Discussion: Reducing validator set or increasing the minimum validator commission?

Hi Persistence Community, Dan from Cosmonaut Stakes here.

With the passing of proposal 109 which halved inflation (link HERE), inflation and thus staking APR will gradually and substantially decrease over the next months.

While this brings many benefits, it also brings drawbacks - one of which is validator revenue. As the staking APR decreases over the next months, validators will find themselves between a rock and a hard place: sunset their validators or raise their commissions.

As the proposal already passed a few weeks ago, we need to discuss what’s the best option for validators going forward.

During the proposal discussion, two options were given:

  1. Increase the minimum commission parameter (from 5% to 10%)
  2. Cut the validator active set in half (from 100 to 50)

Now, none of those two options are ideal. Some validators always have their commission at 5% (or similar) and increasing the minimum commission parameter will oblige them to have a 10% commission. On the other hand, cutting the validator set in half will oblige 50 of the current validators (spots 50 to 100 by voting power) and the services they offer for the chain to vanish.

As mentioned before, none of these situations are ideal, but I’m not sure if there are any other alternatives.

Something to consider is that the Persistence chain is home to the Persistence DEX (formerly Dexter) and pSTAKE. These 2 protocols generate fees which could be redirected to increase the staking APR. In addition to that, I believe there’s also another form of revenue such as MEV capture using Skip Protocol.

Unfortunately, as far as I’m aware, the current revenue generated using the 3 methods mentioned above is minimal and their impact on the staking APR would be minimal, too.

Thus, I’m asking you, the Persistence Community, what would the most ideal way forward be to fix this issue?

Thank you for reading. I’m looking forward to reading your comments!

Do we have any insights in the size of revenue created by Persistence DEX and MEV capture?

That would be quite useful. My first feeling would be that upping the minimum validator commission would be bad for investors, because then they would have both the reduction of the inflation in general AND the additional validator commission.

So if we are “sure” that there is enough to go from the other sources, then that would be the preferred route to me.

You can checkout revenue and fees numbers from Defillama.

1 Like

If you are so concerned about commission reduction, than my question to you is “did you vote against the reduction of the staking APR”, ? If you did then good, then your question here is valid. As an investor/delegator I will be moving my XPRT from any validator that increases their commission above 5%. Persistence.one should release more real rewards to validators/delegators before voting on a question like yours, else investors will unstake and leave for better returns elsewhere. Everyone is hurting because of the current low price, stick in there things will pick up I’m sure.

1 Like

Who are you asking if I may ask?

Fees are averaging between $100 and $200.
If we split that over the 150 million XPRT that has been staked, you can deduct that the value per XPRT is quite negligible (just below 0.04% APR) and can’t nearly compensate the loss of staking rewards…

So the changes must be taken lightly, because it can also cause a wave of people unstaking and selling, since price is down as well as a reduction in rewards.
We have to face that a part of the crypto market is also speculating on the token value and accrueing more of the asset in the meantime.

1 Like