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The Crypto MirrorA Decentralized Staking Doomsday Scenario
Coinbase announced it was acquiring staking as a service provider Bison Trails earlier this week. The usual congratulations and back patting went around on Twitter. To me, however, this wasn't good news. It represents an acceleration in staking centralization. Staking in these early days is already more centralized than decentralized. A small number of large validator operators control a majority of the stake in most staking networks. Current staking economics compound the problem with r...
The Crypto MirrorBlockchain Infrastructure Conference Reflections
I’m feeling refreshed and restored after attending last week’s inaugural Blockchain Infrastructure conference. My gratitude to long time and values-aligned friend Dan Hwang for organizing and inviting me to it. The conference took place at the Austrian National Library, which proved to be not only a beautiful but also an intentional and thoughtful venue for the conversations that happened. Crypto Conference History and Perspective The first crypto event I attended was the ENS Community Worksh...
The Crypto MirrorStaking's Free Rider Problem
Every community has givers and takers. Some give. Some take. Some give and take. The takers usually outnumber the givers. Those that balance giving and taking are rare.All Take No GiveValidator communities on staking networks are no exception. Spend a little time in validator chat groups to see this imbalance in action. You’ll see many people asking for help. You’ll see fewer people offering to help. Those you see help are usually the same people, helping again and again. You might expect the...
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The Crypto MirrorA Decentralized Staking Doomsday Scenario
Coinbase announced it was acquiring staking as a service provider Bison Trails earlier this week. The usual congratulations and back patting went around on Twitter. To me, however, this wasn't good news. It represents an acceleration in staking centralization. Staking in these early days is already more centralized than decentralized. A small number of large validator operators control a majority of the stake in most staking networks. Current staking economics compound the problem with r...
The Crypto MirrorBlockchain Infrastructure Conference Reflections
I’m feeling refreshed and restored after attending last week’s inaugural Blockchain Infrastructure conference. My gratitude to long time and values-aligned friend Dan Hwang for organizing and inviting me to it. The conference took place at the Austrian National Library, which proved to be not only a beautiful but also an intentional and thoughtful venue for the conversations that happened. Crypto Conference History and Perspective The first crypto event I attended was the ENS Community Worksh...
The Crypto MirrorStaking's Free Rider Problem
Every community has givers and takers. Some give. Some take. Some give and take. The takers usually outnumber the givers. Those that balance giving and taking are rare.All Take No GiveValidator communities on staking networks are no exception. Spend a little time in validator chat groups to see this imbalance in action. You’ll see many people asking for help. You’ll see fewer people offering to help. Those you see help are usually the same people, helping again and again. You might expect the...
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Intro
This is Part 1 of a two part series titled "The Rise of the Activist Validator". Part 1 describes the current situation as I see it. It explains why I see a need for activist validators. Part 2 will describe why I feel the current situation could prevent staking networks from maximizing their longevity and value creation.
The Blissful Honeymoon
These early staking days are characterized by a blissful harmony. Projects get along with their validators. Validators get along well with the projects. There's an optimism that permeates early testnets. It continues into the early mainnet days.
Hard questions might arise here and there. Compromises are made in the name of progress. No need to be a troublemaker by rocking the boat. Can't we all just get along?
The answers may not be totally satisfactory but "no worries", the unwanted consequences of these decisions will probably not happen. People are generally good and will do the right thing.
Validators still jump when asked to jump, provide input when asked for input and keep the testnets running. Networks reward the validators for their efforts to varying degrees. The currency is often unissued, illiquid tokens whose value, it's assumed, will only appreciate.
March Toward Mainnet
The blissful march toward mainnet moves forward. Then, after a usually successful launch, the optimism continues. The token remains illiquid.
The idling mainnets idle along. The community at large, including validators, waits patiently for token liquidity, usually in the form of exchange listings.
Delegators stake to the validators. This usually results in a high stake concentration among a small number of well known, larger validator operators. Everyone sees this happening. Nobody makes too much noise about it.
That's simply how it goes these days. What can we do about it? Don't worry, things will even out, eventually.
Who wants to be seen as rocking the boat so early? Nobody want's to be seen as the naysayer or the one who's being negative, in the midst of all this post-launch and pre-exchange listing bliss and congratulatory back-slapping.
The Foundation Delegations
Then there are those foundation delegations.
In these early days, these foundation delegations can make or break a validator, especially the smaller- to mid-size operators. The larger operators already have the large institutional fund delegations locked-up. Those large delegations cement the larger validators' spots in the active validator set.
Smaller- to mid-size operators need the foundation delegations to stay in the active set and hopefully at least break even. They're at the mercy of the foundations to delegate enough tokens to them, for a long enough period of them, to keep them in the game.
