What should the value of minPM?

[sudonym]

Summary

The first community votes about minPM have concluded. To learn more about the community’s decisions and see the discussions about the previous proposals, click the links below:

- Proposal for on-chain minimum profit margin for all Nym nodes

- What should the ceiling of minPM, considering its impact on Squad Wealth Fund revenues?

This is the third and final vote related to minPM to decide its value between 5%-25%.

Important: the chosen value of minimum profit margin will be implemented on-chain, and apply to all Nym nodes.

Closed: 2024-06-06T00:00:00Z→2024-06-13T00:00:00Z, or until decided

• Prerequisites: Operators community votes “yes” to impose minimum profit margin; decision was made regarding ceiling
• Proposed by: @Nym_team
• Options: 5%, 10%, 15%, 20%, 25%
• Eligible voters: @Operator
• Min. quorum: 50% (of node operators who registered on the forum before voting ends)
• result: weighted average of all votes

You can change your vote any time, until the topic is closed. Once voting closes you will not be able to change your vote. Please also share your thought process, concerns, questions and ideas below - let’s discuss the proposal and make decision together!

• 5%
• 10%
• 15%
• 20%
• 25%

[JohnSmithPR]

Here we go, voted 20%.

[nicklo_gw]

Hello, operator comrades! I strongly advise you to carefully study the discussions that took place during the previous vote before casting your vote for any of the options. This will help you make an informed choice

[POLL] What should the ceiling of minPM, considering its impact on Squad Wealth Fund revenues?

[image] Summary The Nym node operator community has passed a proposal to impose a network-wide minimum profit margin (minPM) with overwhelming support. This is a welcome change, as it will favour node operators and improve the prospects of operating Nym nodes for everyone. This proposal is for @Nymja and @Shinobi, the stewards of the Squad Wealth Fund (SWF) to decide what the ceiling of the minPM will be. In other words, the maximum value of the minimum profit margin. The income of the Squad …

[wunderbaer]

Voted for 15% as a compromise

[nicklo]

The danger of setting high minimum requirements for profit margin for Nym operators

At first glance, this may seem like a reasonable measure to protect operators from excessive competition and a “race to the bottom”. However, a deeper analysis shows that setting high minimum PM values, especially above 10%, carries significant risks for a healthy network economy.

The main danger of a high minimum PM is that it significantly raises entry barriers for new operators and plays into the hands of large, already established participants. Small operators, who do not have large delegated stakes, will find themselves in a knowingly disadvantageous position and will be pushed out of the market. As a result, the risk of network centralization increases, which contradicts the basic principles of Nym as a fully decentralized ecosystem.

A high minimum PM limits fair competition, deprives users of choice between operators with different conditions, and encourages the formation of an oligopoly of large players.

In addition, artificial inflation of the PM will negatively affect the rates of delegators. Their profitability (APY) will fall, which will reduce the attractiveness of participating in the Nym network for them. After all, it is the delegators who provide the main inflow of staking into the system.

Thus, instead of solving the problem of the “race to the bottom”, the NYM team risks provoking another negative trend - the outflow of delegated funds, economic contraction, and centralization of power among a few large operators.

Instead of imposing high PM minimums, attention should be paid to another adjustable parameter - operating cost. It is the one that determines the minimum level of operator profitability needed to cover costs. Competent regulation of operating cost will protect the interests of conscientious operators, without imposing excessive restrictions on competition.

We call on the Nym development team to listen to the community’s opinion. We suggest conducting a thorough analysis of the current network metrics, comparing them with the original theoretical calculations, and jointly developing a balanced decision on the balance of economic incentives for all participant groups. The situation requires a flexible approach, not crude administrative regulation in favor of only a part of large beneficiaries. The health of the Nym ecosystem is our common priority.

[JohnSmithPR]

hmmm, is it the same person writing these long-reads?

[nicklo]

Are you surprised by this? Do you have anything substantial to say on the matter?

[JohnSmithPR]

Yes, once I hear the answer to my question.

[wunderbaer]

So, what’s the next steps on this after the voting has ended? Has the minimum amount of operator votes been reached and 25% is the official ceiling now?

[sudonym]

the weighted average of all votes is 19.6%, so the value of minPM will be 20%. Next steps will be announced soon. We will discuss the minPM on today’s community call, along with the next vote about reward split between network layers, which will go live later today.

[sudonym]

Thanks for sharing your thoughts.

@nicklo

We call on the Nym development team to listen to the community’s opinion.

It’s fine to disagree, however this decision was made by the community showing overwhelming support for instituting a minPM. So it is the community’s opinion, nothing less, nothing more.

As I already mentioned elsewhere, delegator APY will be impacted, however even after the change Nym will be in good competitive standing with other projects in the Cosmos ecosystem when it comes to staking rewards.

@nicklo

The main danger of a high minimum PM is that it significantly raises entry barriers for new operators and plays into the hands of large, already established participants. Small operators, who do not have large delegated stakes, will find themselves in a knowingly disadvantageous position and will be pushed out of the market. As a result, the risk of network centralization increases, which contradicts the basic principles of Nym as a fully decentralized ecosystem.

This is false. MinPM does not increase barrier of entry whatsoever, and does not lead to centralization ceteris paribus. In fact the exact opposite can be argued.

@nicklo

Instead of imposing high PM minimums, attention should be paid to another adjustable parameter - operating cost.

OC and PM are unrelated and serve different purposes. OC should reflect what is in the name: the operational costs of operators. Nothing less, nothing more. PM is the share of rewards a node generates. PM is the business proposition of operating Nym infra - minPM improves this proposition. Doing the same with any OC-related policy or practice would be tragically misguided.