[Proposal Idea] Establish Network-Wide Minimum Validator Fee Rate

Proposal Discussion Proposal Ideas
,
1

Summary

Following the successful implementation of CVV006: Implement Minimum Validator Fee Mechanism on the Casper Mainnet, the network now possesses the technical capability to enforce a minimum validator delegation fee. This proposal initiates the crucial next step: determining and implementing the specific network-wide minimum delegation fee rate. An internal poll among Mainnet validators has identified 10% and 5% as the two most favored options. This initiative aims to foster a more sustainable and equitable validator ecosystem by preventing a ‘race to the bottom’ in fee structures, which can jeopardize validator profitability and, consequently, network security and decentralization.

Problem

While CVV006 has laid the groundwork, the actual minimum fee rate still needs to be established. Currently, validators can still effectively set their delegation fees to 0% (or very close to it), leading to intense competition that often forces validators to operate at a loss. This practice is unsustainable, as validator fees are the primary source of income for covering operational costs. A lack of profitability threatens the long-term viability of validators, potentially leading to a reduction in the number of active validators, decreased network decentralization, and compromised security. Setting a definitive minimum fee is essential to fully realize the benefits of CVV006.

Proposed Change

We propose to set a network-wide minimum validator delegation fee rate at the protocol level, to be enacted via the next network upgrade. This will ensure that all validators maintain a baseline income, promoting a healthier and more robust network. The specific minimum fee rate will be determined through an onchain vote, with the two most popular options being 10% and 5%.

Voting Mechanism

To decide on the minimum fee rate, we will introduce a new voting structure with the following options:

  • Option 1 (10%): Supports setting the minimum validator fee at 10%.
  • Option 2 (5%): Supports setting the minimum validator fee at 5%.
  • Abstain: Indicates no preference for either option.
  • No: Opposes the implementation of any minimum validator fee.

This voting mechanism allows for a direct selection between the two most preferred options while also providing avenues for abstention or outright opposition to the concept of a minimum fee.

Benefits

  • Validator Sustainability: Ensures a baseline income for validators, covering operational costs and promoting long-term participation.
  • Fair Competition: Prevents a ‘race to the bottom’ in fees, fostering a more equitable competitive environment among validators.
  • Network Security & Decentralization: A sustainable validator set is crucial for maintaining a decentralized and secure network.

Next Steps

  1. Community Discussion: Gather feedback and further refine the proposal based on input from validators, delegators, and the broader Casper community.
  2. Formal Proposal & On-Chain Vote: Finalize the proposal and initiate the onchain vote to choose the minimum fee rate, utilizing the outlined voting structure.
  3. Network Upgrade: Implement the agreed-upon minimum fee rate as part of a subsequent Casper network upgrade.

Timeline

We aim for a swift discussion phase to move towards a formal proposal and subsequent on-chain vote, given the importance of validator sustainability for the health of the Casper Network. The goal is to integrate the chosen minimum fee rate into the next available network upgrade.

Feedback is highly encouraged.

References

[1] [CVV006] Proposal: Implement Minimum Validator Fee Mechanism - Casper Network Forum

2

I recommend adding more options to the proposal as the new ballot supports up to 10 options. Like 3% 4% 5% 6% 7% 8% 9%10%.

1 Like
3

3% - 5% max as protocol defaults is understandable i think.

But anything higher should not be dictated by protocol but by validator choice imo.

2 Likes
4

Thanks a lot for the feedback!

While the ballot supports up to 10 options, we intentionally limited it to 5% and 10% (plus AGAINST/ABSTAIN) based on prior validator polling.

When too many similar options are introduced (e.g., 3–10%), the vote fragments and makes it harder to reach a clear, actionable outcome. Our internal poll among the validators showed that narrowing choices is necessary to produce a meaningful signal rather than a split result.

If needed, we can always refine the exact percentage in a follow-up proposal once there’s alignment on the direction (i.e., whether a minimum fee should exist and roughly at what level).

In fact, there was also a suggestion to add a quarterly re-evaluation clause. I think it’s a good idea to add that in. Suggestions on the exact wording/formulation of that are very welcome.

1 Like
5

Thanks for the feedback!

Personally, I agree that anything above 5% might be a bit too high, but 10% was the top choice at the internal validator poll, and that’s why it’s among the choices.

6

I agree with you. 3% is also a good choice and can be added to the proposal.

7

If a rate really has to be set, I prefer 5%, that’s what the community already decided on Telegram.
10% is too high in my opinion, even if it could help some validators who don’t have many delegations. They’re free to set more than 5% if they want.
5% is also a standard on other blockchains.
Adding more options to the vote would just complicate things: we already polled the Telegram group, and there’s no more discussion happening here. No need for extra friction.
However, planning a review from time to time, based on the token price, for example, sounds like a good idea.