Token holder staking process

At the successful Ready Layer One Conference, Anatoly underlined the importance of validators as the first customers of Solana and acknowledged the importance of stakers incentivising validator performance improvement.

Therefore staking is a major step for Solana, its validator community and token holders. It starts to involve token holders and gives them an opportunity to be rewarded for delegating tokens. However, there is a wide range of validators, giving token holders the difficult task of deciding with whom to stake. Get this right and they enjoy the benefits, but get it wrong and they face poorer returns or potentially losses, if slashing is enabled.

The future of the network depends on the decisions that stakers collectively make. A good outcome would be for stake to be more evenly distributed between capable validators, as this would reduce the risk of too much centralization or reliance on inconsistent operators.

We hope that the majority of stakers will perform due diligence and make informed decisions. The prospect is that most may be unwilling or unable to put much effort into this. One possible negative outcome is that the majority of the stake ends up with the top few Staking-as-a-Service names. This may lead to smaller, capable, operators who, unable to compete with established names, abandon the project. This would concentrate risk.

We would like to suggest two ideas that could make it easier for token holders to make good decisions:

  1. Provide something close to a ‘one-click’ solution for a token holder to evenly spread their stake amongst a number of validators. (ie. enable them to easily select multiple validators in one step and then have a single signing transaction that delegates their stake evenly across those selected.)

  2. Keep a register of basic objective measures by validator. Such measures could be:
    a) involvement in testnets
    b) higher than 99.5% uptime in mainnet beta
    c) prompt upgrades within X hours

We would welcome discussion on the viability of these 2 ideas which, when combined, may enable token holders to be presented with a default option of spreading their token delegations across validators meeting basic performance criteria. Those who wish to delegate their stake with a smaller or different selection of operators would not be impeded or prevented from doing so, but those who may not put much effort in to this process would be presented with a default that would help strengthen the network.

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Thanks for the reply. If I understand you correctly you are concerned about token price volatility. That will be a function of supply and demand which is a different topic.

If slashing was enabled, I would think a delegator, would want to spread across as many validators as possible.

Cardano does delegation directly from their main wallet, it allows you to delegate to 5 “stake pools”, the wallet software shows you graphically metrics of each pool; blocks made vs blocks missed, pool fee, saturation. Here is an image.

Tezos has a leaderboard at a website https://mytezosbaker.com you delegate from the wallet. I do not know if it run by the foundation or independently.

Yeah I think it could be a combination of things. It’s unclear how effective this will be exactly:

  1. But we’ll need to establish some set of benchmarks where validators can prove that they’re meeting those benchmarks, then have that data available for all delegators to review in a transparent manner all in one location.

  2. I think something like 'ETF’s for delegating like you suggested is interesting. Where you just delegate all your stake into this ETF and your total delegation amount is evenly split across this ETF of validators that all meet the benchmarks for example. Simplifying the process for those who don’t want to dive through all the details of each and every validator.

  3. Discussing participation is a really tricky one. That’s not to say that I don’t value those who have contributed to Solana since the start. I 100% don’t think that we would be where we are today without the support of our early validator community. But to some extent I worry if encouraging some form of “old boys club” is detrimental to the longer term growth of the ecosystem. Maybe we’d need like a reputation system that decays over time depending on participant activity.

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Thank you for the responses to this challenge. There have been some good points made.

I understand Dominic’s concerns about effectiveness and we should not pursue solutions that are not effective. The converse, however is that if nothing is done to help delegators make good choices then staking could end up concentrated amongst a few validators.

An ETF style approach, could be a very good vehicle for being able to easily delegate to groups of validators as a way of tackling this.

We certainly do not want an “Old Boys Club”but we probably do need ways in which token purchasers can build confidence in validators. Most of the track-record so far comes from TdS and Mainnet Beta participation. So in the early stages it may be helpful to make sure delegators can easily see performance in these theatres. Dominic makes a good point though and that is that validators need to thrive based on their current as opposed to historical merits so creating validator performance measures which transcend this are important.

