Learning from Staking V1: A Discussion on Commission Policy and Stake Distribution

🤷‍♀️ All-Purpose Hangout
1

Introduction

The launch of Staking’s first stage has been exciting to say the least. With the incredible support and participation from the community, in just 3 weeks there are over 85 validators, 50,000 delegators, and more than 100M STRK staked, along with 3 major LSTs and numerous integrations.

This initial v1 launch was designed, among other things, to gather feedback early, which will be considered thoughtfully and transparently. Specifically, it highlighted two significant challenges: top validators competing at 0% commission and growing concerns about stake centralization.

This blog post aims to discuss these challenges and gather your feedback on potential solutions. Please note that the proposals below are exploratory and meant to spark discussion, with no commitments to implementation or specific timelines at this stage.

P.S. Discussions around staking and voting mechanisms are in progress and will be covered in a separate blog post.

Commission Increases

Currently, validators’ commission rates can only decrease, which limits their flexibility in responding to market dynamics. Additionally, out of the top 10 validators, 5 currently operate with 0% commission. While this benefits delegators in the short term, it raises concerns about long-term sustainability and the ability of smaller validators to compete.

This is why commission increase makes sense. As highlighted in the community forum (SNIP 18), this can be a sensitive topic. Sudden or extreme changes in fees can impact trust and engagement. Therefore, the goal is to provide validators with economic flexibility while maintaining fairness for delegators. Potential mechanisms include:

  1. Advance Announcement of Fee Changes: Requiring validators to announce commission changes at least one month in advance, giving delegators ample time to make informed decisions.
  2. Rate Restrictions: Limiting the pace of commission increases to a maximum of 1% per month to ensure gradual adjustments.
  3. Self-Imposed Maximum Commission: Allowing validators to set a maximum commission cap, which they could use as a marketing point to attract delegators. This can be implemented as an eternal commission cap or with a time commitment, i.e. maximal commission for the next year is 7%.

As a next step, mandating a minimum commission fee could be considered. Such a mandate could help validators fund their hardware costs and prioritize service quality over unsustainable price competition. Additionally, this approach could support smaller validators by helping them cover operational expenses and build sustainable business models.

Stake Centralization

Stake centralization poses a clear risk: excessive concentration of stake with a few validators can undermine the security and decentralization of Starknet.

To address this, we propose a centralization commission rule is proposed. For example, if a validator accumulates more than X (10% for example) of the total staked amount, an additional Y% (5% for example) commission could be added for each percentage point above the threshold. This mechanism could be implemented as either continuous or stepwise.

This approach aims to disincentivize STRK holders from concentrating their delegations with a single entity, encouraging a healthier stake distribution. It would also help mitigate the “0% commission” race, which disadvantages smaller validators and makes it harder for larger ones to remain profitable.

It is important to mention that Validators can bypass this restriction by joining the protocol with another address at the cost of the minimum stake (20K STRK). In such a case, social consensus could prevent these Validators from getting delegation traction.

Summary

The success of the staking protocol’s initial version is a testament to the Starknet community. At the same time, it has highlighted areas for improvement to ensure the protocol’s long-term sustainability.

It would be great to hear your thoughts on these issues and the proposed solutions. What do you think should move forward or be refined? Is there anything missing? Let us know!

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You’re doing a nice work. But you should increase the validators minimum stake to 50k STRK or so.

3

Thanks!
Can you share more reasoning for the increase? and why 50K?

4

To ensure security and contribution to network’s success. Making sure there are no malicious validations. IMO

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I understand, changing this is not trivial, and we had extensive discussions on this parameter prior to V1 release. With Delegation most have much more than 50K. So thanks for bringing this up, and let’s see what others think :pray:

6

same as Natan i believe many validators has much more than 50k in the pools.
those funds are in “less risk”. i think there should be some incentive to stake your funds instead of “self delegate”

7

So one of the proposed ideas incentivises this (the last one).
I would remind that delegated STRK will also be slashable if the Validator is malicious, so it is in the same risk, just represents different interests.

8

I think we need to not only raise the minimum STRK threshold for validators, but also make the minimum $10 for delegators.

9

Thank you for sharing, can you give some reasoning as to why for both?

10

In my opinion, whoever delegates 10 strk is more interested in the project and decentralization than the user who spent a couple of cents on it. As for the minimum threshold for validators, at the current rate, this is not a big threshold for filtering out low-quality validators.

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I believe that one crucial element is missing from the fee increase mechanism to ensure fairness with delegators: requiring delegators to explicitly sign off on the new fee. Zero-fee validators explicitly promised stakers, on multiple occasions, that they would keep 100% of their staking rewards and earn these rewards with zero fees. Therefore, it is imperative that users explicitly approve any fee increase.

Simply publishing the change in a blog post or on X is not sufficient, as many users are likely to miss it. To avoid a repeat of the “scamnet” scenario, which could harm the entire network, users must be given a clear choice.

They should either agree to the fee increase by signing a dedicated fee increase transaction, explicitly signaling their consent, or withdraw their funds and potentially switch to a different validator.
This approach upholds fairness, transparency, and trust within the network.

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I think the launch of Staking’s first stage has been an incredible milestone for StarkNet! The community’s participation speaks volumes about the ecosystem’s potential and collective enthusiasm. It’s great to see these challenges being addressed early on, this approach is key to long-term sustainability.

Regarding commission increases, I think the proposed mechanisms strike a good balance between flexibility for validators and fairness for delegators. Advance announcements and rate restrictions would certainly help maintain trust and stability. The idea of self-imposed maximum commissions is particularly intriguing, it could foster healthy competition while ensuring delegators feel secure about their returns. Perhaps we could also explore incentivising validators who maintain competitive yet sustainable commission rates?

On the topic of stake centralisation, the proposed centralisation commission rule is a clever way to encourage a more even distribution of stake. While it’s true that validators could bypass this restriction with multiple addresses, fostering a strong social consensus could indeed be a powerful deterrent. It might also be worth exploring additional incentives for delegators who choose smaller validators, maybe a bonus mechanism tied to their contributions to decentralisation?

Overall, these ideas are a great starting point, and I’m excited to see the community’s feedback shape the future of staking on StarkNet. Let’s keep the momentum going and work together to refine these proposals for an even stronger protocol!

13

Thank you for sharing your concerns. While the idea of requiring explicit consent for fee increases is understandable from a fairness and transparency perspective, it is important to consider how staking fee adjustments are handled across major networks. Out of Cosmos, Aptos, Sui, Avalanche, and Osmosis, none have a mechanism where delegators must explicitly sign off on fee changes.

The only chain (chains) I found implementing safeguards in this area is Cosmos, which introduced a max commission commitment and a max change per month commitment. These measures help protect delegators but still do not involve explicit transaction approvals for fee adjustments.

Moreover, validators generally have a strong incentive not to alienate their delegators with sudden fee hikes, as it would directly impact their own stake and reputation. Transparency is in their best interest.

Additionally, Starknet provides a straightforward switching mechanism that allows delegators to react quickly if they disagree with fee adjustments. It doesn’t involve a lengthy 21-day unbonding period seen on some chains, making it easier for users to change validators if needed. We can also encourage dApps to integrate tools that simplify this process further, ensuring users remain empowered to make informed choices.

Thank you again for raising this point. Maintaining fairness and user trust is a shared priority, and we’re committed to refining our approach to serve the community’s best interests.