The problem ¶
Recently there’s been a discussion about nominator-blocking nodes. You can see them here:
I’ve written about the issues with Phragmen, which optimizes for the network and not necessarily for each individual participant (whether they’re a validator or nominator).
In the past I used nominator limiting (that is, I limited the value staked on the node by kicking large nominators, but smaller nominators remained) on several occasions before Team Multiplier was improved to take its commission (it’s returned to the Foundation’s Team Multiplier nomination Pool). After that modification, conditions were “fair” - i.e. TM-backed and non-TM-backed validators and all nominators are be treated equally.
I explained the logic behind my use of nominator blocking (or in my case, limiting):
- Use it where it’s allowed, i.e. non-TM backed nodes (in my case that’s two of my nodes, ENVY and SLOTH)
- Allow smaller nominators to both create a safe buffer for myself, but also let smaller nominators benefit from higher earnings
Regarding the second point, it wasn’t just altruistic - it benefited me personally. But I didn’t kick small nominators even when node election wasn’t at risk.
Return of the blockers ¶
One problem that remained is Phragmen. It tries to maximize the value staked on each node. Which means that nodes who can still make it but block nominations, can run with relatively low stakes.
As an example, these days the average node gets close to 300K xx, while the nominator blocking nodes run with 215K xx allowing those validators to get a much higher ROI by nominating their nodes and sharing the proceeds with no one.
Apparently the new TM approach isn’t enough for some folks, so now we have 5-6 who block all nominators except their own nominator wallet(s)), which is usually the situation in which a nominator-blocking validator has just one or two nominators (my guess is both are their own wallets).
Most validators are TM-backed so they don’t have the option to kick nominators and/or disable new nominations.
Having two non-TM nodes, I do have the options, but for a while I didn’t want to use them.
Options and next moves ¶
Now, however, this blocking is increasing and it’s clear (no on-chain identity, no community participation either) these guys aren’t the good guys.
If they wanted to engage in nominator blocking by default, they could have floated the idea in the community.
But, it is within their right to kick nominators and stop new nominations, so let’s play this game!
One possible option for good actors is to nominate nodes from Waiting. This doesn’t work well because of Phragmen: when they fall short 1 xx, they can’t get elected, but if you nominate them with only 20K xx, they get elected with as much 300K xx, and some other node drops from 300K to 205K and ends up in Waiting. I tried that this week (it’s recorded on the chain, and visible in XX Chain Explorer) and did not make money doing it. This means the approach can’t work: no one will divert nominations from the less risky nodes that are running fine to nodes in Waiting and increase the risk just to make a lower return on their investment!
The other helpful action I can think of is to return to nominator-limiting myself. How can that help?
I expect that nominators I kick will find other validators that do not block nominations - mostly TM-backed nominators (this is done automatically by Phragmen). That includes TM-backed nominators from Waiting as well. TM-backed nominators from Waiting should generally offer a higher ROI vs. “over-nominated” nominators, which should help create pressure on the nomination-blocking validators, and push them out until they unblock nominations.
I’ll start today by kicking two large nominators (70K xx each) and leave the rest on board, which should take ENVY and SLOTH down to from 330K to 250K xx each.
Phragmen will allocate the kicked 140K xx somewhere else, but eventually these nominators will realize they’re making a lower ROI by not finding new nominees and hopefully renominate some of the good nominators from Waiting who got chilled in the recent blockchain downtime and require renomination, and add some of the new independent nominators from Waiting.
That should raise the minimum required to get elected and eliminate some of the nominator-blocking nodes.
Next moves ¶
Yesterday I updated on-chain identity to announce nominator limiting on ENVY and SLOTH.
Shortly I’ll block new nominations and remove the two large validators. The rest will remain on board as long as they wish.