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It's time to grow - Staking Phase 3.5 Proposal


Lucian Mincu
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The Elrond ecosystem has fantastic momentum in all areas. Staking has seen particularly explosive growth. We propose an interim adaptation of some of the staking mechanisms, in order to better align incentives towards further decentralization.

For Staking Phase 3.5, we propose the following changes:

1st change - Increase Top-Up APR, decrease Base APR

Decrease APR for Base Stake (2500 EGLD per node) and increase APR for Top-Up Stake (extra stake on top of Base).

Current APR: ~21% base & ~9% top-up

Will be: ~20% base & 14% top-up*

Reasoning: by decreasing the gap in rewards between Base & Top-Up Stake, staking more EGLD as top-up becomes more attractive and therefore Staking Providers can increase their staking caps.

*The figures are considering the current EGLD amount that is eligible for rewards, which is ~10.6mn EGLD when discarding the EGLD locked in the “Waiting List” and queued Validators.

A simulation with the APRs for the various amounts of EGLD staked is available here:

https://docs.google.com/spreadsheets/d/1rpQhwaKy3GGcpA3zyv-ouEtL5P-MYjfTh1pwN2UBZes

2nd change - Individual Validators Can Become Staking Providers Without Unstaking First

Existing individual validators can opt to become staking providers and accept 3rd party delegations from the community.

Currently: in order for an existing Validator to become a staking provider using their staked EGLD, they have to unstake, unbond, create a new Staking Pool, place their first node in the queue.

Will be: a Validator can choose to transform its standalone Validator Nodes staked from its own wallet into a Staking Pool.

Reasoning: By allowing more individuals to become Staking Providers, we increase the options available for those who want to further contribute to the Elrond Network, while also opening up new EGLD staking opportunities.

3rd Change - Existing Validators And Existing Staking Pools Can Merge

An existing Validator can be merged into an existing Staking Pool.

Currently: in order for a Staking Pool to add more Validators, they need to set up a node, stake EGLD, and wait for their Validator to go through the queue, while not earning rewards.

Will be: a Staking Pool will be able to whitelist an external wallet and thus all the Validator nodes staked from that wallet. The whitelisted wallet can then merge its stake with the Pool’s stake, and all the rewards will be distributed accordingly.

Reasoning: There are Staking Providers with individual nodes who would like this flexibility. Properly executed merges could allow growth for Staking Providers and could further generate new EGLD staking opportunities.

Timeline & Next Steps

The Elrond Staking Phase 3.5 proposal is aimed at continuing the excellent momentum that exists in the staking community. A strong Proof of Stake economy leads to higher decentralization and increased network security, which in turns attracts more valuable use cases.

The changes are expected to go live by mid of June.

Please review the Validators Town Hall Meeting where we introduced the Staking Phase 3.5 proposal and answered questions: https://youtu.be/k8CKA7HBTfo

Please comment with your support or suggestions 🙌

 

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Guest Florin

So to deploy a smart contract for an existing validator to add his already active nodes to his own agency we need an extra 1250 egld same like the creation of smart contract in phase 3 as per documentation https://docs.elrond.com/validators/delegation-manager/ ?

Or the creation of smart contract will be done from the webwallet of the active nodes?

 

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  • Elrond Team
49 minutes ago, Guest Florin said:

So to deploy a smart contract for an existing validator to add his already active nodes to his own agency we need an extra 1250 egld same like the creation of smart contract in phase 3 as per documentation https://docs.elrond.com/validators/delegation-manager/ ?

Or the creation of smart contract will be done from the webwallet of the active nodes?

 

If you already have active nodes then it means you have more than 2500 staked.

The 1250 will be considered out of the already staked amount, so you don't need an extra 1250 egld.

example:

One validator that has 1 directly staked node wants to become a staking provider.

Let's assume he has exactly 2500 egld staked, no topup.

When choosing to transform into a staking pool, 1250 out of the 2500 already staked egld will be considered as the initial deposit for the staking pool, and the remaining 1250 as delegation to the pool from the SP owner.

The validator needs to pay only the gas for the transaction that does the transformation of validator into SP.

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Guest Zodre

Hi. Could you decrease the minimum amount of eGLD needed to become a validator from 2500 to 1500 eGLD? One eGLD costs today $180, which is very expensive for eGLD holders to be able to have 2500 eGLD to become validators. 

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Guest Florin

That is clear now. How about the deplyment of the smart contract? Will it be done via erdpy or through the webwallet of the validator node?

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2 hours ago, Guest Zodre said:

Hi. Could you decrease the minimum amount of eGLD needed to become a validator from 2500 to 1500 eGLD? One eGLD costs today $180, which is very expensive for eGLD holders to be able to have 2500 eGLD to become validators. 

Hey Zodre, we understand what you mean! The calculation for how much eGold needs to be staked for a node comes from the eGold tokenomics, the number of shards and number of nodes required to secure it. For the record, it was something like $5000 when people locked in their tokens for the first nodes.

