Bullet point 3 is a great point. Data center risk works both ways - you don’t want to have it too concentrated, but at the same time, there are not very many options available to node operators as it is. At least not many that are trustworthy and reliable. I would hope to see it work out where data center risk could be more than offset by high reliability
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I understand the logic of it, but still think we are better off separating proposals and discussing them properly. Overall market outlook is bleak, and what is even more concerning, TVL is not growing nearly as fast as was hoped for (which is one of the primary reason for financial issues). This is very ambitious and complex project, MNDE holders concern at this point should be saving time, but improving chances of protocol survival and success.
Certainly devs should have the ability to tweak and iterate. However, currently there is literally zero info on the new scoring aside from “it’s going to be better”. The little I know about it (punishing high credits and using skip rate “for information purposes only”) I had to wrangle from lj1024 in discord. Why not develop specifics first before bringing it to discussion? Besides, the current system seems mostly fine, it is certainly better than a non-existent one.
Now, this is a very good point.
Poor edit, sorry. Yes, I meant 8%. The proposal will certainly help low commission validators, but not by much, probably. The economics are just not there right now. Vast majority of validators would not be around if it wasn’t for SF stake due to the high cost of voting fees. Hence most of them are running high commission and its barely sufficient right now. For new validators they have no hope to attract stake above 0-2%, so they have no choice. At 2% you need 250k sol stake to break even on voting fees. 50k stake from marinade will certainly help, but it’s not nearly enough. I certainly have admiration for people who were able to somehow bootstrap themselves, but i’ve been around for 18 months and there are very few success stories. The ecosystem is not mature enough to support hundreds of well-run low commission validators. That’s why I suggested lowering commission gradually as TVL grows.
Actually, with the partial unstake added in the last months, those changes would be realized without impacting the APY as it currently is. Marinade is already rebalancing stake with a max cap every epoch.
One would have to look at the numbers, but I wonder if this statement is true. So correct me if I’m wrong: low cap would imply it would take longer if there is a lot to rebalance, meaning bigger hit to APR due to increased marinade fee while system reaches target stake distribution. High cap would mean more rebalancing, triggering APR hit due to unstaking/restaking.
You might have seen the previous version of this proposal that suggested that gauges would be affected by the commission multiplier, but it’s not the case in this proposal. Any SOL obtained through the gauge would not be affected by this proposal, even at 10% commission. Reducing their commission will be a choice that they can make in order to try to attract more Marinade stake, or not.
I think you missed my point. I agree with gauges not being affected by commission cut for now, but they will take a hit either on gauge income or on marinade stake regardless of what they do.
Moving the fees to 6% and the commission target to 6% is actually the only way for Marinade to come back to a neutral/positive cashflow without losing on APY and reflecting those changes on mSOL users.
You also mention that Marinade DAO owns 35% of the MNDE supply, which is true. But Marinade DAO is composed of all MNDE holders, not the Marinade team. I’m not sure MNDE holders are very keen on unlocking MNDE from the treasury and dump it into the market, lowering MNDE price, just for Marinade to keep paying salaries.
This might sound crazy, but I question the notion of necessarily having a positive cash flow right now, while validators are slowly bleeding voting fees and, to a smaller degree, rising hardware costs. It is contrary to the declared mission. Also, I wasn’t suggesting dumping more MNDE into the market, lord knows there is already a lot of that and not enough liquidity. I definitely agree that 3–5 months of runway is too little. However, I would prefer extending runway to about a year without gutting large proportion of validators instead of targeting positive cashflow.
- removing compensation program should bring about 700 - 900 sol (30–35k) a month according to the OP (although June blog post states 1246 mSOL income in June.
- bumping management fees to 4% would double the above
- changing fee split in unstake pool would bring additional income, although i’m unsure how much, wish you would provide some numbers
- about 800k sitting in the treasury right now , 2/3 of which is not generating yield for some reason. Also June blog post quoted above mentioned 300k in treasure, so situation has somehow improved?
- MNDE could be considered to generate income without dumping it on the market through gauges either by delegating it to your own validator or increasing incentives to LPs in pools in which treasury is participating in.
With all of the above Marinade can reduce the burn rate significantly and provide itself plenty of runway, while pursuing more sensible commission adjustment and keeping healthy amount of validators, which is in line with declared Marinade mission. At least that’s how I would do it.
P.S.
