XXV Validator has one node that qualifies for Team Multiplier and another that doesn’t, so I have vested interest in level playing field for both types of validators.
I’ve written posts in which I claimed Team Multiplier is too generous, and that was even before it was made even more generous.
After a few more weeks of managing my nodes, I’ve realized how bad it is.
The system heavily favors Team Multiplier validator nodes and this week I’ve been thinking if I should simply stop validating from the node without Team Multiplier. It’s too much trouble and I make less money than I otherwise could (if I didn’t validate).
And on top of that there are many brain-dead nominators (see my previous post).
While in an ideal world we’d have independent (not Team Multiplier-backed) validators spring out of nowhere, on XX Network that doesn’t seem to be the case.
As an example, let’s take era 140:
- XXV3 (TM-backed) - 18% commission, 51 nominators, 6 present including my own address, 108K total stake and 108% profitability
- XXV2 (not TM-backed) - 12% commission, 5 nominators, 1 present (just me, 300K nomination), 335K total stake and 37% profitability
In other words, I find it increasingly difficult to convince myself I should bother with XXV2. It’s profitable, that’s true, but if I did 50% less work, I could make 300% more money (by nominating similar TM-backed nodes rather than my own).
Team Multiplier is too generous and makes Team-independent validation hard to justify. Even Team-independent nomination (the nominating of validators without Team Multiplier) is uneconomical. Look at the list above: to get XXV2 elected, you need 300K on the node (whereas XXV3 needs just 108K).
Normally, nominators would look at the validator’s stake, reward (commission), and how the node is performing. XXV2 would normally be a better target to nominate - more (but not a lot) at stake by the validator, lower commission, same performance.
But no, that’s not what happens.
If you nominate XXV2 (which earns same as XXV3, but charges a 33% lower commission), you need to bet on the chance there will be enough nominators to get it elected (300+K), but if that happens, you’ll make 66% less money (108% vs 37% profitability). Does that make sense to anyone?
Why does that happen? It’s simple: Team Multiplier doesn’t take any rewards for its nomination efforts.
Next steps for XXV2 ¶
Before I give up on wasting my time on XXV2 (and the idea to run more nodes), I’m going to try to make XXV2 sustainable like it was before, by lowering its commission to single digit numbers. And I’ll do this only because I can’t instantly unbind its 35K validator stake.
That may get enough active nominators to get it elected, but if it doesn’t I won’t care. I can just shut it down.
Summary ¶
Team Multiplier adjustments made the situation worse for indepdent validators. The incentives to validate are just not there.
Incentives to nominate TM-backed validators, rather than validate or nominate independent validators, are very strong.
Team Multiplier should take rewards and burn them. That would ensure level playing field in this situation.