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.
What if say a validator starts providing incentives for individuals to vote one way or another. e.g. allocate your votes to me and recieve X amount in profits, or X many Y tokens… It could be natural for economic competition to arise in such a system. Would we look to prevent this or allow it to happen?
I’ve read the proposal and while I believe it comes with good intentions, it is not a very good idea. Marinade started great by using an algorithmic delegation that is much more objective and based on facts rather than on human factors. If you check the majority of the PoS networks, they are super centralized from a stake perspective - people tend to follow the herd and stake with the same validators ranked in top by stake, stake can be bought, many deals are made behind the doors, it is terrible.
I can’t really follow what is the true benefit of adding a human voting that can definitely be easily bought, subjective and through deals behind the doors. It looks more like adding an use case to the MNDE token but probably destroying a positive influence for Solana as a whole. What will happen as a consequence is that small validators will be chosen by humans which will selectively define how much stake one should receive but not based on true on-chain metrics.
The proposal has close to no impact on the huge delegations made by institutional investors or to the whitelabel validators operated in the Solana ecosystem. The real problem lies actually exactly here - since the idea would be to distribute the stake better and not to define a whole new small - medium validator set based on subjective factors.
Apologies for the criticism but I trully don’t believe this will have a positive benefit for the current small validators, except for those that might have some contacts with MNDE token holders or owning themselves MNDE tokens, which doesn’t sound like a fair system.
Algorithmic staking is something which all networks should implement in their original staking mechanism in order to better distribute the stake.
Looking into this idea a bit more… from what I can see on Solana Beach there’s actually a decent amount of validators with > 500k SOL delegated that sit outside of the so called “security group”. I wonder if the chefs have any idea how often this subset of validators actually receive stake from the existing algorithmic delegation strategy (if at all).
Thanks for all the feedback, folks. @Cerba and myself have discussed this and we hear your concerns. We need to think about how this could be designed to address the issues that you have raised so far - I would not expect this to be reaching a governance vote before we do that.
I’m inclined to think that this might be a transparency issue, so it bears thinking about what sort of information could put the community at ease. For instance, it’s perfectly possible that the concern isn’t as trivial as “team members” (which could be someone holding merely a handful of MNDE), but in general large, concentrated stake swaying the protocol’s actions. In that way, it might be connected to the topic of vote multipliers as well.
Let us take some time to get data, create a few models, and come back with suggestions.
Maybe this has already been discussed elsewhere, but I’m also wondering how Marinade will determine which validators are assigned a “gauge” to vote on. As the number of newer validators (who probably need delegation the most) increases, what will the process look like? There are already over 1600 of them per Solana Beach. Will they have to apply? Will this also be decided by a DAO vote? Is there a maximum number of gauges that can be assigned using Tribeca?
Great, I managed to fat-finger delete my own reply.
The topic hadn’t been brought up here, but thanks for raising it - it just came up on a call that @cerba and I were having. Marinade currently only delegates to the top 300 performing validators. However, the DAO could decide that validators between (say) 301-1000 are able to apply to the vote gauges, which could get them more stake and could also help them improve - pulling themselves up by their bootstraps.
Will this also be decided by a DAO vote?
I think the general mechanics need to be decided by a DAO vote - who gets to apply, what the parameters and requirements are, and so on. Running every validator application through a Tribeca vote would be overkill, and once we have voted on them, then they apply to any future potential validators (until we vote to change them).
Folks, I wanted to follow up on the concerns regarding the team using their allocation to vote on validator selection.
Is a concern that the on-chain gauges could allow someone with a large amount of MNDE to bend or break the Marinade delegation rules?
I personally think that the delegation rules should stand above all, even gauges. This means that the maximum 1.5% Maximum Stake Cap would hold.
If it does, and 10% of Marinade’s total stake is controlled by gauges, then that means that if the entirety of the 30% team’s stake were to collude and vote together, it would at most be able to max out the stake limit for two validators.
Given a scenario where the global limits hold - is the team voting with their stake still a concern?
I am in favor of enabling validator voting with a 10% allocation to start.
