#28: Proportional Slashing

Adjusting slashing based on stake, validator governance, network updates from Kava, NEAR, and more.

This newsletter is supported by Chorus One, an operator of validating nodes and staking services on Proof-of-Stake networks.

Cosmos Hub proposal by Sunny Aggarwal to adjust slashing penalties to more severely punish correlated faults in a Proof-of-Stake network. This mechanism would increase the slashed amount if a higher degree of the voting power got slashed within a certain time frame. The design’s goal is to incentivize secure and diverse validator setups.

A similar approach is taken in ETH2.0, where an increase in the percentage of stake going offline or equivocation will result in lower rewards/higher punishments (see also this explanation of the inactivity leak).

Check out the forum post for an interesting discussion around the impact this proposal might have.

A case study dealing with the downsides of linking staking for network security and governance decision power in a PoS network (as done on the Cosmos Hub). Gavin Birch takes a look at how seeking governance influence as a prime motivator is challenging other validator business models.

One suggestion is to separate delegation for network security and governance, e.g. enabling holders to delegate their governance voting weight to any other account. Such a distinction might allow parties seeking political power to gain influence without requiring them to run validation infrastructure. There’s room for a lot of experimentation in this space and it remains to be seen which model will work best to foster a secure network and an engaged community.

VALIDATOR BUSINESS MODELS — Chris is organizing a validator business model roundtable discussion. A growing thesis within the staking community is that running validators is a commoditized service. To differentiate themselves, validators also need to offer higher value services. The roundtable will discuss key questions related to this thesis, among a balanced group of larger and smaller validators.

ETHEREUM KILLERS— Placeholder’s Chris Burnsike put out an excellent piece with his thoughts on the valuation of many of the upcoming smart contract platforms competing for Ethereum’s throne. The post goes into the various reasons why Chris expects there to be extreme downward price pressure for these token projects focusing on the current disparity between supply and demand for trustless computation.

KAVA IEO & TOKEN MODEL — Felix wrote a summary of Kava’s design and token model for the Chorus One blog. Check it out to learn how the Kava token unites security, governance and stability of the CDP platform.

NEAR STAKE WARS— The team at NEAR released their “Star Wars”-themed incentivized testnet plans. NEAR plans to announce the Stake Wars start date during this week’s San Francisco Blockchain Week.

Stake Wars appears to deviate a bit from existing incentivized testnet models, as the focus is on rewarding bug reporting, tool building and bench-marking, rather than simply running validators and executing pre-determined tasks.

NPoS INTRO— A quick summary of Polkadot’s “Nominated Proof-of-Stake” validator selection mechanism from the Staking Facilities team.

CELO FACTS — Two staking-related AMAs with Celo team members took place recently: the Chorus One team had Marek on Telegram and found out more about Celo’s mobile-first approach, the staking and fee model, stablecoin design, etc. (read the transcript here). Staking Hub released a summary of their AMA covering the Celo platform in detail.

BINANCE PoS STAKING — Binance announcing support for staking for some of their launchpad projects, e.g. Harmony ($ONE), which is interesting because this will be their first addition of Proof-of-Stake tokens with slashing.

TEZOS BABYLON UPGRADE — The Tezos Babylon upgrade activated on 18 October. This was the second automatically activated upgrade on the Tezos network since its launch. Chris launched a baker shortly before the upgrade. He experienced the upgrade as well documented and coordinated.

OASIS MAINNET — Oasis just announced their roadmap to mainnet. This includes tentative dates for a public testnet, a staking competition, and a bug bounty. Sign up here to run a node at the time of the public testnet.

SFBW — While neither Felix nor Chris will be at San Francisco Blockchain Week, we think that this will be a very interesting event, especially for those interested DeFi and staking. Make sure the DeFi Hackathon is on your radar!

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Staking Economy is written by Felix Lutsch from with assistance from Chris Remus, operator of the Chainflow validators. Join us in the Staking Economy Telegram to discuss staking. Opinions expressed are our own and do not necessarily reflect the opinions of Chorus One. All content is for informational purposes only and not intended as investment advice.