PUP-17: The Phase Plan (a progressive plan for network security and optimizations)

POKT nodes generate 40ish rewards a day, which is 1,200 POKT a month. Even at the max, an extra 400 POKT (which it doesn’t consistently play out as that) could likely increase to 20M staked in validation vs the current 17M. We are talking about a thousand nodes only locking up a few thousand each to become a validator to maximize on today’s rewards.

After 20k stake per validator, you would likely receive a better APR by deploying another servicer, over continuing to increase your validator stake. This is why we need to increase the reward dramatically so we can reach closer to 200M staked in validation.

2 Likes

Agree with @shane it’s not going to get us to 200M staked in validation. Maybe 20M, maybe a little higher but definitely not 200M. The distribution of validators should improve over time though.

Just asking the question though purely as a layman, why do we need 200M staked in validation? That’s over 50% of all the unstaked pocket in existence. Seems a lot? :man_shrugging:

1 Like

200M is what I’ve heard talked about and it makes sense to me. It’s not just about being over the unstaked amount, but also the amount of validation power anyone participating in the network already can amass. Currently our validation is not spread out. To be decentralized we need to make sure that no one entity can accrue enough POKT to control validation.

Open to other ideas on amounts… but from what I’ve gathered, 200M has been understood to be safe.

(This relates to Shane’s current proposal.) So said Addison under PUP-14 in regards to network security and his proposal to 5x the number of validators. No one responded to Addison’s comment. Is his concern valid? It certainly needs addressing.

If it is valid, perhaps the number of validators should be upped somewhat as a tweak to PUP-17? I did not see any core devs weigh in on this issue or on the related network bloat aspect.

But I do note Jack’s comment on PUP-14:

In another vein, I suggest that before voting on the current economic proposals (Good Vibes etc), a presentation (with a debate component?) be held on Discord by the proponents of the competing visions and that a core dev also participate to ensure that important technical aspects are not overlooked. The written contributions have been extensive and a debate would bring some focus and help the voting public and wider community to better understand the pros and cons. There could be a moderator (Jinx?) and presenters could field audience questions.

1 Like

Thanks for your proposal @shane. I’d like to address the proposal to raise minimum stake.

Based on my research, there are 306 unique Pocket node service domains as of block 61834. Working on the hypothesis that each unique Pocket node service domain represents an individual node running entity, we can estimate there are 306 entities running Pocket nodes. Of those, 86 entities are running a single node. Under the proposal to raise the minimum stake to 30k, these entities (comprising 28% of all node runners) will be forced out. There are also those currently running 3 nodes who will be affected, as they will have to drop down to 1 x node. This will affect 18 entities or 5% of all node runners.

It’s no small feat setting up to be an indie node runner as these entities have been dubbed. It involves tens, if not hundreds, of hours of work to configure a Pocket node and the supporting blockchain RPC nodes. Upping the minimum stake to 30k will effectively knock these folks out of the game, and I feel this is a rather drastic way in which to treat a sizeable number of the node running community. I also feel it sends the wrong message about how small node runners are viewed and the role they play in the ecosystem. The knowledge that one could get knocked out the game as MinimumStake is modified is a disincentive to start running a node.

Is it worth “sacrificing” a few (or not so few in this case) to save the many?

Implicit in this proposal is the understanding that increasing MinimumStake would force-unstake nodes beneath the minimum stake amount, regardless of when that node initially staked. I would be far more comfortable with this proposal if the MinimumStake parameter update only affected future stakes, not existing ones. Its also been stated that that is probably not possible without (significant) Tendermint modifications. I wonder if anyone from the Core Dev team could confirm this?

I can only imagine that implementing this change would be highly disruptive. We also suspect/know the POKT token is very underpriced at the moment. In the event that the token recovers in value, the 30k stake amount is deemed too much of a financial hurdle for smaller entities to enter the ecosystem, and a reduction is proposed; that would incur another risky and disruptive mass (albeit unforced) un-staking event as node runners optimise for servicer rewards.

I am a small node runner. I won’t be affected if the MinimumStake is raised to 30k. I have invested countless hours into setting up my node infra, and I hope to become a DAO voter soon. I love what Pocket does, and the utility it has. I know I’d be pretty destroyed if I got knocked out of the game. Putting POKT into a pool or 3rd party provider as an investment is one thing, but running a node is another thing altogether.

In summary, I’m not sure if I could support the proposal to raise MinimumStake based on how it would affect small node runners, except in one of two scenarios. a) that it only affect future stakes, or b) is is a measure of absolute last resort.

3 Likes

I greatly appreciate your comment. The 86 node runners is the major issue with this proposal and one it should be flushed out. Thanks for laying it all out.

