Agreed. I do have a general concern over what can be perceived as fairness, but it’s not the “rich gets richer” issue: it’s a factor of fundamental differentiation.
If I only want to make money, I’ll take my SOL to the highest bidder. The reason I have mSOL is the promise to make Solana more decentralized through an unbiased, algorithmic distribution.
I’d be very careful with the perception around the stake percentage that gets controlled by voting, merely because if at any point it creates the impression that Marinade is no longer impartial, it will lose value in people’s minds.
Yes, we can explain why it hasn’t happened, provide evidence in terms of costs and effects, but if you have to explain yourself then chances are you have already lost.
Indeed. But if this is anyone’s concern, the flip side is that someone that well-funded and well-connected likely doesn’t need to bother with suborning or subverting Marinade. They can probably find other easier ways to grow their stash.
Happy to give this a shot with a non-controlling percentage, like the suggested 10%, then slowly take it from there.
Well done, Chefs! I’m a big fan of pretty much everything I’ve read so far from the team on Marinade’s governance construct and the thought process behind it. And let’s be honest here - the conversations we are having on fairness and providing support for newer and/or smaller validators don’t really happen much in other forums/discord chats. If we as a community can stay anchored around these values, I think it will go a long way.
Totally agree with @gekonn’s sentiment on fairness as well as the context on being early here:
I would even suggest that the best possible way to promote fairness today is to reach out to some of these smaller validators and make sure they are aware of Marinade’s mission, values, and the opportunity to provide sticky support for their operations. At current prices, you can participate in protocol governance for ~ $100 USD (and potentially compound voting power as suggested in “How Marinade’s MNDE will fuel on-chain DAO governance”)
Let’s also not lose sight of the cap that the Marinade team has established - the largest amount of the overall Marinade pool that can be allocated to a single validator is 1.5%. More info here.
I wanted to pose a few additional questions:
Are there any plans to formalize a process to get closer to full decentralization through a gauge voting system (ie steps to get to 50% delegation controlled by the algo formula / 50% governed by DAO or 25/75 or whatever that maximum number might be)?
I understand the desire to start smaller with 10% controlled by DAO voting and see how things go through a trial period, but have you considered starting at 15% or even 20%?
IMO, more power in the hands of the community from the very beginning could potentially:
Help accelerate Marinade’s TVL growth and make progress toward the goal of 30 million SOL staked in 2022 (currently 6.6 million SOL), substantially improving Solana network decentralization and providing massive support for smaller validators.
Maximize the impact of that sticky stake and predictability for smaller validators right out of the starting gate (assuming total MNDE locked in governance increases over time)
Further increase the incentive to buy & hold MNDE in the near term
How often will governance NFT/MNDE holders have to vote? Will it be a set it & forget it type of thing, or will it be a weekly cadence similar to the Saber gauges on Tribeca?
This is a great proposal! I really appreciate all consideration that went in to the proposal along with the great points made in the discussion.
I think you could build on @dobby’s astute point of a 1.5% cap to a single validator and have a cap for “governed stake” as a control mechanism that could be adjusted to make sure that there’s more opportunity for new and small validators to become profitable
Hello Dobby, thanks for the very interesting feedback
Let me try to answer some of those questions!
Currently, this proposal only suggests a starting point at 10% of the total stake and does not formalize any evolution of this system, but this is something that can be reflected on here, together. I think that implementing the future evolution of this system right from the start and in the initial proposal could lead to a more difficult discussion in the end, as we’d debate both the implementation and how it should evolve. I’d rather have a first vote about the implementation, and a second vote based on a suggested plan, based off data we’ll have at our disposal!
I’d be interested to see what other DAO members and validators think of a higher starting point. I wouldn’t be opposed to raising it myself, as I agree with your points, but the members and users most concerned by this proposal should also express on how they feel about this.
For these specific gauges, it would be a “Set & Forget” type of thing indeed, with the possibility to reallocate your MNDE whenever you desire to do so.
