coreum

Prop 24: Dynamic Delegator Rewards and Minimum Commission Mandate

Abstract This proposal mandates a three-pronged approach to significantly enhance the decentralization and economic security of the Coreum network. It introduces the Dynamic Delegator Rewards (DDR) Module to disincentivize delegation to validators holding an excessive proportion of total bonded stake. Concurrently, it sets a Mandatory Minimum Validator Commission of 5% to ensure the economic viability of all high-quality validator operators. Crucially, it mandates that all collected decentralization penalties be airdropped back to Tier 1 stakers to create a self-funding, continuous incentive for decentralization.

I. Motivation: The Critical Need for Decentralization The security and censorship resistance of Coreum's Bonded Proof-of-Stake (BPoS) consensus are fundamentally tied to the distribution of stake. Currently, market forces naturally lead to stake concentration among a few top validators, which lowers the Nakamoto Coefficient and increases systemic risk.

This proposal addresses this issue by introducing active, economic mechanisms that:

  • Deter Centralization: By reducing rewards for delegators supporting overweight validators.
  • Ensure Stability: By guaranteeing a sustainable revenue floor for all professional validators.
  • Align Incentives: By directly rewarding delegators who support the decentralized validator set.

II. Technical Specification: Parameter Changes This proposal requires a coordinated software upgrade to modify the Coreum runtime, specifically within the x/staking and x/distribution modules.

A. Mandatory Minimum Validator Commission (New Parameter) Directive 1: Enforce Minimum Commission The Coreum x/staking module must be updated to enforce that the min_commission_rate parameter is set to 5.00% (0.05).

Any validator currently operating below this threshold will be required to update their commission to the new minimum upon activation of this parameter.

B. Dynamic Delegator Rewards (DDR) Module The DDR Module introduces a variable Delegator Reward Adjustment Factor (DRF) that is applied after the validator's commission has been calculated, but before the final reward is paid to the delegator.

Directive 2: Implement DDR Tiers The DRF will be calculated based on the validator's total bonded stake (Pstake) as a percentage of the total network bonded stake:

TIER TABLE (plain text representation):

Tier 1: Pstake ≤ 4.0% | DRF = 1.00 | Delegator Reduction: 0% | Effect: Maximum Yield (Encouraged) Tier 2: 4.0% < Pstake ≤ 5.0% | DRF = 0.95 | Delegator Reduction: 5% | Effect: Moderate Disincentive Tier 3: 5.0% < Pstake ≤ 6.0% | DRF = 0.85 | Delegator Reduction: 15% | Effect: Strong Disincentive Tier 4: Pstake > 6.0% | DRF = 0.80 | Delegator Reduction: 20% | Effect: Severe Penalty (Avoid)

III. Distribution of Penalized Rewards (The Penalty Recipient) The COREUM amount reduced from the delegator's reward (RPenalty) must be routed to benefit the entire network, not the centralized validator.

Penalty Calculation: RPenalty = Base Delegator Reward − (Base Delegator Reward × DRF)

Exclusion from Commission: The x/distribution logic must ensure that the RPenalty amount is entirely excluded from the calculation basis for the validator's commission.

Mandatory Redirection: The entire RPenalty amount SHALL BE transferred directly and immediately to the canonical Coreum Community Pool Address.

Rationale: The delegator pays the price (incentivizing re-delegation), the centralized validator gains no benefit, and the network as a whole gains utility via the Community Pool.

IV. Community Pool Utilization: The Decentralization Airdrop

A. Decentralization Incentive (Airdrop) To directly align the penalties with the goal of decentralization, the Community Pool funds accrued from RPenalty (centralization penalties) shall be used exclusively to reward stakers who support smaller, non-centralized validators.

Directive 3: Penalty Airdrop to Tier 1 Stakers

Accumulation: All COREUM tokens collected from the RPenalty centralization penalties will be tracked and accumulated in the Community Pool over a 12-month period.

Airdrop Target: 100% of these accumulated penalty funds shall be distributed (airdropped) back to all delegator wallets that are actively staking with Tier 1 validators.

Tier 1 Validator Definition: A validator is defined as Tier 1 if their total bonded stake (Pstake) is ≤ 4.0% of the total network bonded stake.

Distribution Logic: The funds will be distributed proportional to the delegator's average staked amount with Tier 1 validators over the 12-month accumulation period, thereby rewarding the most consistent supporters of decentralization.

Cadence: The distribution shall occur annually, following the completion of the first 12-month accumulation cycle.

V. Expected Outcomes & Risks

Outcome Table (plain text):

Goal: Increased Nakamoto Coefficient | Expected Impact: Stake flows to Tier 1 validators | Counter-Measures: N/A Goal: Sustainable Validator Set | Expected Impact: 5% floor stabilizes revenue | Counter-Measures: DRF does not reduce validator commission Goal: Reduced Delegator APY | Expected Impact: Yield-sensitive stake moves out of overweight validators | Counter-Measures: Wallets must show "Effective Delegator APY" Goal: Incentivized Decentralization | Expected Impact: Annual airdrop strongly incentivizes Tier 1 staking | Counter-Measures: Accurate tracking needed

VI. Implementation and Next Steps The Coreum community is asked to vote "Yes" to approve the development and implementation of this triple-feature protocol upgrade. Upon successful passage, the Coreum development team will proceed with the necessary code changes for inclusion in the next designated Software Upgrade.

We urge all token holders and delegators to consider the long-term security benefits and robust incentive alignment this mechanism provides for the Coreum ecosystem.