I agree that this should only be a measure of last resort, which is why I’m posting it now. There are very few options to address today’s economic situation.

The most notable that has gained attentions is GOOD VIBES which seeks to put economic control of Pocket behind centralized levers that primarily focuses on locking the majority of POKT into validation. While I appreciate the goals it’s trying to achieve, it makes POKT a validator focused economy and sacrifices Pocket’s decentralized economics to a centralized committee, who decides which nodes are more profitable when. I don’t believe that is a good idea.

The lite client is still a ways away as it needs to be finished and QAed.

Weighted stake also needs development and testing, so it is likely not a short term fix either.

So when it come to short term options, it looks like we have two options:

  1. Raise min stake (The Phase Plan)
  2. Relinquish economic control to a centralized committee (GOOD VIBES)

I’m open to ideas that would not effect single POKT node runners but they haven’t been presented yet. There is a natural evolution that has been a part of all major blockchains, where growth requires changes that require folks to upgrade. Bitcoin mining is a good example where miner do need to keep upgrading their hash power as more folks join Bitcoin mining. Pocket may need to be similar in that way.

Fortunately tipping of one’s POKT is very reachable right now with today’s market condition. Most of the single node runners staked their node before May, which means POKT is magnitudes cheaper than their initial purchase.

If upping the minimum stake can significantly reduce sell pressure, add a buy pressure incentive, and set POKT up for a scalable future, it may be in the best interest of those node runners to be behind this initiative. Open to feedback.

If there are other ideas, I’m all ears, but from what I’ve seen, this has the least amount of risk with the most quantifiable upsides.

P.S. There have been some that have suggest a good faith loan program for small node runner to ensure they can still keep generating rewards. There could be options to help the independent node runners, which I am ALL FOR. Open to more idea as well here :+1:

1 Like

I completely agree that the network needs to be secure, and I think this is a viable solution for doing so

My only concern is that by the time this proposal is voted upon, the minimum stake is increased, and a mass unstaking/restaking is coordinated, the lite client will be very near or already completed which will negate the need for increasing the minimum stake and will avoid losing 28% of our small node runners.

1 Like

Mass unstaking will always have to happen because of dramatically changing block producer rewards, so having minimum stake happen then isn’t much different IMO.

I’m all for mitigating the need for changing the minimum stake… but we haven’t received an official timeline on the lite client, so everything is guess work at this point. It feels like folks want action now, so this is the closest solution I can come up with while the lite client timeline is being worked out.

This is just an arbitrary point on the good vibes curve.

Why would we do this and disregard a system that allows for the market to pick a reward distribution that converges on a cost minimum?

We could also treat this as a first step and have a future proposal which addresses a longer term system.

I am by no means an expert on the topic so I will just be sharing thoughts and initial impressions.

I agree with the validator rewards increase since that is important for the network security.

The part that I still have my doubts on is in the minimum stake increase. At first glance, my impression is that this will only benefit large entities and will push out smaller ones. Therefore making the servicing network a bit more centralized.

For instance, if a single 15K node is being profitable right now then why do we want to add the burden to spend an additional 1.5K-2.5K USD (at the moment of writing) just to keep it running? For some people that amount is trivial but for some it is not, especially during the economic conditions the world is currently experiencing. And if the node is not being profitable right now then my assumption is that it will be shut down eventually, therefore reducing the node count. Therefore, I am speculating that the economic conditions by itself will make node runners (especially smaller ones) to keep going or to shut down.

Right now I am against the stake increase but since I am not an expert, it is likely because I have not understood the whole picture (yet). In this case, I would be willing to spend some time to be illustrated in this area.

1 Like

My understanding is if a node runner is staking in a pool, the share of the pool and the rewards from that pool would remain the same.

Only if a node runner is staking on a domain they control, or with a node runner service would they need to restake with a higher amount.

nb: The service rewards would double, if the minimum staking requirement doubled.

Generally speaking, this is a pragmatic approach to solving this issue.

I’ve been debating with @shane on the best path forward. We’ve come to understand that everything will be a tradeoff - there’s no right answer here.

I have a few underlying concerns, which I will address in the following sections. I also have many open questions that I’m sure the community is openly asking.

Predictability

The benefit of GOOD VIBES (GV) is that we provide a predictable box for node runners and validators to thrive. The question is: do we prefer a “box” or a more laissez faire approach.

My concern is that with a 21% (or 27%) Validator Allocation, node runners will not know the outcome until things shake out. What if the common sentiment is that servicing is still superior in rewards? What if people make the wrong call? Node runners are left with a game of chicken where they are incentivized to sit on the fence. Why would I act until I know the outcome?