The point that both you and Ben raise on a max cap is also interesting. Should the stake controlled by MNDE be considered as the “same stake” as the stake delegated by Marinade’s delegation strategy, or should it be treated in a totally independent way?
For example, should a validator that currently has reached the 1.5% cap on the stake he gets from the delegation strategy be able to get more stake through the gauges? Or should it be forbidden by the system?
In my opinion, both should be considered individually, and another max cap should also be specifically implemented on the stake controlled through gauges too, but I’d be curious to hear your thoughts on this.
I like this approach! Very reasonable and measured. No need to try to lock something into place now that might prove to be sub-optimal 3 months from now. Totally with you.
Also with you on this point. I think it’s probably best that any cap placed on the portion controlled by MNDE governance be considered independently from that of the algo formula, else the whole gauge voting system becomes less desirable. I would lean toward giving the community more power and more reason to participate and to care about governance rather than less. For that reason, I also think that any new cap introduced should be higher than 1.5% (if capped at all).
Thanks for taking the time to answer some questions and explain your current thinking. This is fun!
I think for a change like this we should start small. There are two things at play for me:
The perception of fairness and how users may react to the change (which I outlined here);
It will be psychologically easier to increase this value than to lower it in the future - the change effectively adds a certain amount of power to MNDE, and people react better when you increase their power than when you reduce it;
I’m comfortable with 10%, but around the 15%-20% range it starts feeling less like something we’re experimenting with and more like a change that will be harder to roll back if we realize it had some side effects we did not like.
(Likely because I currently wouldn’t want more than half the stake controlled in this way, and 20% it would be well into that percentage)
Valid point, if I understand you correctly(?) and important to discuss.
Do you mean that it is problematic if someone in the core team also runs a validator, or anyone contributing to the Marinade DAO?
Would love to see if you could elaborate a bit more on it. Thanks!
EDIT: The core team does not get 30% - this is for the contributors of the MarinadeDAO, just so ppl don’t think that 30% is spread to like 8 ppl which is not true. However, @meyerbro 's point is still very valid and have to be addressed imo.
I think the tricky part is the perceived self enrichment/conflict of interest where you have (as Marinade) received 6.5m SOL in stake on the premise that this is fairly and algorithmically distributed amongst as many validators as possible to aid decentralization, then create a token, give a large chunk to yourselves then let that token decide the distribution of that stake, including to validators you yourselves operate
(I’m phrasing what I believe meyerbro’s point is, and what I think the discussion of this point would center around, I don’t mean to imply any malice or ill intent on behalf of the marinade team)
Very valid point and I do agree with this point of view, that it is indeed problematic and perhaps even goes against the Marinade ethos. I would for sure support something that would deal with this possible issue.
I’m thinking what kinds of safe guards one can apply to mitigate a possible issue related to this. I do not have any clear ideas for the moment myself, so I’ll wait for someone with possibly a higher blood sugar level to share their thoughts on it too
35% - DAO Distribution . Used as token holders see fit via proposals, initially used for Liquidity Miningprograms.
35% - DAO Treasury . This is a treasury reserve to be used for operations, grant programs, and strategic partnerships. This treasury is controlled by Marinade’s multisig and will be unlocked and governed by MNDE holders.
Besides this reserve, the treasury also receives mSOL protocol fees:
2% of staking reward fees generated by Marinade protocol
25% of liquid unstake fees generated by the Unstake liquidity pool
30% - Team . This is an allocation for current and future contributors. The distribution has not started yet and those funds are currently controlled by Marinade’s multisig.
Thanks for raising the point, @meyerbro, it’s one I hadn’t considered (I hadn’t realized team members were validators).
