An open discussion about improving the node-runners cost-efficiency, decreasing sell pressure and increasing security by educating community on the importance of non-custodial node-running feature

Ecosystem
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Attributes

  • Author: RayBorg

  • Title: An open open discussion about improving the node-runners cost-efficiency, decreasing the market sell pressure and increasing the network security by educating community on the importance of non-custodial feature

  • Related PUPs: PUP-31 and PUP-27 (I will explain later the connection with the proposals)

Summary

Pointing out to all members of the POKT community about the importance of running the most efficient and least expensive nodes, while at the same time keeping the private keys themselves (not your keys, not your coins). Expensive and inefficient node-running is reflecting all POKT investors in a way similar to an additional taxation. Moving away from expensive node-running service providers towards more efficient and cheaper node-running service providers is beneficial for everyone in the POKT community and all the investors in every possible way.

A list of node-running service providers is publicly available at CompareStakingServices .
They are sorted by the profitability calculated after deducting the charges by each of the service providers. For example, the following data shows that Aapokt is leading past 24 hours with a net POKT rewards of 11.65 POKT per 15k POKT staked (clean profit after paying the service costs).

comparestakingservices
comparestakingservices1768×674 71.5 KB

Abstract

Pocket Network managed to strongly cut down network expenses during the past few months, but there is still a lot of room for improvements. Network is still not in a good shape which doesn’t allow much space for a price to start recovering. This is an educational post for community to raise awareness of many facts that majority is aware of, but didn’t think about them thoroughly.

Motivation

Expensive node-running offered by most expensive and least efficient service providers are directly harming all the POKT investors considering the excessive market sell pressure which can be mitigated to large degree by educating community that more efficient node-running helps everyone in the POKT community, including themselves.

A list of key points and constructive suggestions that would work in everyone’s favor and for everyone’s benefit

  1. PUP-27 should pass to give people an opportunity to consolidate further. Furthermore, PUP-27 passing would also force 15k servicers that are running their nodes at expensive providers to become even less profitable so all of the inefficient node-runners would be forced to shut down their nodes or switch to more efficient service providers. It would result with significant reduction of market sell pressure, ensuring more POKT goes to investors pockets rather than node-runners that are charging high fees.

  2. It’s massively important that PUP-31 gets implemented so that investors can switch from inefficient/expensive service providers to most efficient service providers. Introducing more competition among service providers serves as the most efficient tool for lowering the profit margins of service providers.
    As of right now, many investors hesitate to change provider because they don’t want to wait for 21 days and lose all of the rewards during that time, remaining at inefficient service providers.

  3. The importance of non-custodial staking feature should stand out even above profitability itself. It’s what real crypto is all about. You don’t give away your private keys to anyone, especially not the random people you never met in real life nor know who they are. Even if there’s an insurance in place, it’s anti-crypto to give away your private keys to anyone. Majority should be their own bank, storing their own private keys safely.
    This is also important in a way that concentrating a lot of POKT in big service providers possess a huge security risk which is hard to handle. Everyone is hoping that service providers have taken all the security measures according to the highest security standards. In case of a hack of some of the biggest service providers, 100 million POKT would possibly get dumped on the market at the same time, causing the immediate death of the Pocket Network project. It’s very important to educate community on the risks of such possibilities. Furthermore, while anyone possess private keys of millions of POKT, it opens up a space for potential unethical activities.

  4. All the suggestions above including PIP-31 are promoting the decentralization, which would be supported as much as possible. More unique people would hold their own private keys and being less reliant on centralized entities.

  5. It’s a fact that node-runners are still being able to take advantage of a situation that node-running is an overly complex process for an average person to run their own node(s). I’m also among them and I never ran a single node myself but used the most famous node service providers and now moved to small node runners like aapokt.com or cryptonode.tools (they can be found here: https://comparestakingservices.com/ ). It’s even more important that both of them provide 100% non-custodial staking feature so private keys are safely stored by the real owner. Running with them is easy because they also offer an easy step-by-step tutorial how to stake in a secure and 100% non-custodial way.

There are many other points that can be done here, but this is certainly a good start for a hopefully very constructive discussion. I hope this post will raise some questions and serve as a central place for people to discuss an option to use non-custodial staking, compare the quality of various node-running service providers and many other questions that newcomers might have. Goal is to help making node-running process as smooth as possible.

Copyright

Copyright and related rights waived via CC0.

1 Like
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While I do think that non-custodial staking should be the way to go, I disagree with the reasons you mention for the system to be centralized and also with the proposals you cite to correct this problem.
Non-custodial should be revisited to make it more appealing. It should work better if:

  1. Allows trust-less rev-share with the node runner address.
  2. Allows using rewards to pay for claims before rev-share.
  3. A stake-delegation feature exists to enable pools to exist in a non-custodial scenario.

