Stakeware validator

Governancehow we voted, and why

We log every network vote we cast, so our stakers can see the tradeoffs we weighed, hold us to them, and override us when they disagree.

the votes

SGP-1

solana constitution

governance framework with staker override == gud.

yes
SGP-2

double disinflation

a less scary version of 228. cut slowly and watch what happens.

yes
SGP-3

resource pricing

directionally correct, but the resource model looks wrong, and so does the timing.

no
SIMD-228

market-based emissions

a giant economic lever with too many unknowns. we will not make a default choice for our stakers.

abstain (split no)
SIMD-123

on-chain validator block reward sharing

kills side deals, puts reward sharing on chain where stakers can see it.

yes

our vote on SGP-1 / 2 / 3

tldr; yes / yes / no

if any of our stakers disagree, please feel free to reach out, or override at governance.solana.com/proposals.

SGP-1

solana constitution

yes

easiest yes of the three.

governance framework with staker override == gud

we are having growing pains and hiccups. we expected that.

SGP-2

double disinflation

yes

this one is funny after we abstained on 228.

cons (same as 228)

solana is a growth story. mess with the well understood inflation decay and you risk losing everyone who invested based on that story.

@brianlong has a pretty good steelman here.

pros

228's basic thesis was probably right. at ~2/3 of SOL staked, we are probably overpaying for network security.

sidenote: eth is having the same debate. worth watching from ethcc earlier this year.

staking rate vs protocol inflation

PeriodSOL staking rateProtocol inflation
2021~75%~7.2-7.4%
2022~75%~6.5-6.8%
202371.5% year-end; peaked ~72%5.6%
2024~66-68%~4.7-5.1%
202568.3% year-end~4.0-4.2%
Aug 202668.8% (435.1M / 632.9M)3.68%

meta

cutting inflation makes sol scarce. price probably goes up. we stop overpaying for network security.

i like sgp2's less aggressive schedule. we cut slowly and see what happens, rather than the aggressiveness of 228.

current path, roughly
3.8%3.2%2.8%2.3%2.0%1.7%1.5%
new path, roughly
3.8%2.9%2.0%1.5%

does stake leave? does defi get more SOL? does security get worse in a way that matters? if the answers are bad, we change it again.

this is a less scary experiment than 228.

so our vote is yes.

(my guess is nothing will change. the staking rate has barely moved 7% between 2021 and now. it will not magically move now, and more sol will not enter the sol economy. we need more compelling defi for that to happen.)

SGP-3

resource pricing

no

hardest one.

resource based pricing is directionally correct.

but i am not convinced we are pricing the right thing in sgp3.

high CU apps are obviously opposed. most other people are questioning why cu based pricing (including the italian):

the case against cu based pricing

even @toly suggested a more elegant mechanism that's easier to test.

and, of course, @uriklarman with his usual color.

so our vote is no. but mostly because the resource model seems wrong, as does the timing.

meta

my biggest change since the 228 vote is accepting that we do not need perfect information before we change anything. in fact, we cannot have perfect information.

solana moves fast. sometimes the correct move is a modest, reversible change.

228 was too large an economic lever with too many unknowns. SGP-2 is a much smaller version of that experiment.

SGP-3 starts at 1/10 and can be evaluated before it escalates, but perhaps with the wrong resource model. so if it does not pass, i expect another version will.

thanks

thanks as usual to these folks, and to everyone else who engaged on the discord.

@pumpkinspool@7LayerMagik@cavemanloverboy@ShinobiSystems

our vote on SIMD-228 & SIMD-123

tldr; split abstain/no on 228, yes on 123

this vote is close to done, and we will probably not hear back from any other stakers. so here is our reasoning on both.

SIMD-228

market-based emissions

abstain (split no)

pros

  • reduce overpayment for network security
  • could make defi more competitive, with a caveat (h/t @tarunchitra)
  • somewhat fixes the leaky bucket (h/t @MaxResnick1). us only. cexes will still dump REV, although there are fewer emissions to dump (h/t @kdipep)
  • entice etfs

cons

  • spook institutional and large sol holders who were sold a growth story. we changed our minds overnight, and it feels like yolonomics (h/t @calilyliu)
  • kill some current defi (h/t @solblaze_org)
  • some small validators may die (h/t @MaxResnick1)
  • yolonomics, with simds as bandaids. that is ok as long as we actually consider the downsides and move fast

meta

the forum proposal was anemic. most cons were not mentioned. some pros that may have been obvious to the proposers, and some that sat in the github discussion, surfaced late. the twitter name calling did not help either.

we did get a more gradual decline in the curve, and a new simd to reduce vote costs. h/t here to @maxresnick, @kankanivishal and @tushar_jain.

but questions remain

  • will it spook current institutional holders? current defi devs? large whales?
  • are we ok with that if the etfs come? will they come anyway if we do not make this change?
  • what good have etfs done for btc and eth? is this tradfi playing tradfi games?
  • why the rush? why not take the time and build a proper staking etf?
  • if this hurts small validators and sfdp has to step in, why was that not in the original proposal?
  • why not a different curve? static low emissions? something tied to REV, instead of the one we copied from ethereum tied to staking rate?

no one knows what will happen. this is like pulling a giant economic lever and hoping for the best. that is why we abstain.

we also do not want to make a default choice for our stakers. one of our stakers wants us to vote no, so we split their vote out.

whatever the outcome, we stay nimble and vote on the next thing to fix whatever this breaks.

SIMD-123

on-chain validator block reward sharing

yes

this one is much easier. it removes the need for side deals, brings everything on chain, and shows stakers how validators distribute rewards.

it will squeeze margins at smaller validators. it will also make them more competitive on APY with the large ones.

governance lessons

  • engage with proposals earlier, and ask questions
  • do not be afraid of elitists, and do not vote based on their opinions
  • one proposal at a time is probably better
  • long fruitless discussions help no one

thanks

to everyone else who engaged and provided context.

@ShinobiSystems@trentdotsol@7LayerMagik@dubbel06@c2yptic@knox_trades@maxekaplan@laine_sa_@SolusRGB@jaskanwar_singh@cfl0ws

for god & protocol.