MNDE Value = Governance Control:
As Marinade is decentralizing governance, we must recognize the DAO will act via token voting for any major decisions. That governance power is unsustainably cheap given the current MNDE price. With 24mm of MNDE locked in governance, a malicious actor could pass any proposal for only $2mm (51% of locked).
Marinade’s primary goal should always be ensuring decentralization and security of Solana but that doesn’t mean the protocol can ignore economics. Outstanding mSOL and MNDE price have been steadily declining while competitors are growing. Liquid staking is a winner take all market - it is imperative mSOL wins over our mercenary competitors.
The MNDE token needs utility and a strong price to help ensure Marinade thrives in the long term. This proposal demonstrates MNDE’s utility and will help provide a floor price as validators look to acquire stake. This is a positive for all of Solana.
Eligible Validator Guardrails:
I agree Marinade should require strong performance from any validators asking for gauge votes. This ensures we do not compromise our primary goal of Solana decentralization & performance. Allocation caps can further prevent any prospect of abuse.
Team Self-Delegation:
I struggle to understand why this is a problem. If delegates have met strict performance requirements, why would it matter whether the validator is operated by a team member or third party? Rational self-interest would prevent any MNDE holders from voting in a way contrary to the long term value of the DAO.
If validators are upset they are losing votes, they should buy more MNDE. It is quite cheap right now. If delegated validators are not benefitting the network, we should tighten the requirements further regardless of the operator.
Some of the proposed solutions to this team delegation question introduce a massive amount of complexity that could reward questionable workarounds. With only a 10% voted allocation, we should start simple and see how things actually play out. We can always introduce restrictions later if actual problems emerge but those will be challenging to undo once in place.
You make an excellent point - in a scenario where a global 1.5% cap holds, I would not be concerned at all.
However, I don’t think that applying the 1.5% cap universally across both algo and governance-controlled delegation would be a good solution. @brian_smith_0 is right - the MNDE token needs more utility, not less. We ultimately want validators to recognize the true value of the token and compete to acquire as much as possible. If the governance-directed portion is capped at all, that cap should be much higher.
And as long as there is transparency and the team continues to act in the best interest of the protocol and its goals, we will be just fine.
Now I might be missing an economic component of this but, would it make sense at all to offer validators looking to get MNDE in order to direct staking the ability to buy MNDE from the treasury increasing the amount of SOL held and staked by Marinade while also giving them MNDE to control the stake? Definitely increases inflation on the token price which I know is not many peoples favorite thing but would offer a compounding effect on the SOL delegation these validators are receiving.
I feel that the Token Exchange program that was announced recently partially solves the matter you’re bringing up.
It is a reality that MNDE is hard to acquire on markets due to slippage and the Token Exchange will offer another way to get in the game. If this Token Exchange proves to be a very good way to distribute MNDE, all holders will be free to vote for another round of a similar nature, maybe even directly addressed to validators.
To come back on the most brought up topic of this discussion, I also believe that MNDE acquired through work and contribution should have the same power and rights as any MNDE on the market. The decentralization objective must be guaranteed by the broader rules of the Marinade protocol: whether it’s a team member or a highly funded individual, both should never have the ability to skew the goal of Marinade as its rules are clear and unmovable.
I feel that 1.5% of the total stake is a reasonable limit to begin with, as with 10% of the stake controlled by those gauges, someone would have to acquire 15% of the total MNDE in gauges to max out a validator before running into this ceiling.
This situation gives a “maximum” that can be reached by any validator or actor, which I believe is healthy. Because the financial incentive to accumulate more MNDE will drop after this point, there will be a reduced incentive to accumulate more MNDE. @dobby I’d be really interested to hear your thoughts on this “high limit” as you advocate for a higher limit (or a separate one) for the gauges. Don’t you think that if someone owns 15% of the gauges and maxes out a validator, the financial incentive should start dropping for this actor in order to help with the decentralization of power and interests?
It’s also worth considering that an actor could still see value in buying MNDE beyond this point to simply take it out of the supply in gauges or direct stake to another validator that may offer financial compensation in exchange (bribes).
