- Author(s): Henry Habgood, Patrick Linden, PJ Forster
- Parameter: ProposerAllocation
- Current Value: 1%
- New Value: 5%
Increasing the ProposerAllocation parameter from 1% to 5% will increase the number or rewards paid to validators by 500% while reducing service node rewards by 5.6%, creating an economic incentive for node runners to stake additional POKT to become validators.
This is an immediate change that we can make to the protocol that will serve as a token sink, strengthening the security of the network, while pushing the number of service nodes downward as node runners consolidate their current nodes into validator nodes, thereby increasing rewards (if this doesn’t happen, then price pressure from additional purchases should increase the price and similarly reward POKT holders).
Right now a validator earns ~10.3 POKT per 15,000 POKT staked above their servicer stake, which is the allowable economic profit to become a validator that node runners have agreed on.
Increasing that reward by 500% (to 51.5 POKT per day) would make the economic incentive for being a validator high enough that more tokens would move to validators in order to profit from the short term outperformance of validators. This change would have an unknown effect on rewards for service nodes as the change in rewards would likely come with a similar reduction in total nodes.
There are many great ideas currently in discussion on how to improve the protocol, and those discussions are complex and technical enough that they (rightfully) require time to discuss before being implemented.
Further, the more changes recommended that require an unstaking period to implement pushes back the timeline to implementation for any one PEP.
This adjustment is designed to occur quickly and to solve some of the immediate needs of the protocol, which are:
- Increasing protocol security by driving up validator stake
- Reducing node count to address over-provisioning
This proposal is not meant to be a permanent solution, but rather to be an improvement to the protocol that allows node-runners to exercise their economic freedoms to consolidate into validator nodes in a timely manner.
The increase of validator rewards from 1% to 5% will create a natural economic incentive for nodes to consolidate. The value was selected as it creates a meaningful change without requiring an unstaking event which could delay the change further.
No, it won’t. It will improve upon what we have and allow us to gather data on how to better improve upon the protocol further. Most importantly it will give us immediate results and allow for more time to design a more complex, long term solution.
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