[Temperature Check] Reward node runners through governance

Rationale:

Lately we’ve seen the online participating stake trending lower (sitting at ~1.6B ALGO right now), this is probably a side effect of general market conditions where retail/institutions start to lose interest and move away from the cryptocurrency space, on top of that there’s also a very significant amount of online stake that belongs to the Algorand Foundation and Algorand Inc (around 40% if I’m not mistaken) which poses centralization risks and goes against the foundational principles of our industry. Furthermore, as a Pure Proof of Stake chain, a malicious actor would “only” require 1/3 of the total online stake to attack the network which is becoming “easier” due to online staking trending lower and the market cap of ALGO going lower as well.

I’m aware that one of the initial assumptions made by Silvio Micali when designing the Algorand blockchain is that given the ultra-low amount of work required for setting up a participation node, people would run them for free as long as they were interested in the success of the network they belong to. We can see this actually works on established and highly adopted networks like Bitcoin, however, Algorand hasn’t reached a similar level of adoption yet, and it’s still a long way to go to reach such high level of adoption. Having said that, I believe some sort of early stage incentives are required for node runners to increase decentralization and security of the overall Algorand network.

Solution:

I propose a percentage of the total governance reward pot each quarter gets allocated to node runners in a similar way to what’s been done with DeFi, this would be voted in upcoming governance measures and it will probably become a lot easier to do on a technical level as AlgoKit and 1-click node setups will become available soon. Given the high composability of projects in the Algorand network, it would also be possible for governors to participate in consensus and DeFi simultaneously. This would be a good incentive towards increasing decentralization,TVL, liquidity and security all around the ecosystem.

Looking forward to read your comments

Edit 1:

I think there’s some sort of confusion going on at the moment, I’ll try to clarify:

Firstly, this is not a change at the protocol level, the Algorand network will continue to work exactly the same ‘under the hood’. This is simply an allocation of some of the governance funds to reward already existing node runners and possibly incentivize more people to run their own nodes (this is the general idea), exactly like what happened with DeFi this current governance period, which effectively incentivized a lot of people to participate in governance through DeFi and discover a whole new world inside the Algorand ecosystem (myself included). By running a node, you’d be eligible to have a small extra reward just like you’re eligible to a small (not so small actually) extra reward by participating in governance through DeFi.

It’s exactly the same if you run 1, 10, 100, 1000 or 10000 nodes. What matters is your online stake amount just like what matters to governance is the amount you commit.

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Keep it simple and integrate #Algorand Governance with consensus participation. Make consensus participation a requirement for #Algorand Governors.

Details would need to be flushed out, e.g., uptime criteria.

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I’m also in this camp. Make node setup noob friendly, than tie governance to it. If you cannot run your node, join through some protocol like Folks Finance.

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Makes sense to me. The extra rewards for DeFi governance participation incentivized me to take my stake off my node. I could see a 50/25/25 split. 50% for governance 25% for defi participation 25% for online wallets, an even 1/3 each, or like oyster said requite governors to use an online wallet or participate through defi.

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Yeah, absolutely. I also moved my ALGO towards DeFi once the Foundation started rolling out incentives and look at what it did to TVL. I’m pretty sure this will have a similar effect regarding online stake, and turns out we could do both DeFi and consensus simultaneously which is great.

I also agree that 50/25/25 is a good proposal, perhaps 33% each but it might be too extreme to implement in the short term.

There are a few details regarding participation nodes which would need to be discussed such as uptime and so on, I believe it should be 95%+ at minimum to be eligible for these extra rewards. It’s important to get the right tooling as well which is not quite there yet, but once these 1-click node setups start rolling out it should be really easy.

Need to node intensifies! Supporting this. Reward node runners. Well written Naut!

Anyone can node if I can! Come check out:

Knights of Algorand & Node Keepers while you’re at it! Tell em UncleSam.Algo sent ya!

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No wallet outside of Inc is anywhere remotely close to 33%. Furthermore my understanding on the protocol such an attack would not take the network down or create malicious blocks since there are 3 committees and a recovery mode on timeout/stall.

I am strongly opposed to node rewards as it brings in a whole new set of game theory issues. People will run nodes for monetary gain, not for the Algorand network. They will pool, they will act in their best interest to convince governor’s to make the rewards permanent, they will do whatever they can for their business of rewards, regardless of what is best for Algorand. They will become xgovs, they will market to convince others. Their incentives do not align with the good of Algorand and they centralize over time.

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Most likely it would slow down the network, yes, it shouldn’t take the network down completely because relay nodes are somewhat controlled by the Foundation as well, which is not a good mitigation barrier imo. Nonetheless, I appreciate your input as it’s always good to read different perspectives

Edit: Just a friendly reminder that this is not a protocol change, it’s a temporary incentive using governance rewards exactly like DeFi. Are you telling me giant and powerful organizations would collude to have a piece of the pie on 15M extra ALGO rewards per governance period? It seems a little far fetched to me but I respect your PoV regardless.