The real fatigue comes from considering proposals, not from voting. You think 5 page proposal doesn’t produce fatigue? =)
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Low credits don’t have anything to do with “staking performance.” Credits (vote credits) are a metric of voting performance, but in some cases validators have made modifications to exploit this beyond the possible number of credits validators can receive without making custom modifications to the software provided by Solana Labs.
There are obvious problems with the system, which is why there is interest in improving it.
I don’t know what you mean by a non-existent one.
You’re not a fan of decentralization?
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I believe Cerba has already answered this point, but to make sure it doesn’t get lost:
The various fee changes are meant to act in concert in order to stabilize the treasury. Merely splitting this out to a proposal wouldn’t move the needle, so it is bundled with other changes that would be required to do this without impacting APY for mSOL stakers. It is the same reason why separating the compensation plan changes to a standalone proposal wouldn’t serve the same purpose.
Arguably, this could have been two proposals (a point I made myself when reviewing a draft):
- A proposal with the changes required to stabilize Marinade’s treasury given market conditions; and
- A proposal including the other strategy changes.
However, given that there are changes to the strategy included on #1, and the parties most affected by both proposals would be the same (validators), the decision was to bundle them.
I hear you and it is a valid point, which is why this is a governance proposal and not an internal change.
As a counterpoint: keep in mind that the important thing was the goal of temporarily bumping APY for mSOL holders, not merely drain the treasury of fees.
While this changes the mechanics of how that is happening, mSOL APY is expected to remain as if the compensation plan was still in place, thus not impacting mSOL holders negatively. In fact, this change would be more sustainable and long-term than a plan that’s meant to end in a few weeks.
To be clear: while I’d love if this were to take Marinade to cashflow-positive, that is neither the goal nor what it is calculated to do. The key aim for these changes is to stop the bleed, since as Cerba mentioned on his original post…
Yes, our top two goals are decentralizing both Marinade and Solana, but those become much harder to reach when you can’t pay people.
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I agree with you on this, and this is what this proposal was made for: try to guarantee the survival of the protocol.
PlayerOfBits also explained some reasons behind bundling those changes, and I think you understand why we did it, and I fully understand why you don’t like it. If you aren’t happy with everything that this proposal encompasses, you can invite people to vote “No” and/or make separate proposals. You can even make a proposal contesting one of the points of this proposal after it has passed in order to revisit it, if it passes.
However, currently there is literally zero info on the new scoring aside from “it’s going to be better”. The little I know about it (punishing high credits and using skip rate “for information purposes only”) I had to wrangle from lj1024 in discord.
The proposal actually explains that credits will move to a secondary place in the delegation strategy, and that the new important metrics will be data center location, commission and stability over epochs. While we can’t yet provide the exact parameters of the strategy, I think this is enough to understand the purpose of the change, wouldn’t you say?
As @pumpkinspool stated, the current situation is not “mostly fine” as modded validators are skewing the average and it’s affecting every validator not running those mods. The current delegation strategy does work, but those improvements are needed to make the delegation strategy more transparent, easy to understand and read, and fairer to everyone.
What I can add is that Marinade will probably gather feedback on the new delegation strategy and tweak it before we arrive to a final version. You’ll probably get a way better understanding of the new delegation strategy as it’s finalized and details can be discussed directly on Discord, between validators and the dev team to tweak the last things.
At 2% you need 250k sol stake to break even on voting fees. 50k stake from marinade will certainly help, but it’s not nearly enough. I certainly have admiration for people who were able to somehow bootstrap themselves, but i’ve been around for 18 months and there are very few success stories. The ecosystem is not mature enough to support hundreds of well-run low commission validators. That’s why I suggested lowering commission gradually as TVL grows.
I agree with you on this point. I would love for Marinade to have enough stake to fully bootstrap a large number of validators, but this can only be achieved in combination with our other efforts to bring more TVL. The current situation forces Marinade to redirect stake towards lower-commission validators, that’s unfortunately the only option we have. As TVL grows according to our plan, we can revisit the target commission and adapt the strategy to the amount of stake we have, and to the number of validators that Marinade should reach and support.
Lowering commission gradually as TVL grows would unfortunately not bring enough revenues in the next months to keep building, but it’s something that can be revisited once Marinade has achieved its objective of securing a strong treasury in USDC/mSOL to pay for expenses.