As you can see in my posts, I’m aligned with you and @laine about Marinade keeping most (or potentially all) the stake distributed algorithmically. I do think there are safeguards in place which make @Cerba’s proposal rather low risk:
I get the concern of a potential conflict of interest. Given votes are transparent and on-chain, however, wouldn’t this kind of corruption be obvious? (eg. a set of wallets always voting for a specific validator)
If such petty corruption would be obvious, then it seems to follow that engaging in it would destroy Marinade’s value proposition, and thus devalue the MNDE the team holds - rational self-interest would compel team members to pressure each other to act honestly [1];
Finally, even if we do think team members might favor others who are validators, wouldn’t keeping the percentage low (say, the proposed 10%) make this kind of behavior even less appealing vs. the potential blowback?
Would love to read your thoughts on those.
[1] eg. what happened in OpenSea, where Nate Chastain abused his position to engage in petty corruption, but his actions were against the team’s interests so he was expelled.
Thanks FWIW I’m in favour of maintaining algorithmic distribution for a majority of Marinade stake, but I don’t oppose some percentage being distributed per this proposal’s suggestion via MNDE voting.
Something mentioned on yesterday’s Solana validator round table was also to possibly give validators higher voting power, I’m not entirely sure yet whether I think that’s a good idea or not but wanted to mention it here so it’s on the record, and in doing so I believe the most effective way would be to attach such increasing weighting to votes placed by accounts that hold MNDE AND are withdraw authorities of vote accounts. That being said anyone can create a vote account so the weighting could either be stake weighted or there could be a minimum stake required to obtain the increased voting power (or have it linked to the algorithmic score!! that would be a nice crossover between the two methods)
The team allocation most contributors get (including me) is not nearly that high as some of the MNDE wallets I have seen from people/companies that are gathering mnde tokens for the last year.
I also think every contributor should have the freedom to run a validator themselves.
But I do get your point and concerns. I would vote yes to “MNDE given to team members shouldn’t have voting power to select validators”.
To speak for myself. And I will always be completely open and transparent about this; I would never use any team token allocation to vote for my validator. I agree it would be unethical. like @PlayerOfBits said, such things would be pretty obvious.
But, I did buy a bunch of MNDE on the market like everyone else, that I would use to lock in and vote for the validator of my choice.
I’d be OK with this as well. It would require team members to maintain some wallet hygiene, and I agree with @stakeconomy that team members should be able to vote with MNDE they have acquired themselves, but I’m not against restricting voting with the MNDE assigned as payment.
Then again, that’s easy for me to say, since I don’t particularly value assigning stake weight to any specific validator (although that may change once I see the feature in practice). Curious what other team members think.
My view is that it’s not problematic for someone on the core team to run a validator or even for someone on the core team to vote for their own validator so long as there are clear guard rails in place and there is transparency around the process.
If the goal here is to distribute Marinade’s stake fairly, maximize impact for smaller validators, and increase Solana’s Nakamoto Coefficient, I would argue that the core contributors probably have the best sense for how to accomplish that. No need to handcuff the most informed voting power out there.
…
I don’t think the right solution is as simple as this.
Perhaps the best route would be to let the core team vote how they see fit but with caps on the total amount of their personal voting power they can assign to one gauge/validator.
What would that number look like? Maybe it’s 25% of personal voting power, maybe it’s even higher? Idk what the right number is yet, but I would love to spend some time discussing it here.
But again, transparency is the key - and recent history has taught us that having the right tools in place to monitor these things is highly important.
BTW, I would be more than happy to help build these tools too!
Thank you for the great work and outlining the proposal. I think it is a great idea to integrate some support mechanism for new validators into the Marinade Pool to raise the Nakamoto coefficient. While I like the current proposal, I think there are some limitations / things to be cautious with.
1. Helping smaller validators to get profitable
Validators can secure a “base-stake” to operate and increase their planning security. This is great, but can become problematic without a limit for big players
Big players can arbitrage the leverage MNDE offers away. The scenario quoted below will incentivize big players to set up a validator and gain yields of 28.8%-57.6% on their invested capital. For big funds it can be worth to act like this with millions of dollars until the MNDE price reaches a point that makes it unattractive for big players (and much earlier for new validators) to use MNDE for delegating stake. So we should make sure to only make gauges capital efficient for the right people.