This makes it even more unlikely for any validator who hopes for a foundation grant to rock the boat. This could hurt their chances of operating on the network, period. And who wants to look back on all that time and attention invested, only to see it get wiped away, by not having enough delegation to operate?
And what about the larger operators? Well, they don't want to rock the boat, either. Many of them have invested large amounts of money in early token sales. Many of their biggest customers are large funds who invested in the token pre-sale.
Investors in token sales want to see the token price go up, not down. Rocking the boat by pointing out concerns with the network, will probably cause the price to go down, at least in the short term.
Everything's great then! Isn't it? This sounds fantastic, doesn't it? Everyone wins?
Or do they?
Is this really the best route to creating long-term, sustainable value for these networks and their supports?
Over the past couple years, I'm beginning to sense that this lack of dissenting opinion is preventing the networks from realizing their true potential. Not having a well-rounded set of opinions can make these networks more vulnerable to the known or unknown unknown.
Activist validators are needed to balance out the opinion set. These are validators who aren't afraid to rock the boat a little. They don't hesitate to point out vulnerabilities when they see them. They push back when the core team asks them to do something they feel is too risky.
More on this in Part 2. I'll publish it first on The Crypto Mirror (this publication).
(Part 1 was first published on the Chainflow blog. You can support ideas and writing like this by delegating to Chainflow.)
Intro
This is Part 1 of a two part series titled "The Rise of the Activist Validator". Part 1 describes the current situation as I see it. It explains why I see a need for activist validators. Part 2 will describe why I feel the current situation could prevent staking networks from maximizing their longevity and value creation.
The Blissful Honeymoon
These early staking days are characterized by a blissful harmony. Projects get along with their validators. Validators get along well with the projects. There's an optimism that permeates early testnets. It continues into the early mainnet days.
Hard questions might arise here and there. Compromises are made in the name of progress. No need to be a troublemaker by rocking the boat. Can't we all just get along?
The answers may not be totally satisfactory but "no worries", the unwanted consequences of these decisions will probably not happen. People are generally good and will do the right thing.
Validators still jump when asked to jump, provide input when asked for input and keep the testnets running. Networks reward the validators for their efforts to varying degrees. The currency is often unissued, illiquid tokens whose value, it's assumed, will only appreciate.
March Toward Mainnet
The blissful march toward mainnet moves forward. Then, after a usually successful launch, the optimism continues. The token remains illiquid.
The idling mainnets idle along. The community at large, including validators, waits patiently for token liquidity, usually in the form of exchange listings.
Delegators stake to the validators. This usually results in a high stake concentration among a small number of well known, larger validator operators. Everyone sees this happening. Nobody makes too much noise about it.
That's simply how it goes these days. What can we do about it? Don't worry, things will even out, eventually.
Who wants to be seen as rocking the boat so early? Nobody want's to be seen as the naysayer or the one who's being negative, in the midst of all this post-launch and pre-exchange listing bliss and congratulatory back-slapping.
The Foundation Delegations
Then there are those foundation delegations.
In these early days, these foundation delegations can make or break a validator, especially the smaller- to mid-size operators. The larger operators already have the large institutional fund delegations locked-up. Those large delegations cement the larger validators' spots in the active validator set.
Smaller- to mid-size operators need the foundation delegations to stay in the active set and hopefully at least break even. They're at the mercy of the foundations to delegate enough tokens to them, for a long enough period of them, to keep them in the game.
This makes it even more unlikely for any validator who hopes for a foundation grant to rock the boat. This could hurt their chances of operating on the network, period. And who wants to look back on all that time and attention invested, only to see it get wiped away, by not having enough delegation to operate?
And what about the larger operators? Well, they don't want to rock the boat, either. Many of them have invested large amounts of money in early token sales. Many of their biggest customers are large funds who invested in the token pre-sale.
Investors in token sales want to see the token price go up, not down. Rocking the boat by pointing out concerns with the network, will probably cause the price to go down, at least in the short term.
Everything's great then! Isn't it? This sounds fantastic, doesn't it? Everyone wins?
Or do they?
Is this really the best route to creating long-term, sustainable value for these networks and their supports?
Over the past couple years, I'm beginning to sense that this lack of dissenting opinion is preventing the networks from realizing their true potential. Not having a well-rounded set of opinions can make these networks more vulnerable to the known or unknown unknown.
Activist validators are needed to balance out the opinion set. These are validators who aren't afraid to rock the boat a little. They don't hesitate to point out vulnerabilities when they see them. They push back when the core team asks them to do something they feel is too risky.
More on this in Part 2. I'll publish it first on The Crypto Mirror (this publication).
(Part 1 was first published on the Chainflow blog. You can support ideas and writing like this by delegating to Chainflow.)
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