The governance proposal corresponding to this discussion is now live:
[^^^ added at OP’s request]
Summary:
In alignment with recent market dynamics and trends observed across other blockchain networks, we propose increasing the minimum Staked Seed Node (SSN) commission fee to 8%. This adjustment aims to ensure sustainability for network operators while fostering long-term growth and decentralization within the Zilliqa ecosystem.
Abstract:
As per the Zilliqa Improvement Proposal (ZIP) process, this proposal suggests enacting a minimum SSN commission fee of 8%. Following community discussions and a preliminary poll, if the forum poll achieves a 25% “For” vote, the proposal will advance to Snapshot voting.
The two options for the community to consider are:
In favour: Enact a minimum SSN commission fee of 8%.
Against: Maintain the status quo.
Motivation:
Several factors motivate this proposal:
Sustainability of SSN Operations: The current fee structure can undermine smaller SSNs’ ability to cover costs, maintain infrastructure, and innovate. Increasing the minimum fee ensures all operators have a baseline for sustainable operations.
Market Dynamics: Other blockchain ecosystems have recently increased minimum staking commission thresholds, recognizing the need for sustainable economic models for validators and node operators.
Ecosystem growth and decentralization: the higher incentives will make it easier for new potential operators to reach profitability and overall more attractive for them, therefore directly benefiting Zilliqa’s ecosystem, facilitating a smoother transition to Zilliqa 2.0 and the decentralization of its network infrastructure.
Specification:
If approved:
SSNs will be required to set their commission fees at 8% or higher.
Non-compliant SSNs will need to adjust their fees within a defined timeframe after implementation.
If necessary, the rewards of the non compliant SSNs will be withheld.
Implementation will follow the ZIP guidelines:
Poll
In favour: Enact a minimum SSN commission fee of 8%
Some feedback on the content of the proposal - I think it’s important to add context that a base commission fee was set at 4% in December 2022, when the price of ZIL was fairly similar to the current price. https://gov.zilliqa.com/t/implement-minimum-ssn-commission-fee/
I appreciate hardware costs may have increased since then - it would be good to understand the impact of this in terms of %.
I gather you may have good insight into the staking commission thresholds of other blockchains from your platform - it would be good to incorporate such insights into the proposal as evidence to help inform voters.
We are also fairly close to the implementation of PoS with Zilliqa 2.0 - my understanding is the updated protocol has lower hardware requirements, potentially lowering costs for node operators, and staking rewards will be dynamically adjusted depending on the utilisation of the block space:
It may be worth waiting to see what the staking dynamics of zilliqa 2.0 are like before raising the minimum SSN commission fee again, but would also be interested to hear input from other node operators.
As a builder developing Torch Wallet, I wanted to share some perspective. With the current fees and ZIL price, it’s extremely challenging to generate sustainable revenue. Personally, I haven’t taken a salary for almost a year because all the ZIL we earn goes directly into development.
The 40% slashing has made things even tougher. It’s important to understand that without adequate funding for builders, the ecosystem—and ultimately ZIL’s price—won’t be able to grow sustainably. While the staking initiative with SSNs provides some incentive, it’s still not enough to make things viable.
Even a small percentage adjustment could make a huge difference for builders. Redirecting ZIL from inactive SSNs to active ones also could foster a more sustainable business model and encourage ecosystem growth. Building anything meaningful requires significant investment, so I hope the community supports this initiative. Every ZIL reinvested is used to build and strengthen the ecosystem, not wasted.
Hey Will, while those are valid considerations, the core issue lies in incentivizing ecosystem growth in my opinion.
Currently, there’s limited revenue potential for SSNs to support builders who can actively contribute to the ecosystem. Without sustainable funding, the development of tools, dApps, and platforms—like Torch Wallet—becomes increasingly difficult. Right now, I’m essentially working for free, reinvesting everything into development. Without an increase in ZIL price or stakers, this model is unsustainable, both for me and for other builders.
If there’s no incentive for builders to create and innovate, the ecosystem risks stagnation. This not only impacts individual projects but also weakens the broader ecosystem’s appeal to stakers and users. A stronger revenue model for SSNs can help align incentives, allowing more resources to flow toward teams actively building valuable projects.
Regarding Zilliqa 2.0, it’s true that the protocol might reduce hardware requirements, but the key question is whether it will provide the necessary incentives for continued ecosystem growth. If the ZIL price or staker participation doesn’t increase, even reduced costs won’t solve the fundamental issue of sustainable funding for builders. In my opinion, enabling SSNs to generate more revenue encourages more teams to build, potentially attracting more stakers and increasing the ZIL price over time. This creates a positive feedback loop benefiting everyone in the ecosystem.
I believe that a mandatory minimum fee of 8% is excessive.
On cardano, for example, there are various nodes with 4% fees.
The minimum threshold should certainly be higher than the current one set at 4%, but certainly lower than 8%, it’s double.
It could be set to an increase of 2%, 6% minimum, on large numbers large returns are considered for the sustainability of the nodes keeping the network healthier and more active.
Nodes will still be able to set higher fees than the minimum of 6%, compared to the work they put in to improve and offer a smooth and user-friendly service.
An excessive increase in the minimum fees could drive away small investors.