Don't worry about running a full node, simply delegating your EGLD will help secure the network proportional to your stake, and will earn you rewards. Most of the nodes on the network are running on stake that is pieced together from "smaller" delegators.

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According to this article from March 18. 2021 staking rewards for a single node should be 24.4%
https://elrond.com/blog/elrond-staking-phase-3-upgrade-details-and-timelines/

In todays article is stated that 1st proposed change is to lower APR for a single node from 21% to 20%.

Decrease from 24.4% to 20% is quite large.

Can you please explain why you state current APR is 21% instead of 24.4% for a node with 2.500 egld?

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  • Elrond Team
14 minutes ago, Guest Ron said:

According to this article from March 18. 2021 staking rewards for a single node should be 24.4%
https://elrond.com/blog/elrond-staking-phase-3-upgrade-details-and-timelines/

In todays article is stated that 1st proposed change is to lower APR for a single node from 21% to 20%.

Decrease from 24.4% to 20% is quite large.

Can you please explain why you state current APR is 21% instead of 24.4% for a node with 2.500 egld?

the APR varies depending on how much is staked in the network.

The 24.4% APR was for the situation where we have 8 mil egld staked (so 3200 staked nodes each with 2500, no topup)

With the current level of stake in the network (~10.6 mil egld stake eligible for rewards) it should be  ~21% APR for base stake.

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  • Elrond Team
28 minutes ago, Guest Ron said:

Computed APR at staking providers varies significantly: highest is 21.4% and lowest 8.05%.
https://explorer.elrond.com/providers

What is causing these variances?
And will they disappear with the proposals from today?

if you go and read the first proposal for staking phase 3 and the appendix formulas you will see that there are different factors influencing a staking pool APR

1. Amount staked in the network

2. The staking pool registered active nodes

3. Number of produced blocks the staking pool active nodes participate in consensus for (cannot be approximated beforehand so it is assumed 100% success rate)

4. The staking pool queued nodes (not earning any rewards)

5. Topup stake  for the staking pool = total stake in pool divided by all SP nodes (active and queued) multiplied by the active nodes

6. Staking pool fee

7. Transaction fees in the blocks proposed by the staking pool nodes (cannot be correctly approximated beforehand)

This is why different SPs have different APR, which is displayed for any delegator to see.

This proposal will close a bit the gap in APR since topup stake now earns a better APR then before, which was the main reason for the discrepancies.

You still earn more if you run more nodes instead of having the stake as topup, but the difference is lower than before.

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All of these are great changes, but I would like to also suggest improving switching from a staking provider to another as a regular user.

Right now if you are not happy with the current provider you have to unstake, wait 10 days without receiving any rewards and then stake again.

It would be great if there was a switch button similar with claiming rewards that would make switching providers easier.

Not sure how feasible it is from a technical point of view, but I think it will help the community while keeping more egld staked. Many people could unstake, change their mind and go sell the tokens.

Thanks for considering this suggestion.

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On 5/12/2021 at 11:21 AM, Lucian Mincu said:

3rd Change - Existing Validators And Existing Staking Pools Can Merge

An existing Validator can be merged into an existing Staking Pool.

Currently: in order for a Staking Pool to add more Validators, they need to set up a node, stake EGLD, and wait for their Validator to go through the queue, while not earning rewards.

Will be: a Staking Pool will be able to whitelist an external wallet and thus all the Validator nodes staked from that wallet. The whitelisted wallet can then merge its stake with the Pool’s stake, and all the rewards will be distributed accordingly.

Reasoning: There are Staking Providers with individual nodes who would like this flexibility. Properly executed merges could allow growth for Staking Providers and could further generate new EGLD staking opportunities.

 

Hi guys maybe I miss understood  something but this seems to me the opposite of accelerating  decentralization. I had in mind to create a new validator, Me and my friends have the required 2500 egld, currently staked in legacy or staking providers. If I unstack my tokens and create a new validator I will be in waiting list and will not have any rewards, but any existing staking pool can create new validator and white list himself and skip the queue? 

Does any new investors have any chance to run a node?

Did I missed something?

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Guest britcoin
On 5/14/2021 at 3:18 PM, Guest Mik said:

Hi guys maybe I miss understood  something but this seems to me the opposite of accelerating  decentralization. I had in mind to create a new validator, Me and my friends have the required 2500 egld, currently staked in legacy or staking providers. If I unstack my tokens and create a new validator I will be in waiting list and will not have any rewards, but any existing staking pool can create new validator and white list himself and skip the queue? 

Does any new investors have any chance to run a node?

Did I missed something?

They are not skipping queue. These are existing active validators who have already waited. The changes here will allow them to merge into a pool so that they can accept delegations. As is currently, a solo validator cannot accept delegations without unstaking and going back to end of queue.

