max self-stake to a fixed amount and leave the multiplier as is

And indeed combine this with a reduction in the min stake

it could be simplified even easier than that though. just create a max cap in delegations and keep the multiplier. example a max cap in delegations of say 50 mil or 75 mil max per node.

reducing the amount of self stake would most likely have a negative impact. with our current set-up. who is going to run a node at a loss. they would have to run less costly equipment.

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I agree with the assessment that proceeding with the voting on reducing the delegation multiplier is necessary to address the issue of power concentration and potential security risks within the Fantom Opera blockchain.

It is absolutely imperative that we emulate the example set by Polygon (MATIC) by decreasing the requirements for becoming a validator. This will increase the number of validators on the network, thus ensuring that no single validator holds an inordinate amount of power, and enhancing the security of the network.

To note that the fact that Fantom has been offline in the past due to the concentration of power in just a few validators is a scary reality that we must address. This serves as a reminder of the importance of decentralization and security within the network

This will certainly break up the first 4-5 nodes but I’m not sure it will do enough to ensure network security, I think if we went that way the cap would need to be lower

I like the idea of changing the multiplier or fixing the max self-stake via % of overall stake because it is dynamic and responds to the growth or shrinking of the overall system without needing to make further changes. Any Max/Min with a static value would almost certainly need further adjustment later.

actually having more validators will not ensure that. it doesnt matter if you have 1000 validators. if people that are staking join the biggest nodes. having 1000 nodes doesnt mean anything if everyone staking stakes on 5 nodes

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