Now, I don’t really know if this is possible in v0, but even so it would be a consensus breaking change, an we are trying to reach v1 without any stressful changes (this will be one). If anything should be done, I would think it as a V1 feature, which means post Q12024 (at least)

This is not correct, as it was discussed in the PUP-27 thread, increasing the stake ceiling to the proposed valued does not lead to network reduced costs. The cost of running a Pocket Node is not the main cost of the network anymore since the mass adoption of LeanPOKT. Also the number of Pocket Nodes is not a problem on sell pressure, only on staked capital, but that’s another story.

I agree that lower friction in changing providers is desireble, but PUP-31 in not the best conduct to implement that. The correct way to promote this is by implementing TransferStake, we were working on it but we were not able to put the hours needed on it and we are hesitant to do it if the community does not agrees that this work is required and should be rewarded (and it is also a consensus breaking change).

Most node-running service providers accept non-custodial, however it has some problems:

  1. Pools cannot work with it.
  2. The owner of the non-custodial node (the client) should be aware that s/he needs to pay for transactions, otherwise the node will not be able to claim (the client needs to work).
  3. There is no trust-less way to make reward share, then the owner of the non-custodial node should pay a fixed sum in advance or transfer manually a given percentage of the earnings.

As you say this is a problem of educating the community not of the protocol itself. I think that many clients of node-running operations are comfortable with custodial staking since they don’t need to do anything, they just put some $POKT in and reeve some $POKT without needing to care about anything.

Maybe I use the term “centralization” differently. The Pocket Network centralization wont change in the best case, it would turn more centralized if you keep pushing for node-running cost efficiency given the current network landscape. The most efficient will be the bigger one, as it once was the case in this network, the only reason for that to change was the creation of LeanPOKT and GeoMesh. This teach us that the only way to change the centralization of the Pocket Network is by changing the play field, not by stressing node-runners.

3 Likes
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I could not agree more on all of your points, @RawthiL .

I have a number of stakes across providers, and my largest one changed to non-custodial a few months back. Now, I have to remember to log in to my output wallet after getting a monthly invoice, and transfer the fee amount to them. All of the rest of my providers, the rev share simply comes off the top and I never have to worry about it.

The emphasis on “efficiency” and/or “profitability” here, and using a comparison site which only measures servicer output without regard for validator earnings, ease of use, customer service, and the inability of any sort of pooling with non-custodial, is a remarkably narrow perspective of the ecosystem. The vast majority of pool stakers, for instance, have less than a single node’s stake worth of tokens staked, and because non-custodial staking only works in a 1:1 relationship with a staked node, it is not accessible for that entire segment of the marketplace.

Kudos to @RayBorg for opening a conversation about the ecosystem at large, but the analysis in OP seems to ignore fairly large segments of the marketplace.

1 Like
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Thank you @RayBorg for putting together this thread.

Re non-custodial, I concur with @RawthiL. Protocol-level improvement is needed, not just education, in order for usage to become more wide-spread. While I tend to not have the same hesitancy in general that many express regarding tasking v0 protocol improvements that bring substantive value to the ecosystem over the next year, I do hesitate regarding touching this portion of the code, considering how badly execution was botched the first time around.

Re PUP-27, I personally believe that it is a worthwhile change and do not understand @RawthiL ‘s argument that it does not, in fact, bring incremental value. However, I do understand @shane ’s argument re tech debt and @Jinx ‘s argument re turning too many knobs at once. Therefore, I remain inclined to keep it on the shelf at the moment. If PNF approves my IDEAS for allowing straw polls for DAO proposals or pre-proposals, I may conduct a straw poll of voters to see if there is sufficient receptivity to the idea or raising stake weight ceiling to warrant moving forward.

Re TransferStake, I personally would be interested in seeing this move forward. If it does, bundling in PartialUnstake which I have previously sketched out and floated as an idea could be considered as well. This quote from @RawthiL below, summarizes one of the challenges facing contributors in the current DAO culture:

Organizations like poktfund and poktscan (and many others) are bursting at the seams with IP they could generate to add value to the ecosystem but must throttle back in the absence of reasonable surety that the DAO has the will to fund these activities at fair values. The DAO would be wise to be quick to fund imbursement requests from proven contributors as long as the ask amount is ballpark reasonable. This creates a self-fulfilling willingness to create even more IP. Instead we sow negative comments, dicker over value of IP delivered, and in general create a slow and uncertain funding environment. This has to change if Pocket is going to survive the onslaught of dRPC competitors. The main threat of Lava etc is not their drawing dAPPs, investors or node runners away from Pocket. The main threat is siphoning off our best contributors (both within PNI and within the community). Not much control the community has to prevent that from happening at the PNI level (except things like PEP-49), but we have complete control over the funding culture we create at the DAO level. Sorry to hijack the convo. I know this is off-topic a bit from your post.

1 Like