New investors have slim to no chance of running a node since the 3200 limit has been reached. However, narrowing the APR gap between top-up and base makes it so that it is pretty good APR just delegating in Maiar and will allow more community members to delegate making the network more decentralized.

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I had a question on one of the calculations in the staking spreadsheet (https://docs.google.com/spreadsheets/d/1rpQhwaKy3GGcpA3zyv-ouEtL5P-MYjfTh1pwN2UBZes) 

 

Fee Income/year = node# x (base% x baseStake + topup% x topupStake) x fee%

 

Does SP really get a fee off their own base stake? This seems like double dipping. I would think the SP gets only rewards (base% x baseStake) from base since it is their own stake. That is, fees are subtracted from rewards and diverted to SP. If SP has own stake, he just gets rewards without fee.

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  • Elrond Team
On 5/16/2021 at 4:59 AM, britcoin said:

I had a question on one of the calculations in the staking spreadsheet (https://docs.google.com/spreadsheets/d/1rpQhwaKy3GGcpA3zyv-ouEtL5P-MYjfTh1pwN2UBZes) 

 


Fee Income/year = node# x (base% x baseStake + topup% x topupStake) x fee%

 

Does SP really get a fee off their own base stake? This seems like double dipping. I would think the SP gets only rewards (base% x baseStake) from base since it is their own stake. That is, fees are subtracted from rewards and diverted to SP. If SP has own stake, he just gets rewards without fee.

The end result of getting fees out of own rewards equals with not getting fees out of own rewards. SP gets the same amount (rewards +fees) either case.

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Good day all.

Overall I think this proposal is a good one and these are all welcome changes.

One suggestion I'd like to make, to aid decentralization, would be for the removal of more Elrond-run nodes to clear out the waiting queue. 

The waiting queue has seen terrific reduction progress over the last month, as was requested, and greatly aided by the efforts of the validators.  However, even with this reduction from about 210 nodes in the queue (if I recall correctly) after phase 3 launch, to now 49 today, there are still a handful of service providers that have had 0 node activations while the top 40 service providers have 8 or more nodes, the top 20 have 15 or more nodes, and the top 10 SP's have at least 45 nodes.  Some providers such as ARC Staking have 7 nodes in the wait list to activate to raise their APR, while at the same time, the new service providers that launched have not even activated yet, such as my own Steak4All, and: HAMATek, UnityStake, Bware Labs, and Risasoft have no active nodes and their thousands of combined users are at 0% apr and leaving for largest, established paying-apr providers.

This scenario in the paragraph above is causing centralization. The small and newly launched SPs are unable to rewards their delegators who supported them. So they are floundering, possibly not able to survive -- and when these new SPs fail, unable to continue, they will leave the community, their delegators have a bad and confusing time, and their egld will be assigned absorbed mostly by the top handful of SPs.  This is not decentralization.

I'm not sure if it is even for feasible for more Elrond community nodes to be decommissioned at this juncture. But as an in-term 3.5 phase, I wanted to make this suggestion as a direct way to clear the queue. If it's not doable that's fine, but on behalf of my loyal delegators, some of which are friends and family, I wanted to submit this suggestion. Alternatively, raise the node cap by 50 (yes, I realize this is likely easier said than done, for technical reasons).

For my SP, steak4all, thanks to community efforts in clearing the queue, we are nearing activation now, it's very close (node spots 6 and 8! It's been a long journey). It's looking much better for me to activate now.  But for other 0% apr SP's, and more importantly, all those thousands of delegators wondering why they aren't receiving egld staking rewards, even after having assigned their hard-earned egld for non paying SP's for over a month and a half now, it would be make a world of difference if only a small number of foundation nodes were removed. 

Alternatively, two more ideas: Would it be outrageous to put a cap on nodes for SP's?  60 nodes, 75 nodes maybe?  Or getting rid of the unlimited egld delegation cap and making it a hard cap according to the number of nodes you have? Functionally phase 3 seems to favor established and the largest SPs, again, the opposite of decentralization.

None of the new service providers thought it was going to be easy, starting a new business. But if decentralization is the goal, then it should be possible for new SPs launch, and to do so, node spots need to be available to accommodate the demand.  Simply, if there isn't the space available then validators will compete for this space, and in this competition it is more likely the largest SPs will succeed -- not the newest SPs; not the smallest SPs: as was the hopes for greater decentralization.

Thanks for reading!  Very excited for Elrond's future as always, and happy to be here.

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  • 3 weeks later...
Guest Moonlorian

Hi all, I converted a validator into staking provider in TestNet phase 3.5, but now I cannot managed my node from the wallet. Do I need to install a Delegation Manager? Is it possible to manage through erdpy?

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  • 7 months later...
Guest JamesCCbiarp
It's time to grow - Staking Phase 3.5 Proposal - Governance - Elrond Community Forum

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