The Right Number

I’m concerned that picking a number based on some high level assumptions of how people will act is too risky. The lack of predictability is why GV could be an alternative worth considering. No matter what people do, I, as a node runner, can predict the future with relative certainty. This may provide more confidence to participants.

Servicer vs Validator Economies

This proposal does a better job of discouraging a validator economy. A lack of true validator economy is attractive to some parties. I acknowledge that fact. Do we want validation to be a feature of service providers or an entire product? When we need to switch back to servicing, how painful will that transformation be? It is hard to say at this point, but I trust contributors to do what’s right for the economy.

Further, are whales interested in running service nodes over “easier to do” validation if the rewards are in similar ballparks? When does that begin to eat into the underlying service Pocket provides?

Management

There is a fair bit of feedback on GV that the proposal strengthens the narrative of a “POKT FED”. While the execution of that change is the responsibility of the Foundation, I’m confident that the Foundation will act within the bounds of the proposal. These words may not provide much comfort, but there are checks and balances built in to protect the community from abuse. On a tactical level, I believe after the scariest implementation period, changes to the curve or the GV factor should be DAO decisions.

At that point, the effective difference for GV and this proposal is very little from a governance perspective outside of regular parameter changes that would occur with GV as determined by a DAO voted curve.

Inflation

This proposal doesn’t properly address the issue of inflation, which Shane is aware of and he is addressing (I believe).

Without a concrete plan, I would have reservations about this proposal.

Suggestions

  • Add in a component that addresses inflation without leaving it ambiguous.
  • Publish the math of the post-Phase 1 outcomes for servicers and validators
  • Delegate the responsibility of a grace period to the Foundation or have a concrete plan to execute on.
  • Further define the sub-phases of Phase 1 and 2. Is there a correct order of operations?
    • I’d suggest that the validator change should occur before the minimum stake change.

Closing

Until we truly get economics and network costs under control and find equilibrium, we will be forced into constant compromises to bootstrap the network to where it needs to be. This may be necessary, but we need to recognize what it means: costs to the holders of the token.

For example, if we’re going to support more nodes than is strictly necessary to run the service, we’re going to have excess inflation and unnecessary market pressure. If we choose to support more than is strictly necessary, we’re all agreeing to bear that cost. In some scenarios this may be worth it and in others it may not be.

In my personal opinion, it’s best to try to get as close as we can to market equilibrium today rather than continuously kicking the can down the road. These changes need to be part economics (inflation) and part costs (light client, node count).

Regardless of GV or Phase Plan, we need to understand that these are near term fixes to long-term problems.

WAGMI

1 Like

I agree. I think in that respect GOOD VIBES in its original incarnation is superior to v1.1. It took bold action to get us to where we need to be. And that’s what we need, bold action. We’ve made this mistake before (see PUP-13) , and the fact we’re sitting here mid-way through the adjustment schedule looking for other solutions is proof. Sometimes progress is made with small steady steps, sometimes it’s made with leaps. It’s time to stop being afraid, stop hedging, and make a leap forward.

The future of Pocket is bright - we just need to find the courage to lift our head up, reach out and claim it.

Thanks for the response @adam. It’s been great talking through our proposals and finding the advantages and disadvantages of each.

I do not see the Phase Plan introducing risky variables into the Pocket ecosystem. Updating these parameters does not incur any more network risks than what we have today, which I personally think is a good thing. Pocket’s core economic incentives are the same, just with parameter changes to improve security and consolidate nodes.

I do not feel like Pocket needs an economic box. The complexity of GV gives me much more pause than simply adjusting network parameters that were built into Pocket for these times like these. I personally don’t feel Pocket economics need to be re-engineered, parameters just need to be updated.

Why would node runners decide not to take advantage of all those rewards to say in servicing? There are less infrastructure costs and more consistent rewards with being a validator… so why would the network ignore those rewards to only stay as a servicer?

We currently don’t have issues with folks upping their nodes to above average to be a validator, and I don’t see any reason why that would change if validation rewards are increased by 21x.

This is the nature of any free market. I don’t feel Pocket needs an economic box that ensures all decisions, good or bad, have the same outcome. To be decentralized there has to be the freedom to make bad decisions. If some folks aren’t wise with balancing their validator and servicers deployments, other folks who figure it out will take their place and generate better rewards.

I feel keeping Pocket’s economics decentralized and competitive is important.

The future can’t be predicted with any decentralized ecosystem. Pocket has been thriving since the launch of mainnet without explicit predictability. I think we need to be wise with making updates to our parameters, but I feel there is far greater risk with putting all our eggs in one centralized plan basket.