I agree it’s not a good long term strategy, but both online staking & ALGO market cap trending lower is not the right direction to be heading imo.

I honestly believe it would increase decentralization in the short term and “force” some of us normies to actually run nodes and be comfortable doing so

It may start out temporary, but would not be guaranteed to end as expected. You create pure business motive for node running, and those business will use resources to protect their business/profit. They will work to convince people to make it permanent, they will work to make it more difficult to run. They have no care about the overall health or decentralization of the network itself, only about maintaining and growing their profit.

Edit: I don’t want to force “normies” to run nodes. It’s stake weighted anyway, so you won’t have that much say in it. But the undetlying theory still holds that businesses that depend on Algorand already have incentive to run nodes. Algorand only succeeds with many businesses using Algorand. I would not worry about this theory failing unless there were higher usage of Algorand right now. But in the bear market with low usage overall, I don’t see the need to try to prop up node running. The online stake is still sufficient to not worry about security.

Do you believe the DeFi community on Algorand will behave the same way you just described? Because the incentive is exactly the same, I honestly don’t see the difference

There should be the max staking limit per node for rewards similar to Ethereum staking model. It makes the consensus more resilient otherwise even if the same entity runs multiple nodes.

Basically, it will encourage whales to run multiple nodes as opposed to one to maximize their benefits and contribute to better blockchain stability.

IMO, eventually, transaction fees should be used for rewards; practically, this is the only way for sustainable blockchain ecosystem in the long run.

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I feel like this is common sense. Bitcoin miners are incentivized to keep the protocol decentralized thru rewards for mining… is the foundation that foolish to not realize this? Or they intentionally don’t want Algorand to be 100% decentralized?

Staci please respond… what’s the reason you guys are not incentivizing people to run a node to further help in securing the Algorand blockchain?

Is it because the tools to run a relay node isn’t out yet? Can anyone run a relay node? How do you run a relay node for dummies? Do I need to buy a stronger computer? What needs to be done?

I fully agree with this post - some big changes need to happen within the Algorand foundation.

I don’t really know why you can’t do both. Use AlgoFi to participate in consensus with your vaulted Algo and you are getting DeFi APR and securing the blockchain. Simple. Rewarding node runners needs to be a thing, but I don’t think it needs to be tied to xGov participation or losing out on your DeFi bonus APR. Is it ideal that only AlgoFi has this option at the moment? No. But if demand is there, someone will fill the niche to keep up with competition.

Thanks, @AlgoNautilus, for checking the temperature on this. It’s such an important topic. Personally, I’d like to see AlgoKit launched first, but I am definitely on board with getting it on the governance discussion agenda.

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you are not securing network just by running the node…

you are securing network when you make your account online

I would love to see incentivization of anybody who makes his account online.

Also i would like to see fair incentivization of node runners. For example let the foundation make a budget, and distribute this budget to every online node each hour.

If some nodes would be down, the live nodes which secure the network by providing infrastructure would get more money. If a lot of nodes will join the network, the most efficient nodes will get paid and less efficient will get turned off.

I suggest this budget should be there not only for relays, but also for public indexers and public nodes which allows users to make their accounts to be online.

Also @Adri, i dont think that there should be any direct link with governance with this. Only way it should be linked is that the monitoring and rewarding progams should be open source, and in long run the Algorand DAO must be able to to approve changes to the software or configuration.

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Couldn’t xGov make such a proposal once it’s up and running? I do like some of the points you’ve outlined here regarding it’s possible structure already.

This is the way! I believe that if users want to participate in governance not only should they commit to not moving their ALGO bag for the entire period, but also they should have them online and securing the network. While this is obviously challenging for some users to do on their own, AlgoFi already allows bringing your stake online and GARD will have this feature live as well by EOM for each unique CDP a user creates. Small changes will make a HUGE difference.

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why not work on both concurrently??? This is imperative imo. This argument to tie in the actual operation of securing network with social governance has been a topic for years, if you’ve been in the space before becoming the Governance program manager. The more eyes/new investors look into the current state of Algorand governance, the sooner the system will implode with a permanent disdain on the centralisation masking to be “decentralised” and democratised. The Foundation’s fallout track records really doesn’t help here either.

There’s no denying every single participating governors know how they’re (not) participating in actuality, just being quite during this dev stage, but we’re all watching.

Algorand must do everything so that securing of the network is so easy that it is one button click!! I am against making xGovs run relay node. Everyone should secure the network, not just xGovs… But before that algorand must do few technical improvements.

Also please stop fuzzying everyone that running the participation node means that you protect the network… You protect the algo network when you generate participation keys at any of the public participation servers (or your own) and write tx to the network that that participation keys are securing algorand network on your behalf.

Check the video on how you can make your account online by one click: Algorand governance walkthrough - YouTube

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