The 1.5% cap counteracts this behaviour somehow, which is nice. See more under (3).
Proposal: Only validators with <XXXk SOL in total stake should be eligible to benefit from gauges. This would go further than the 1.5% cap of the pool i.e. we could offer usage only for validators with up to ~200k SOL staked. This is a range where validators can operate with a solid profit. For sure validators with >500k SOL should not profit from the MNDE token if this program really aims at helping new validators
2. How much of the Marinade Pool should be controlled by MNDE?
I think 10% is a good starting point
Going above 15-20% is potentially dangerous imho because Marinade does not keep its promise of algorithmically distributed staking. This could lead to a smaller pool size and eventually also to a decline of the MNDE value. Just from my feeling, 30% would definitively be too much. But I also like the comment mentioned to separate the discussion about the actual size of the MNDE controlled part from the discussion about the initial mechanics
3. Should the stake controlled by MNNDE considered as the “same stake” as the stake delegated by Marinade’s delegation strategy?
When answering this, think about the initial rationale to cap the Marinade stake to 1.5%
As far as I know, validators are capped to 1.5% of Marinades pool to support decentralization and ensure a diversified base of validators
Adding a second cap of 1.5% and allowing validators to get more stake through the gauges is against the rationale of capping validators stake in the first place. Consequently, validators should not be able to get more than 1.5% of the pool through MNDE.
Adding a second cap of 1.5% does not help new validators. It makes it only easier for validators who are already successful.
First off I think this proposal is an excellent idea and I’m in full support. Here are a few reason’s why
Reason 1: A lot of foundation validators are stuck at 10% commission and are slowly losing stake from the foundation and have not been able to attract organic stake due to the very high commission. If they halve their commission to 5%, a more reasonable number for attracting organic stake, they could possibly put themselves on a path of sustainability, but their marinade stake would not go up significantly and the short term losses may not be sustainable.
You can see this from the mariande stake data where the average 10% commission validator is at an eyeballed estimate of ~15-19k stake from marinade and the average 5% validator is at 19k to 25k stake from marinade. (If there is contentoin on those numbers I can take futher time to find exact numbers) at 7% apy In these two instances the 10% validator receives 126 sol a year from Marinade stake and the 5% validator receives 68 sol which could be the difference between profitability or not.
If there was a sustainable path forward via providing value to the community, attracting additional stake organically, and through Marinade, perhaps they could gather enough stake to strike out on their own and be competitive with out the foundation stake.i.e. have more competitive returns.
This proposal would allow some validators to possibly make the move from 10% down to 5% or lower and have a long term sustainable path without going out of business in the mean time.
Reason 2 By putting a direct value allocation on MNDE the value of MNDE its self will go up. This will in turn allow for higher liquidity mining values and further increase the defi value proposition of mSOL attracting more stake making for a higher value of MNDE.
Reason 3 As more validators are able to have a sustainable path, with competitive rates, the overall returns of mSOL will increase. This would make marinade a more attractive option for some of the stake from whales who currently stake with validators with better returns.
Conclusion I see this as an important step to increasing the value of both MNDE and the value of holding mSOL which will put us well into the fly wheel of value. (even if you are familiar with the flywheel of value concept, I highly recommend this wonderful article, https://www.strategy-business.com/article/The-Flywheel-Philosophy)
Unless the Chefs have received an exorbitant amount of MNDE at very low prices I do not have an issue with them using their earnings as a Chef to do what they please with their MNDE. To me it would be the equivalent of them receiving USDC and trying to say what they can or cant do with their earnings. In fact If anything I would trust the chefs to act in the good of Marinade as holders of MNDE more then if they did not hold it.
Now I would have a different view point if the chefs controlled a very large percentage of MNDE and got it at un unfair valuation.
