target_staked_ratio is set to “0.4”. This means that if more than 40% of the Namada supply is staked, Namada’s staking inflation will begin decreasing towards zero, dampening the momentum. It would be nice to have a bit more breathing room.
We (Knowable) would like to float the idea of making a governance proposal to increase Namada’s target_staked_ratio to “0.5”
The only change is that staking rewards wouldn’t begin decreasing if more than 40% (and less than 50%) of NAM is staked.
I’m open to this, but I also think we should keep in mind the overall context: the goal of a PD controller (at least to me) is not only to help Namada reach a certain target but also to ensure that the network pays no more than necessary for security. So, if we want to change the target, I think we also should ask ourselves the question: what is our “actual” target (at which point we wouldn’t want to increase the target any more, at least for the time being)? 50%? 2/3 (same as the Cosmos Hub)? Something else entirely?
I think it might be overall simpler and more predictable for network participants if we go ahead and set the current target to whatever our actual target is – and if and when that target is reached, after which reward rates might start to go down, not changing it further, at least not immediately.
I was actually thinking about this today, fully support this proposal. Most PoS networks have a target staking ratio above 60% so even if we raise it to 50% it is still conservative and low compared to most other PoS networks
I agree with cw that we should figure out what the actually desired stake rate is and set it once and for all. (for same reasons mentioned if I understand him correctly).
There may be some unstake before phase 5, which we should take into account.
perhaps also it would be good to be precise in comms that target staking ratio is a more technical pd-controller target (where inflation begins to tend towards zero), so it’s not seen as as defeat if actual stake-ratio is below target.
Agree that we should choose some actual newly desired ultimate target rather than to keep having to revisit gov proposals to increase in steps. I do also think, as @pretoro says, we should do some extra comms around what this would mean.
Not sure if I have super strong feelings, but I currently lean toward supporting something closer to 60% than 50%. I’m interested to hear other thoughts!
I’d prefer to lock the staking inflation rate instead of changing the target, but I don’t think we have a parameter that sets a staking inflation floor. I think we’d begin losing validator support if inflation started heading toward zero, which isn’t accounted for in the security budget.
Personally, I’d feel more comfortable picking a target if we knew what kind of stake we will need (see here), and my bet is that observations during the weeks that follow Phase 5 will be helpful to deciding that.
@cwgoes@brentstone, what factors do you think would be helpful to pick an ultimate target? Ultimately, I see staking as economic security for Namada’s IBC token deposits, with staking incentives being at the cost of non-stakers, like NAM traders / liquidity providers and NAM MASP depositors.
(fwiw I’m dubious about the usefulness of this PID controller mechanism, but that’s perhaps a different conversation)
Shouldn’t we offer more incentives for people to Shield instead of Stake? Increasing target_staked_ratio would attract more people to stake. I can support an increase but I don’t have a clear view of how much it should be
We would support the staked ratio, but more importantly we should not forget that the main value proposition of Namada is the shield assets capability.
As @Fraccaman said, the incentive for shielding assets should be important.
What we mean is that higher staked ratio and higher rewards should not come at the price of lower shield rewards.
It would be interesting to understand how the shield rewards would change with the stake ratio change.
Example: What does it mean to the future shield rewards if we increase the stake ratio to 50 %, 55% 60% etc. ?
Have we understood correctly that more rewards to delegators & validators it means less rewards for shield assets and vice versa ?
Thanks for this post @Gavin . yes we support this apporach 50% or even 60% . but i want also to support @Fraccaman that we indeed need to offer more incentives for people to Shield instead of Stake. this is very important
Thanks for the response, and for sharing these – I think maybe we should start with a more basic question, which is: are we happy with staking rate targeting through staking issuance rate control by a PD controller? Let me recap the basic theory and maybe we can check where our understandings (or preferences) might differ:
The basic assumption that we make is that validators and delegators have some kind of hidden calculation that determines when they will stake (run a validator or delegate), and when they won’t, where we can model this calculation roughly as a “minimum level” of rewards at which they will stake. For example, say that there are three validators: Alice, Bob, and Charlie, where:
Alice will stake if the rewards rate is at least 5%.
Bob will stake if the rewards rate is at least 10%.
Charlie will stake if the rewards rate is at least 15%.
Now, we (as the protocol) don’t know what these levels are, but we can “find out” in a certain sense using a PD controller, where the PD controller raises or lowers the staking issuance until a target staking rate is reached. To continue with our example above, suppose that Alice, Bob, and Charlie each have a stake of 1 million NAM. Let’s consider a few different PD controller scenarios:
a. A PD controller with target set to 1 million NAM and max issuance rate set to 20%. This PD controller will raise the issuance rate (let’s assume it starts from 0) until Alice stakes, after which her 1 million NAM will be sufficient to reach the target and the rate will remain constant (in this scenario, a total issuance of 1.666…%, meaning that Alice’s rewards rate is 5%). This PD controller has discovered that keeping 1 million NAM staked requires a minimum issuance level of 1.6666%.
b. A PD controller with target set to 2 million NAM and max issuance set to 20%. This PD controller will raise the issuance rate (let’s assume it starts from 0) until Alice and Bob stake, after which their 2 million NAM will be sufficient to reach the target and the rate will remain constant (in this scenario, a total issuance of 6.6666…%, meaning that Alice and Bob’s rewards rate is 10%). This PD controller has discovered that keeping 2 million NAM staked requires a minimum issuance level of 6.66666%.
c. A PD controller with target set to 2.5 million NAM and max issuance set to 10%. This PD controller will raise the issuance rate until 10% issuance is reached, which will not be enough to convince Charlie to stake, but the PD controller will not raise the rate any more due to the maximum cap. In this scenario, still only 2 million NAM will be staked, the same as (b) - and we can say that the PD controller has discovered that 10% issuance is not sufficient to keep 3 million NAM staked.