One would have to look at the numbers, but I wonder if this statement is true. So correct me if I’m wrong: low cap would imply it would take longer if there is a lot to rebalance, meaning bigger hit to APR due to increased marinade fee while system reaches target stake distribution. High cap would mean more rebalancing, triggering APR hit due to unstaking/restaking.
What I meant by this is that the stake is already being rebalanced with a max cap of 4% per epoch. This has been the case for the last months, so it’s already reflected in the 30-day APY of mSOL for example.
When applying the new delegation strategy, we’d use the same cap and maybe it’d take 10 or 20 epochs to fully rebalance everything, but the impact on APY would not be very far from the one we currently have when rebalancing. If we do raise this cap, then yes, this could lower a bit the APY for a small period, but since stake would reach lower-commission validators faster, the APY would be compensated in the next months too.
If you’re really interested in this question, maybe you can try to model the impact and check if the APY hit would be bigger than what we expect? I’ll also check with @lj1024 if we have any model already that would simulate the impact on APY.
I think you missed my point. I agree with gauges not being affected by commission cut for now, but they will take a hit either on gauge income or on marinade stake regardless of what they do.
I see what you mean and sorry for missing your point. I don’t really have an answer to bring to you regarding this, unfortunately validators running at 10% will be affected by this proposal. The gauges will allow to “lower” the impact for validators at 10% that have invested in MNDE, but in order to keep the same stake, they’ll probably have to acquire more MNDE indeed. The only thing I can say is that the drop won’t be “brutal” and they will have time to plan around and make a decision based on what is happening and how things are evolving.
This might sound crazy, but I question the notion of necessarily having a positive cash flow right now, while validators are slowly bleeding voting fees and, to a smaller degree, rising hardware costs. It is contrary to the declared mission.
The mission stated in the article you quote is “Now Marinade’s goal is to make Solana performant and decentralized.” By directing more stake towards stable validators over multiple epochs, Marinade is actually pursuing this mission. We also make the case that there is currently not enough SOL staked (overall) to support 7000 or 10000 validators, it’s simply not possible. The goal of those changes are to allow Marinade to gain more money out of its stake, and consolidate the stake to validators being performant and stable, with a bonus if they run at a lower commission. I wouldn’t be surprised if a validator in a low-populated data center being stable over 50 epochs get stake from Marinade, even at 10% commission.
The thing that you mention and that I understand is that some validators rely on Marinade to become profitable. While I’m very happy that it’s the case for some of them, it’s unfortunately not a “guarantee” that Marinade can uphold to, no matter what. The current situation pushes Marinade to a corner, and we first need to build a solid treasury in order to keep pushing the TVL higher. If Marinade itself is not profitable, validators relying on Marinade won’t stay profitable either for long.
Having a cash-flow positive balance is actually extremely important, as a “12-months runway” can quickly become a 3-months runway if TVL were to disappear, or if SOL price was to drop heavily (impacting all future revenues).
removing compensation program should bring about 700 - 900 sol (30–35k) a month according to the OP (although June blog post states 1246 mSOL income in June.
bumping management fees to 4% would double the above
changing fee split in unstake pool would bring additional income, although i’m unsure how much, wish you would provide some numbers
about 800k sitting in the treasury right now , 2/3 of which is not generating yield for some reason. Also June blog post quoted above mentioned 300k in treasure, so situation has somehow improved?
MNDE could be considered to generate income without dumping it on the market through gauges either by delegating it to your own validator or increasing incentives to LPs in pools in which treasury is participating in.
With 2% fees, the estimate is 0.01% of the TVL per month as revenue. For 7M SOL, keeping the fees to 2% would represent 700 SOL per month, or $24k5 per month (with SOL at $35). 4% would be $49k, and 6% will lead to $73k5. With expenses around $110k per month, you can see that 4% would not cut it.
Fees from the unstake pool can be calculated with the stats available here. We’re seeing between 200 and 500 mSOL in the last months depending on the unstake activity, so it can be expected that moving the fees to 50/50 will bring between 400 and 900 mSOL (or between $16k and $36k at current prices). We also need to take into consideration that the bear market has leaded to quite a lot of unstakes, and those profit cannot be considered guaranteed at all.
Regarding using the 800k in the treasury to earn yield, managing a treasury is actually quite a responsibility and requires time and attention. I’m not aware of the plans regarding those funds, but would be uncomfortable having all this money in Solana DeFi. This treasury is actually the “expense” account that received the funds from the TEP, and I imagine that a part of these funds will be moved to the DAO treasury as we steer the ship back to profitability. (300k to 800k is the result of the TEP). They are probably kept here as we might need to use them over the next months to pay for salaries, unless this proposal passes.
