Agreed, but this extreme measure to change rewards to this level introduces a very large imbalance which I’m can’t seem to justify.
Taking @adam’s suggestion of incentivizing the network to only have balanced rewards at 15k servicers, with the amount of POKT staked today the GOOD VIBES staking ration would look like this:
Validator Stake: 495M POKT
Servicer Stake: 240M (assuming all 15k validators are staked at 16K POKT)
Yes, the network is secure with 495M staked on validation, but from my understanding this is extreme overkill for what is required to secure the network.
By having 2/3 of the network staked in valdiation and only 1/3 staked in servicers, this create many potential issues and inequalities.
ISSUE 1: Validation becomes top heavy and centralized
As @adam pointed out in his proposal:
When this happens, the network is locked into a node class that controls 2/3 of staked POKT.
How do you role back 2/3 of the POKT staked once validations becomes too top heavy and centralized?
Changing mechanisms that lower validation or validation APR can put the network at risk if there is unstaking. The whales in this class of node will likely become uncontested with no meaningful ways to reverse course without endangering the validation of the network.
Validation incentives can always increase without issue on the Pocket Network, but they cannot be decreased/reversed or the network risks unstaking of validators. Once this level of valuation is in place, I don’t see how we can ever reverse course until v1.
ISSUE 2: POKT becomes primarily about the validator economy
With 2/3 of the staked POKT dedicated to validation, the focus of all economic decisions will primarily be driven by validator incentives. POKT can not role back validator economics to benefit servicers because 2/3 of POKT is committed to the validation economy.
It is likely that most whales will be entirely focused on the validation economy because GOOD VIBES is encouraging validation to be 2/3 of all staked POKT. Most whales have no reason to even run servicers since their entire stake can be inside of validation.
All future economic decisions will likely favor the validation class because the security of the network relies on them and they hold all the validator voting power.
ISSUE 3: Growth taxes servicers to the benefit of validators
If there are ever more than 15k servicers, then the servicer class is essentially taxed by lowering their reward to give to the validator class (which are exclusively whales). If independent node runners join the network, servicers are not only diluted but they also have to give a extra % to the validators.
This mechanism doesn’t make sense unless 2/3 of the network is required to be staked to secure the network… and from what I gather, this 2/3 is extreme overboard.
Servicers already have delusion when new nodes join, plus they have massive infrastructure costs from running chain nodes… so then adding this % tax to be given to validators makes no sense.
Issue 4: Lite client addresses over provisioning.
Why though?
If over provisioning is addressed with a lite-client, why do we need to adds an economic mechanism that favors whales over independent node runners?
If the lite client does what tests have currently shown, then the need to decrease the # of servicers by giving more rewards to validators isn’t needed for the good of the network.
PROPOSED REVISION: Adjust the block producer reward without adding the dynamic % to decrease servicers numbers.
If we were to increase the block producer reward enough so that 1/3 of all staked POKT is focused on validation, then the network is secure without penalizing servicers.
Right now 17M POKT is dedicated to validation… which as we know puts the network at risk.
If we instead looks to incentives 240M POKT to be dedicated to validation, we secure the network.
This leaves 2/3 of the staked POKT focused on servicers. There will be significantly less imbalance and it will decrease the current node count from 48k to around 33k because of servicers being moved to validations.
We then start with 33k and the lite client on the way. As you point out Adam, the network is still growing, but from the data from the lite client, over provisioning will likely be fully addressed in the immediate to mid future.
If we ever need to increase the validation reward to increase security or lower service number, we can always increase it validation rewards at the right time. I’m not saying to change it “arbitrarily”, I’m asking we simply adjust it to what is required for the network to be secure. But with the current GOOD VIBES in it’s current state, we cannot reverse anything without putting the network at risk.