Progressive fee in CSM

Problem

• What are we looking for in the first place?
  • Potential for CSM share increase?
  • More independent NOs?
  • Other?

This uncertainty highlights the necessity to outline the solution space, assuming that we are trying to tackle all or some of the outlined goals.

Option 1. Progressive fee on the module level

At its core, the option assumes a reduction of the Node Operator fee shares correlated with the total number of validators in the module. The first N validators in the module receive a full Node Operator rewards share. The rest of the validators get a reduced Node Operator rewards share. Alternatively, there might be several "thresholds", each associated with a reduction of the Node Operator share.

The validators are sorted by the validator index on the beacon chain to match Node Operator rewards share with the exact validators. If X validators from the first batch (full rewards) are exited, they are automatically replaced with the X validators from the second batch.

This approach can be considered a loyalty program for the early joiners, somewhat similar to the Kickstarter model.

Pros

• Potential for more significant CSM stake share
• The increased cost of enter/exit manipulations
• Explicit benefit for early joiners who are long with CSM (loyalty boost)

Cons

• No explicit benefits regarding fees for the identified solo stakers
• No direct impact on the number of independent Node Operators participating in the protocol

Option 2. Increased fee for Identified Solos members

This approach assumes increased (full) Node Operator rewards share for the first N validators controlled by the Identified Solo stakers while keeping Node Operator rewards share low for the rest of the Node Operators and validators above N controlled by the identified solo stakers.

Pros

• An additional benefit for Identified Solos
• Potential increase in the number of independent NOs
• Potential for bigger CSM share via lower general fee

Cons

• Useless if the list of Identified Solos is not updated

Option 3. Just reduce the general fee

This is the simplest method. Pectra upgrade opens up the potential for a decrease in the bond requirements in CSM. Since the primary economic indicator for CSM operators is the capital multiplier (APR multiplier for the bond), bond reduction allows for the reduction of the module fee to levels comparable to or even lower than the current 5% for the curated module.

Pros

• Potential for bigger CSM share via lower general fee

Cons

• No explicit benefits for Solos or early joiners
• Short-term measure, since the further fee reduction would require additional reduction of the bond requirements