Regarding your last point, Marinade does not run any validators, and it would be quite unfair to use the MNDE in treasury, not even distributed yet, to skew the gauges to our advantage. All MNDE holders using them and leveraging them would probably not like this move too.
As you can see, with the changes on the delegation strategy and the unstake pool, Marinade should reach between $90k and $110k monthly revenues. This is just enough to guarantee a 6-8 months runway (with the current treasury from the TEP) while keeping operations going, but not really more than what’s needed.
Definitely agree with your point on fatigue, this proposal shows that the biggest the proposal is, the more complex it is for MNDE holders to find time and energy to participate. I’m definitely taking this lesson with me, but as explained in all the last messages, those changes made sense as a block and had a same reasoning, so I deemed worth to consolidate everything into one big proposal.
Thanks for the detailed answer, I will close this message by saying that you’ll still be free to vote no and invite people to do the same, or to vote yes and bring up a new proposal suggesting some addendum to certain parts of this proposal even if it passes.
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Hello folks,
How are we doing? Any major outstanding questions?
I wanted to make sure we weren’t missing anything before moving this forward, given the length of the exchanges.
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Let me bring (hopefully) a little bit more clarity to what we intend to do.
First, re-iteration of the planned steps:
- Fees, commission
- Proper and detailed data gathering
- New scoring model
I think the first point has already been covered very thoroughly, so allow me to skip that one and let’s go to the second point.
I love simple, robust things that I can rely on. That has been the case for as long as I can remember. I feel delegation strategy is neither of those things. When I joined Marinade and saw this beast spreading across 4 repositories, being run manually each epoch, I happily offered to start improving it. I understand that in the first phases of any startup-like project, the focus needs to be on speed of development, but as the project grows, I believe the foundations should be revisited and stabilized.
So far, we have done a good job doing that: the code base has been reduced, process automated and overall simplified, new features were added with ease on the development side.
Yet, there is still plenty of legacy relicts.
And the current data structure? It is difficult even for me to see which field is moving average, which is average of averages, which data represents the end result of the epoch, what exactly is erased from the first scoring run by the second etc.); there is too few datapoints in time (effectively once per epoch), the storage is iffy, the data gathering process is tightly coupled with scoring/emergency unstaking; the data sources we use could be improved, … When I want to check some validators, the easiest way is to pull from githug and run my saved queries in my favourite SQL client. Now imagine making this data accessible to e.g. Decentraizer… And this all is going to take some time (= resources) to fix, so of course it is necessary to get support for this idea through the proposal. Maybe MNDE holders don’t feel, so strongly as I do about these issues.
Intermezzo, dashboards: The visibility of what is about to happen is very low (read 0). I want validators to see in real time who is about to receive stake and who is going to get partially unstaked;
Now to the the last part. Indeed, there is very little info on how exactly the new scoring is going to work and I do not want to give a hard promise on the exact methodology before we are actually able to gather all the data that we need to even test the ideas we have.
When the new scoring system is implemented, it is going to run side by side with the old one, so no worries, we do not plan to surprise anyone with some unknown enigma that would eat all of your stake. We will still be in the phase of development and will be able to receive the feedback while still in testing/development phase.
Reminder: 1) there is very little variance in credits (the values for performing validators are all very close to the average); 2) to make network stable and decentralized it needs different things: performance, unique geo-locations, timely upgrades, long term stability, new validators - (all of them of course still only under condition of reasonable performance over time - we do not care that you are top 50 in credit if you are down for 2 epochs). We still want to help bootstrap new validators with small stake but at the same time reward good perfomers (we need to remain competitive within the staking pool space). All that could be covered by selecting our favourite 400 - 500 validators (the count may change based on TVL, obviously) using some of the variants of Pareto Efficiency - and we intend to do that.
Again, to re-iterate, we will run this in a testing mode first, of course. Maybe Pareto will not work out well (very difficult to say now) and we will instead adapt current scoring system on the new data (with better capability to see “red flags” and with better capability to see some new angles to who is validating well). But without this proposal, I will not be able to explore these new possibilities/approaches. I hope this makes sense to everyone that needed further info/answers.
I intended to keep it short. Oh well…
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In the absence of further questions, I’ve moved the proposal on-chain!