I resonate a lot with @brian_smith_0’s points regarding this, the focus should be on MNDE fueling healthy and performing validators in a setup that prevents stake concentration harming the decentralization objective. I think that if we all agree on broad rules for Marinade, we’ll pave the way to get there together.
Note: To answer’s @dobby question regarding how to create gauges, the process to do so should be permissionless. Meaning any validator/MNDE user will be free to create the gauge for an eligible validator. So any eligible validator will be able to have its gauge and use/market it
Thanks for the response Cerba - Totally see how the exchange program solves this somewhat. I suppose the only thing is that swapping with someone like Raydium and holding RAY in the treasury doesn’t really push mSOL growth but does leave Marinade stuck with RAY while giving a decent amount of influence over to an AMM.
Raydium is obviously just an example, not sure if they proposal is focused on any community member or specifically validators? Need to go back and re-read that medium post.
I know that the details of the Token Exchange program are still being ironed out, but I believe there will a be a set of tokens that are accepted, and those tokens would have to be directly useful to Marinade and not only be a treasury diversification. Not all tokens can be considered for the exchange and I believe the focus will be on SOL/USDC as much as possible.
Nonetheless, even if RAY is not an acceptable token to be traded for MNDE in the context of the Token Exchange, Raydium or any other protocols could participate with another accepted token.
Hi everyone, I’m writing on behalf of a top 15 validator. I think this proposal would make Marinade uniquely different in the liquid staking landscape and build up a significant competitive advantage. It’s only a matter of time until stake delegation is financialized. Marinade should capture this opportunity, democratize it, and influence its ethos.
A few things that I think are true for the majority of top 20 validators:
Validators were the top contributors in many early Solana SAFTs and public auctions and thus own a significant amount of self-stake.
Many large stake accounts are owned by individuals that are part of validator companies or very close to them.
Having stake is our core business. Many products and services we built (e.g. MEV related) rely on the fact that we have stake. Decreasing that stake (e.g. converting to mSOL) runs counter to our core business interests.
On the other hand, siphoning off stake from the security group (top 33% of stake) is key to increasing Marinades TVL. Marinade would need to find a way to convince validators to convert at least some amount of self stake to mSOL. That isn’t easy, but I think it’s doable.
A key factor here would be the ability to recoup, to at least some degree, self-stake that is being converted to mSOL. Gauges controlled by MNDE is that ability. I was thinking about the 1,5% max stake cap and under which circumstances it could be increased as it will be quite a limiting factor in its original form. A possible way to tie the ability to influence stake delegation to the overall Marinade goals (increase mSOL TVL) would be to link the ability to gauge voting above a certain threshold to the amount of SOL converted mSOL.
E.g., a validator that wants more than 1,5% of max stake needs:
Enough MNDE to influence the gauges. Building demand side for MNDE is crucial, I fully agree with the post of @Cogent_Crypto.
An equal amount of mSOL in its wallet. Want 200k SOL more than the max cap? Gotta have ~200k mSOL. This is the tricky part - how can we make sure people can use mSOL in DeFi but still bind the ability to go beyond the 1,5% max stake to holding mSOL?
I think that way, we would be able to force an increase in Marinades TVL, create a strong demand side for MNDE and allow validators with a large self stake to get behind Mariande sustainably. It’s a classic win-win. Validators can convert self stake to mSOL without significantly decreasing stake on their validator. Marinade can sharply increase TVL and MNDE demand side.
From the 1.5% max stake perspective, this is a helper, not the end goal. I believe the market is smart in the long term, so perhaps instead of arbitrary conditions, 1.5% can be raised like 0.1-0.3% each month automatically. This should create simple and approachable conditions for everyone while still setting up an advantage for decentralizaton in the beginning.
Anyway, the max_stake parameter should be governable including removal. I would not advise to remove or significantly increase (10%+) it to the beginning when people will be still learning the process and consequences.
Thanks for the perspective and welcome to the forum!
As a note, I would say that how the various stake assignment limits could change is independent from the on-chain gauges proposal: on-chain gauges could fail, and a limit change proposal still pass; or the other way around.
I would personally recommend keeping proposals atomic, so perhaps forking this into a separate discussion topic might be best.
