Node Operators want to set as high a commission rate as possible.
Delegators want to delegate to Node Operators offering the lowest commission rate.
A balance needs to be achieved for a healthy network.
Details
Currently, Node Operators (NO’s) are free to set their own Commission Rate (CR). This is the percentage of rewards that NO’s wish to earn. The lower the commission rate, the less a NO earns meaning that more is shared between their Delegators.
However, setting too low a CR means that many NO’s run at a loss. If they increase their CR, they may lose Delegators as Delegators might choose to delegate to other NO’s who have a lower CR (in order to maximize their rewards).
NO’s with deep pockets can afford to operate at a loss in order to win more Delegators.
The majority of NO’s commission rate for Era 7 is 5% with an average of 8.4%
The proposed solution
Based on conversations in Discord, most NO’s believe that:
The NOCR should be increased
There should be a minimum NOCR applied to all indexers
The outstanding question is what this minimum NOCR should be. We believe that this value should be around the 25% - 30% range so will put this to a vote with the following options:
20%
25%
30%
35%
We will propose a 48 hour voting window using Snapshot as we would like to implement the new commission rate quickly.
We invite thoughts from everyone in the community here and on our Snapshot Voting
Yeah, it’s not healthy at all for the network like this to have a race to the bottom / loss leader situation for many reasons, so something like this makes a lot of sense. Later, I’d like to see some more sophisticated dynamic allocation of this depending on the state of how many delegators/indexers are on the market, but for this early stage just disallowing lowballing makes sense.
I like setting the minimum to 25%, not 30% as going over 30% is quite a emotionally hard price to see for delegators - i.e. and having the price premium on the dashboard hover between 25-30% seems like a sustainable place to be.
I agree that we need to set a minimum commission threshold. The only thing is that 30 percent is a really high emotional bar, but as we see it is necessary.
30% feels right to me. Appreciate the emotional bar comments but I think educating delegators will be the key to them understanding that 30% (or whatever floor is voted in) is the new 0% - no-one can offer better returns commission-wise.
At the end of the day this is a parameter of the network that can be changed if we don’t get it right first time. Kudos to the team for following through with this approach.
@jim-counter I think that is a fair counter-point to the emotional barrier argument. I changed my vote to 30%, and educating that as the new 0%. In the end, indexers are what brings in the power to the networks and the rigs are expensive.
Community governance plays a crucial role in SubQuery to ensure that decision-making is distributed among a wide range of stakeholders rather than being centralised in the hands of a few. This approach aligns with the core principles of web3 decentralisation, promoting transparency, inclusivity, and a sense of shared ownership within the SubQuery community.
The proposal was to set a minimum commission rate and the snapshot voting platform was used to choose between various options ranging from 20% to 35%.
A quadratic voting system was used which places more emphasis on the number of individual voters rather than the size of their voting power.
The end result was that 20% was chosen as the minimum NOCR.
We intend to introduce this minimum Node Operator Commission Rate to apply for all rewards received in Era 9 and onwards.
Existing node operators do not need to do anything, we will automatically update their Node Operator Commission Rate (NOCR) to match the minimum if their selected NOCR is less than the new minimum.