Let’s get your Chefs NFTs to the voting booth 
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Solend tentatively voted yes but I wanted to personally voice 2 concerns
- (minor) moving up to 6% is fine, but i think should still respect the payback by keeping at 4% for 30 more days then bump to 6. kind of semantic but would feel like being more true to the intent of the original plan
- (moderate) I worry if the changes to the unstake pool will significantly lower liquidity. Liquidity is important for maintaining peg. I hope this could be monitored after the change and reverted if needed.
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Hey @nope, thanks for the comments! Let us crunch the numbers on the first one and address it separately, but I wanted to clarify this first:
By maintaining the peg do you mean the rate people are likely to get if they want to instant unstake? I don’t believe there’s a reason why liquidity on the pool should affect the mSOL-SOL relationship, which comes from accumulating the staking rewards.
I think I see where the issue might be coming from: I’ve just realized that @Cerba referred to it only as the unstake pool on the proposal, but it is about instant unstaking.
There are no fees to merely unstake your SOL, nor any specific pool for it - Marinade would just unstake it at the end of the epoch.
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Hello nope, thanks for the late comment!
To answer to your first point, we ran some calculations and we estimate that roughly 50% of the planned compensation plan has been executed already. This is in huge part due to the recent lenght of epochs on Solana that has increased quite a lot, as you can see below (x being the epoch and y being the number of hours they lasted for). Longer epochs lead to a lower APY for staking rewards, which affected the estimation we were able to make at that time.
In this context, it would take more than 40 days to fully complete the compensation plan, whereas the vote about the compensation plan had already put a maximum end date to September, 2. Assuming the change goes live by August 10, this means we will only be removing 20 days.
Given the importance of stabilizing Marinade’s finances and the support that this current proposal has received on-chain (and that states that it would overwrite the compensation plan), we feel that we should carry on with the proposal as it is and not try to modify it in the last hours of its existence.
If you strongly believe that Marinade still has a “debt” to its users, I think this topic is worth rediscussing, maybe first on our Discord and if it’s an opinion shared by many, on the forum once again.
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when i say peg i mean the trading peg yes not the backing from unstaking, the instant unstake pool plays a big part of that.
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Yup, figured that possible use by liquidators was a concern, but wanted to make sure I clarified the other point, in case other users read it - I’ve seen some confusion on the Discord regarding mSOL keeping its peg with SOL.
Thanks!
The proposal has passed with 23,354,347 votes for, 337,524 abstaining, and zero against.
Thanks to everyone who voted!
I think geographic decentralization is the best thing to maximize for… outside of certain developed countries egress costs are much higher and there’s also a risk that voting performance and skip rate aren’t as good of very far from the rest of the network, so subsidizing those efforts is more important imo than just trying to subsidize any validator just so the network can add to its node count… which is already economically unsustainable unless voting costs go down or block rewards improve. I think it’s better if the network is more distributed and you can see validators running nodes in Siberia, South America, etc rather than seeing another one in Germany… MEV will be a geographically centralizing force most likely, and I like the idea of incentives to balance that out.
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+1 ser. Need to support the team and the war chest in times of these brutal bloody war days.
If SOL is back to ATH, is there a chance the fees can be lowered?
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It’s definitely something that the DAO will be able to suggest, yes
I’ll use this message to update a bit on the progress now that the proposal has passed:
- Management fees will be changed on 08/13
- Bonus to commission lower than 10% will be applied on the scoring of the current epoch, 337.
- Unstake pool fee split will be done over the next two weeks as it requires a bit more work.
We’ll now start working on the data gathering part of the project, and the progress will be communicated on Discord.
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The proposal didn’t include anything to this effect, but it’s all governance, so anyone could make a proposal at that point.
We are also looking into providing more regular financial updates. A better approach might be not thinking only in terms of SOL price, since there are other factors that could affect income - say, if we were to 5x TVL in a sustainable manner, the treasury would accrue funds much more rapidly.
Once things are stable, and we have more data on how everything has behaved, we can discuss how much of a runway the team should have to cover its future plans and whatever the DAO proposes, and then use that as a goalpost.
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Very informative article! I learned a lot for myself about the economics of Marinade’s work. Delegating to Solana is going through a tough time right now because of the price dump. Let’s be honest - most validators are forced to maintain nodes at a loss to themselves, since the current remuneration does not cover the cost of maintaining the servers. We have to find a compromise that will keep Solana’s existing network infrastructure intact and survive the bearish trend.
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