Radix Enhancement Proposal (REP) - Dynamic, Weighted Validator Fees

Validators
1

Hi All,

Recently the XIDAR validator team raised a proposal in the RDX Works Discord, to suggest a protocol enforced minimum owners fee of 10% across the entire validator set. The basis of the proposal was to remove the burden of paying a subsidy from the RDX Team and instead pass this onto the staking community through fees. XIDAR’s proposal can be found here: XIDAR Proposal

Off the back of this, I have written a draft proposal that aims to achieve the same result (i.e removing the validator subsidy), but does so in a way which also rebalances stake over time and ensures that all validators receive a subsidy through a network imposed fee.

The full proposal can be found here: REP - Dynamically Adjusted & Weighted Network Fee

And for those who haven’t got the patience to read it in it’s entirety, here’s a tl;dr -

:eight_pointed_black_star: Introduce a network imposed fee which is calculated every epoch (5 mins)

:eight_pointed_black_star: The fee is weighted depending on how far a validator’s stake deviates from the median stake value. In doing so, this should gradually rebalance validator stake around the average, as stakers seek out lower fees.

:eight_pointed_black_star: Owner fees remain as-is and can be defined by each validator. Total validator fees will consist of 2 elements: Owners Fee & Network Imposed Fee

:eight_pointed_black_star: A new on-ledger component will accrue the Network Imposed Fees and validators will be able to claim using their owner badge as proof (with or without a KYC badge as desired by RDX Works)

:eight_pointed_black_star: Based on current USD value of XRD, and the median stake of 0.7%, the following chart shows how the network imposed fee would vary across the validator set, in absolute terms the spread in fee is small (7.02% to 6.72%) but increases rapidly as a validators stake deviates from the median value:

networkfees
networkfees864×526 25 KB

I welcome any comments on this proposal, either here in the thread or please feel free to request comment access on the document.

Thanks in advance,
Faraz (Radstakes)

3 Likes
2

This way stakers will have to pay bigger fees it they stake to a smaller validator.

So stakers are incentivate to stake to the biggest ones.

3

Sounds good, Faraz.

I agree that we should not have higher fees for smaller validators, as this would incentivize delegators to stake only with the big validators. However, if there were a base fee where the distribution favored smaller validators, it would be a great solution to support them and an instrument to stop the validator subsidy.

I think it’s crucial to discontinue the subsidy, as it undermines the principles of a free market. Additionally, implementing a minimum fee is essential to prevent a race to the bottom and to cover server costs. This approach is necessary for maintaining a healthy network and a sustainable business model.

Our primary revenue source currently comes from running validators for the Azero network, where we earn a minimum of 5%. This arrangement has been well-received, with no complaints from the community so far. I believe a similar minimum fee structure would work great for Radix as well.

For this reason, we would certainly support a protocol update implementing a minimum fee.

2 Likes
4

@StakingCoins - Actually the opposite is true, the bigger nodes have the largest fees so stakers are incentivised to stake to lower nodes.

@stakesafebart - Thanks for your comments Bart, and I agree that discontinuing the subsidy is crucial, the cost of running performant servers should be a “cost of the network” that’s borne by all stakers, rather than a centralised entity such as RDX Works.

3 Likes
5

Hi Faraz, thank you for making this proposal. My current questions are:

Q1: For owner fees set at 100% (such as DexTer), what would be the imposed network fee?

Q2: Could you add a “combined fee” column to your demonstration spreadsheet (perhaps col I)?

-thank you.

  • Wingspan
6

Hi Wingspan,

Thanks for taking the time to read the proposal.

Q1: For owner fees set at 100% (such as DexTer), what would be the imposed network fee?

A node would not be able to exceed 100% combined fee, so in DeXter’s case for example, the fee would be limited to 93.28% to account for the imposed network fee.

Q2: Could you add a “combined fee” column to your demonstration spreadsheet (perhaps col I)?

No problem, added this to the sheet.

7

Hi Faraz,

I have written up some feedback for you.

Not directly impacted myself as no longer in the validator set but there may be something useful in it for you.

REP - Dynamically Adjusted & Weighted Network Fee - Feedback

Alternative Model

Alan

8

Hi Faraz, thanks for reviewing. I updated the doc and removed the pieces that were based on the incorrect assumption you pointed out.

Feedback doc and the model above should now be public.

9

Hi Faraz, as I expressed in the Validator Node Runners channel, I’m against both proposals because any type of mandated network fee on top of the validator’s configured fee has the risk of pushing stakers aways from Radix to other ledgers/blockchains that have no such mandated fees. My vote is for the RDX Works team to keep the subsidy until they achieve their objectives for marketing Radix, forming partnerships, launching their own Dapps to help bring users, onboarding new developers and projects, etc. to increase the number of users and volume of transactions, to the point where even the 100th ranked validator gets a reward equivalent to the current subsidy.

On a side note, I also think it’s unrealistic to expect the RDX Works team to build this complex logic in the core Radix engine code just for us. My understanding is that the team has a very long backlog of enhancements/features/break-fixes, so my expectation is that even if approved this request will go down to the bottom of Matthew/Russel’s backlog of enhancements/features/break-fixes, and by the time it gets implemented we’ll probably be at X’ian already.

3 Likes
10

Thanks for your feedback Wilson, although Radix validator fees are some of the lowest I’ve seen amongst other chains, and even with a mandated 7% fee, there’s only a minor effect on stakers APY. The mandated fee also reduces significantly once the USD price increases above 10c.

I agree its unlikely that RDX Works will implement this proposal, but at the very least it serves as a good test case of how the validator community can raise these type of proposals for consideration by the team and engage in healthy discussions around them.

11

I’m pro the idea of incentivizing users to stake to lower validators, however, doing so by enforcing a fee of some kind is not the way to go in my opinion,
I think it would be much better if the network emissions themselves are weighted by factor based on the staked amount for each validator node, in such a way that lower validators has a bigger factor and higher validators have a lower factor
For example validator #100 will have a factor of 1.1 for network emissions and validator #1 will have a factor of 0.9, and validators in between are ranging between those numbers so that the total network emissions stays the same
This way stakers get higher APY on lower validators and vice versa
At the same time validators owners of lower nodes can increase the fee as they desire and still get higher APY and higher owner fees to compensate the running costs, or choose not to increase the fees if they want

3 Likes