Decentralization of validation service — why should we care?
Decentralization of every blockchain network is a never-ending process. There are various decentralization factors that should be taken into the account when measuring decentralization such as token distribution, governance or validator/collator set distribution. This last factor is the one we would like to talk about in this article!
In the Polkadot network, there are two types of nodes. Validators on the relay chain which take care of validating transactions and provide overall security of the Polkadot/Kusama networks, and collators which are block producers for specific parachains. The goal of the collators is seemingly less important as they simply create blocks that are passed to the relay chain but there’s a catch! And the catch is the same one as always — the need for decentralization.
So why do we need collator set decentralization in a parachain, since the parachain with only a handful of collators running is still a secure one? Well, the problem here is called censorship resistance. In a nutshell, this means if the parachain is operated by only one or few parties, they can easily collude to censor transactions from certain people or entities and thus make the entire network stray from the original blockchain promise.
Also, it’s only a matter of time before MEV arrives to Polkadot and its parachains. Any validator/collator that is backed by a single entity will have a great motivation to engage in MEV because there will be no nominators from the community that can punish him for such a behaviour.
Community vs big players
Keeping censorship resistance in mind, it becomes clear that multiple entities participating in producing blocks on the parachain is an important concept. This is not just the number of collating nodes, but rather it is the effective control of the nodes. The parachain might have 64 collators in the active set but only have 8 entities controlling those nodes. This leads to the conclusion that we must strive to preserve smaller independent node operators in the active collator set. The main reason is that such collators will almost never have more than one node and thus providing true diversity and decentralization of the active set — as opposed to the big players who like to gather more and more capital to spin up more nodes and take even bigger profits as a result.
And it’s not only about profits, being able to increase the amount of tokens you own also means a stronger voice in the governance process on all DotSama parachains. So again, do we really want the big (and often anonymous) entities to take all the profit and then bend the networks settings to their needs because of their increased voting power?
It might result in a situation that resembles centralized networks or oligopolies where there are only a few node operators that run the entire network and will ensure to keep it this way through governance.
Staking on exchanges
This is a practice that Polkadotters have been wildly criticizing since the inception of our community. To put it simply, staking in the centralized exchange means that you are supporting CEX itself, not the underlying network. The more people are staking with exchanges, the more validators can actually exchange operate and thus undermine the level of decentralization.
Let’s take Binance and Polkadot as an example — when Binance started to offer DOT staking, they had around 5 validators. Nowadays they can afford to have 15 (which accounts for 7% of the whole set) and this number will only rise if people continues to stake on exchange instead of delegating to validators.
We know, staking in DotSama ecosystem can be tedious but it’s the only way how to keep network decentralized — and how to ensure the biggest and most stable income for yourself! Nothing can beat choosing your validators/collators properly and support the ecosystem/community at the same time!
We will also dive into this topic more in the next article where we will discuss decentralization on Kusama and Polkadot.
Moonbeam — case study
One of the biggest examples of these issues is Moonbeam, an EVM-compatible parachain running on Polkadot. Moonbeam is running on top of Proof of Stake and it allows up to 64 collators to be in the active set and participate in block production.
The problem here is the active set is slowly getting dominated by the big players and this brings a couple of problems.
We (and the community) don’t know these entities and certainly don’t know what their future intentions with the network are — is it just to take profits or is there any other purpose?
Since these players are anonymous, they don’t usually participate in any technical discussions with the Moonbeam team or other validators. This can potentially lead to worse node performance (and thus bringing less rewards for their delegators) but also to malfunction of the service because communication with the team about the technical issues is crucial for collator stability.
Gaming the system
We have been in the Moonbeam collator set for a couple of months and it was a really interesting show to watch (to say at least). There are delegations (and their revocations) happening on a weekly basis in total amount of sometimes more than 1m GLMR — which sometimes leads to spinning a new, anonymous node and sometimes it seems that big players are juggling with their tokens just to have more fun :-)
But in the end, this definitely means less stability for the delegators since community collators are getting more and more dependent on these whale games and can be replaced in the active set within a week of sudden revocations.
The result is that a delegation is not “set and forget” but all the delegators are forced to keep their eyes on the collators and re-delegate every now and then which is certainly harmful to the user experience.
And finally, the cherry on top. Community collators are important because they return part of the rewards to the community of the project — they are active on Discord to help delegators, writing guides and articles or creating tools and dashboards within the community to help all delegators and validators. One of the best examples being our own Polkadotters community where staking rewards allow us to work full-time on producing tons of content for the entire DotSama ecosystem.
Sadly, this is something we rarely see from the big players and I think this should play an important role for delegators when they are deciding which collator to support. Because we all belong to the same community and validators should always be there for their delegators to assist!
CDF — Community to the rescue?
As an response to this situation we have decided to come together with other community collators and set up a Collator Delegation Fund — we use our staking profits to delegate GLMR to other community collators who are endangered by the big players and might slip out of the active set. This is a great initiative which helps to keep the community involved in producing blocks and decision-making within the Moonbeam governance process!
But we cannot do it solely on our own so we welcome all the delegators to join us in this effort and to delegate to one of the following collators which will fight for the decentralization and openness of the active set!
Involved parties — Polkadotters, CertHum, Pathrock, Sik | Crifferent, BloClick, StakeSquid TrueStaking, and BrightlyStake.
If you care about decentralization and community being part of this important parachain project, we will appreciate your help!
As you can see, community involvement in running parachain projects is an important topic. Such collators/validators are not only the most reliable but they also deeply care about projects they are validating in and do their best to help its ecosystem and community to strive and grow!
This was the first part of the series. In the next one we are going to focus on the relay chain situation (Kusama, Polkadot) and how the upcoming release of Nomination Pools can help community validators to battle the big players that are controlling the active set!
We are active validators and collators in the Dotsama ecosystem. Consider supporting us by nominating your tokens to our Kusama | Polkadot validator or to our collator of your favorable parachain (we cover most of them) by the POLKADOTTERS name.