Do you think this basic assumption is reasonable, and are these examples helpful? I bring this up specifically because of this comment:
To me, this is exactly the worry a PD controller is designed to alleviate - if we start losing validator support, the staking rate will go down, the issuance rate will go up, and – presumably – some more folks will start staking. Are you skeptical of this mechanism, and if so, may I ask why?
To be clear, I’m very open to ideas here, and I’m not sure of the degree to which historical usage data of PoS networks fits this simple model – it might well be too simple in meaningful ways – but I think it will be worth figuring out more precisely where we might have different understandings here, before trying to agree on parameter changes.
I’m a bit hesitant to change this. I think we should wait at least 6 months to a year to measure before making big changes. Doing what others do isn’t always optimal.
I am strongly in support of incentivizing shielding NAM. However, there has been a lot of resistance to this (see the forum thread on shielded rewards set that I can’t find atm).
the PD-controller mechanism works as intended if validators behave in an economically rational way (that is, as rationality is defined in microeconomic theory in particular). However, it’s doubtful they will in actual life because most will factor in other parameters along with thoughts and feelings. Will validators unstake when rewards tend towards zero, and then restake when it goes up again? or will they go “f this shit we don’t want to deal with these constantly changing figures, and in particular having rewards go to zero.” some may even feel they were lured in by a protocol that ultimately gave them zero rewards if they don’t fully understand the mechanics.
I think there may be a point to keeping things more simple, I don’t oppose the PD-mech, but I’m unsure why it’s “so great”.
If we keep the PD (which I don’t see why we would not), I think it’s reasonable to set a target so high that we don’t let rewards tend towards zero before the point where we really want people to start unstaking and stay unstaked - in other words, probably a bit higher than currently. maybe 60 even, tentatively.
all of the above somewhat tentative and may be like very wrong
As for increasing the target, I support it. Of course, before phase 5 we will see some outflow from staking, but I do not think it will be very large. I consider the figure of 50% to be the most optimal.
This is an interesting proposal with clear potential benefits. Increasing the target_staked_ratio to 0.5 would encourage higher staking participation without penalizing rewards too soon, supporting decentralization and network security.
That said, it’s important to consider potential downsides, like reduced liquidity or challenges in adjusting inflation dynamics if staking spikes unexpectedly.
Overall, it’s a solid idea, but supporting data or simulations on the impact of this change would strengthen the case and likely gather strong community backing
if we start losing validator support, the staking rate will go down
why do you think that staking rate will go down as validators leave? i think we shouldn’t conflate the validator role with the staker role–i have the impression that they’re often fairly unbundled. i’d bet that stakers would just redelegate to another validator.
being a staker is a fairly passive role, and i assume that on the way down they can “afford” to stake for longer than a validator can sustain operations
are we happy with staking rate targeting through staking issuance rate control by a PD controller?
not happy with its current form, because i think it has a stronger effect on validator behaviour than on staking behaviour. ie. we’d wipe out a good portion of our validators well before we affect staking behaviours. (and imo validators exiting signals that a community isn’t worth participating in). if that’s true, we should devise a way to mitigate the effect that the PID has on validator operators so that we can more precisely target stakers. eg. a fixed base amount (using cPGF?) to fund operators in a way that helps sustainability (not profitability).
assuming we can better focus the affect on staking behaviour, perhaps the PID could be a little less ham-handed if it worked more like a thermostat, with a target range, instead of clicking on/off around a single target. like a target of 45% with ±5% tolerance would hold staking inflation constant between 40% and 50%
i do like the PID and i like having a 0% floor to experiment with, assuming we could insulate the validators. or imagine having negative rates, which could be done by rewarding liquid holders to dilute stakers
@Gavin I think by “staking ratio”, @cwgoes meant the ratio of staked tokens to total tokens. “Issuance rate” is the inflation rate in his example.
@shield-crypto changing the target staked ratio doesn’t really have any affect on how future shielded rewards will behave. We are still free to choose if we want to incentivize NAM, what the target MASP amount should be, and what the independent inflation rate will be for holding NAM in the shielded pool. Of course, by raising the target, we are encouraging more staking, but I do not think this constrains the amount of NAM available to be put in the MASP in a meaningful way.
There is no reason why we couldn’t both raise the target staked ratio and incentivize NAM in the shielded pool in the future.
This is an interesting idea but we also may not reach this 50% value. most likely in the short term it will really help, but how it will affect the future is unknown, of course we need to look at examples of other chains