The recent launch of staking by another high speed blockchain illustrates the likely problems associated with getting this wrong. They experienced problems with unclear and unreliable metrics on their staking dashboard and a number of large players completely dominating the stage. This left many smaller node operators, who until that point had played a crucial part in their network development, very isolated and aggrieved.

I’d like to better understand when Solana plans to move to the point of enabling staking and what preparations are in hand. I think it would be great to engage the validator community so that good, well thought through and robust solutions can be developed well ahead of time, thus ensuring this critical phase of the network goes smoothly.

This is a good point. It’s one that usually gets lost in the “what is too much centralization?” or “what is healthy stake distribution?” question. Yet without asking this question, it becomes very difficult to set a target for an initiative like this.

For example, is 67% of stake spread over 10, 20 or more than 20 validators sufficient? Once that question is answered, it becomes a bit easier to put a tactical plan together to achieve that goal. After achieving it, the conversation moves to whether or a not a network should take active steps to maintain it.

Yes. I started Staking Defense to help bring visibility to these smaller, capable operators who often get overlooked. I encourage you to repost this post there, to help spark additional conversation by those who may directly benefit from this initiative.

This can be helpful to encourage stakers to delegate to more than one validator. It at least gets stakers thinking about the question. However, if a staker has already decided to delegate to a single validator, it’s unlikely they’ll delegate to more than one via the interface option alone. For example, they’d have to get ready to delegate, then stop the process to investigate additional options.

Harmony made a lot of noise about a UI that supported multi-delegation. However, as I understand it, stake continues to centralize on that network since Open Staking launched recently.

This is also helpful. The true challenge here is to get stakers to look past those validators who offer the minimum fee. I believe that experience with networks that are live for 1+ years now is that most stakers don’t look past fees when making their decision.

I would also add a fourth criteria or maybe separate category that includes subjective info about a validator, e.g. a validator’s values. I hope that stakers would want to align with a validator with whom their values align.

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Hi Chris,

Thank you for these constructive responses.

You are right to ask what is a more even distribution of stake amongst validators. The hard thing is quantifying this. I know that we do not want a significant amount of stake in the hands of one or two validators, such as some of the exchanges but what that looks like at the other end of the scale is difficult to assess. I suspect it is a balance of enough to ensure validator capability. So how many capable validators are there? There will of course be competition and this will ultimately determine how may are actually delegated to. For now I’d be tempted to take a number equal to the number who have participated and been proven across TdS and early mainnet. I presume from the way your question is phrased that you anticipate 100% of stake to be spread across 100% of validators and to use your numbers 33% have either more or less than the average stake. Which leads to more questions about how evenness is encouraged and managed. From a network security point of view we want the stake to be sufficiently distributed such that it is not possible for one party or a group of large players to control the network. The more evenly we can distribute it across a large number of validators the less likely the network is of being able to drift in to a situation where a group of players can maliciously collude and dictate the network.

I think the work of Staking Defense in bringing visibility to smaller, capable operators who often get overlooked is absolutely great. I will repost there and look forward to what other inputs we get.

The proposed ‘one-click’ solution for a token holder to evenly spread their stake amongst a number of validators may be helpful and, as you say, at least gets stakers thinking about the question. You make a good point that a staker who has already decided to delegate to a single validator may be unlikely to delegate to more than one because of the interface option alone. However, at least this approach could promote the benefit of risk reduction to the staker and give them an easier route to staking across multiple validators.

We accept that, as Harmony has shown, just providing a multi-delegation option will not solve the problem by itself. However, we would counter that, if this option wasn’t there, the result would likely be even worse for decentralization and by at least catering for this it brings the issue further to the fore and reduces another barrier to getting a more even distribution.

Thank you for your support for a register of basic objective measures by validator to encourage stakers to look past those validators who offer the minimum fee. I like the suggestion of including subjective validator information about a validator, such as their values.

Mike B LunaNova

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