GV v1 was close to being put up for a vote and it had notable oversight that would have crashed the network’s economics. GV v1.1 addressed the oversights I brought forward, but there are likely other oversights because it’s trying to put the entire ecosystem in an economic box where the focus is on validation.

These are great questions and ones I’ve been struggling to answer if we shift into a validator focused economy. Servicers are what make Pocket’s service great, so I think it’s important that the economic focus always be servicers and just use validation to secure the network.

Thanks for that clarity on where the DAO fits in. I personally find the curve (aka: GV Factor in the spreadsheet) very hard to predict or explain. I think that will be one of the greatest challenges to a GV like economic model… very few will actually understand how it works.

Correct. Because this proposal isn’t changing how Pocket’s economics work, inflation plans can be introduced without issue.

The nature of this proposal is to address the two most pressing challenges, which is network security and infrastructure costs.

I greatly appreciate the suggestions. I am actively working on mapping out a more indepth economic model that outlines the results of the Phase Plan. I’m also looking to include weighted stake (PIP-22) as the consolidation mechanism instead of increasing the minimum stake.

There are some fundamental inflation changes that weighted stake introduces, so new models need to be created to map out the impact. I plan to release my finding soon.

Thanks for all the feedback :slightly_smiling_face:

1 Like

I’m confused what you mean here. GV in it’s original incarnation would have crashed Pocket’s economics. It was updated to v1.1 for a reason.

Personally I disagree. I think if we’re to enact change, we should plan for where we want that change to take us, not for where we are. If the plan is to boost token price by reducing sell pressure, increasing demand and reducing token supply, and if we believe in that plan, then reducing token rewards significantly makes a lot of sense. If we plan the whole thing around bottom of the market current 12 cent token price, then we don’t believe in the plan delivering - so why implement it in the first place.

But, having said that, I recognize it’s perfectly possible I’m just too bullish, I’ve always had strong opinions - that’s why you need multiple voices, come out with a balanced solution.

1 Like

I’d like to start by saying I greatly appreciate everyone’s time, effort, and energy with all the recent proposals, revisions, and comments. I have an unbelievable amount of faith in our community/the Pocket team and am excited to ride my PoktRocket to the moon in the near future. With that being said, I wanted to share my outlook on recent proposals… and i apologize if this is not posted in the appropriate thread.

Respectfully to all authors/commenters and from a non-technical view, I could not justify the need for PIP-15+'s complexity. I believe a combination of PIP-22 and this proposal (PUP-17) addresses all current concerns I am aware of (security, infra costs, growing node count, reducing sell-side pressure) while maintaining community morale and (hopefully) driving increased buy-side in the short/long term.

My only comment/question pertaining to a hypothetical combination of 22 and 17 is why increase the minimum stake with PUP-17 to 30K rather than let human nature/desire drive the average stake per node up by itself?

In my opinion, with proper communication to the community on the details of a hypothetical proposal (combination of 17 & 22) most pokt holders will want to lower their avg cost per stake by consolidating nodes while still earning approximately the same rewards with weighted staking (obviously absent PUP-17’s reward % reduction). PIP-22 should result in overall node reduction, increased total staked %, slightly increased security of the network, and slower node growth while nodes are barely profitable.

Once the fair value of daily rewards points to profitability, I’d see node growth increasing as token holders look to increase node count for diversification between regions/chains.

I see PUP-17 driving a significant amount of competition to become a validator, resulting in more staked tokens, slower node growth than we have today, and a more secure network. In turn, this would force some current validators to be converted to servicers, which will either drive up the buy-side pressure to continue competing as a validator or allow the newly over-staked servicers to experience the weighted-stake rewards of PIP-22 and not force any nodes to unstake and restake with minimum servicers amounts.

My understanding is the long-term vision of PN has always been to service billions and trillions of relays per day with hundreds of thousands of nodes in the network. I don’t see a forced reduction of the node count by increasing the minimum stake as a positive step for the network/community to take.

Id suggest letting the individual holders determine how much they want to pay monthly in infra fees based on their node counts and then continue to reward users who lock up 100% of their available tokens. Leave it up to the token holders to drive the long term goals of the network. Thanks for reading this far.

-Kadow (I’m a forum newb… but I can log in :blush:)

2 Likes

Thank-you for the comments and feedback. Working on these issues has actual become a full time gig for myself as I really feel we need to get this right :sweat_smile: Thank you for the support.

I’m very confident we are close to finding the proper balance and action plan.

I’m actually working on a modified model that uses weighted stake (PIP-22) for consolidation, instead of upping the minimum stake. :point_down:

Those are exactly the goals :slightly_smiling_face:

2 Likes

@shane glad to hear it. We are all here to help

1 Like