How the NEAR Foundation is Supporting Network Decentralization
NEAR FOUNDATION
October 30, 2020
Now that inflationary rewards are live, token holders are able to earn rewards from staking. Even without running a node, they can support the stability and security of NEAR by staking to validators. In just a few weeks, more than 250 million NEAR tokens have been staked, representing 25% of all NEAR in existence. We’re overwhelmed by the amount of community support and engagement that’s ignited over the past few weeks and are excited to continue helping fuel the community’s growth.

In this article we will explore the importance of distributing stake among validators, the NEAR Foundation’s efforts to help kickstart the validator community with Delegation Funding, and two new recipients of NEAR Foundation Stake.

Distributing Stake to Validators
On Proof of Stake blockchains, it is common for token holders to converge on the few staking pools run by validators that already have most of the stake as they seem the most popular. While this is normal and repays the hard work of validators, it can have an impact on the protocol reliability and governance.

On one hand, in the unlikely scenario that the top 25% of validators go offline in a PoS blockchain, 25% of the blocks will need to be re-allocated to other nodes, which translates to slower transaction confirmations, or smart contracts needing additional time to be executed, at least until these top validator nodes come back. This may become even more evident if the top 33% goes offline: at that point, the consensus would be missing, no new blocks would be produced, and no transactions or smart contracts would be processed. In the opposite situation, if the smallest validators go offline, the protocol will miss only a few blocks, which would be almost undetected by the user.

On the other hand, this convergence can influence governance: in a liquid democracy, PoS blockchains use the staking size to weight the vote from a validator: the higher the stake, the bigger the influence on the vote. This means that every staked token gives a perpetual vote right to the validator of choice, at least until funds are delegated to a different staking pool, or unstaked completely. In a scenario where a PoS protocol is voting for a controversial change, the same top 33% validators can control the vote outcome, thanks to the delegation in their staking pool. 67% of stake is required for validators to “vote yes” on a proposal, so the most powerful validators can provide enough voting power to stall the vote or keep things unchanged.

While it’s extremely unlikely that NEAR validators will decide against the interest of the community, NEAR Foundation is anyway actively involved in keeping protocol decentralization one of its top priorities, and have as many validators as possible in the top 33%.

With that, here are three new Governance- and Validator-related initiatives that the NEAR Foundation is excited to announce:

The NEAR Governance Community
Unstaking Foundation’s Tokens
NEAR Foundation Delegation Pilot Program
NEAR Governance Community
The NEAR Governance Community launched last week as a forum for the community to discuss topical NEAR protocol improvements and governance initiatives. The first two issues submitted are the Phase II Governance Review and the Block Producer Selection Algorithm. While the content of proposals may be very technical at times for most token holders to contribute to, validators are encouraged to be actively involved in the conversation to signal to the community that they are aligned with their needs. 

As a token holder selecting Validators to stake to, you can follow these conversations to get a better understanding of the commitment and direction different validators want to take the community, and elect to stake with validators that align with your beliefs regardless of the size of their staking pool.

Unstaking NEAR Foundation Tokens
With the launch of Phase One in August, the NEAR Foundation delegated 28.8 million tokens to a small number of staking pools, to kickstart the network and help validators become active while the community was claiming their own tokens.

This week, NEAR Foundation will withdraw its funds from the staking pools in the top 33% in order to help more evenly distribute stake among all validators now that more token holders from the community have started to stake. In alphabetical order, these validators are: astro-stakers.poolv1.near, bisontrails.poolv1.near, chorusone.poolv1.near, cryptium.poolv1.near, dokiacapital.poolv1.near, figment.poolv1.near, staked.poolv1.near, and zavodil.poolv1.near. 

While these validators represent an example of integrity and commitment to NEAR Protocol, this operation will reduce the gap from the lower 67% of validators, and will free up additional resources to onboard more validators to NEAR (see below).

NEAR Foundation Delegation pilot
Initially introduced in the Stake Wars is over blog post, the NEAR Foundation has been piloting a program to select new validator candidates to stake to in order to help onboard them into the NEAR community. 

Currently, the minimum stake to become a validator is above 2.2 million NEAR tokens. Below this threshold, the staking pool is not elected and would not have the option to earn token rewards from producing blocks. This is the typical chicken-and-egg problem: as a delegator, why should you give your stake to a pool that is not yet big enough to be elected and produce new blocks? Or if you are interested in being a validator, how will you raise enough stake to start producing blocks and generate rewards to make being a validator a viable endeavor?

The NEAR Foundation is helping to alleviate this cold start issue by providing a temporary delegation of between 1-4 million tokens as a form of “startup” stake to kickstart new validators’ participation in the active validator set, and help them attract delegation from their followers and the NEAR token holder community at large.

As mentioned above, eventually, the NEAR Foundation will progressively unstake these tokens from the validators, as it did with the top 33% validators in the list above, and re-allocate them to other staking pools to continue on boarding more validators to NEAR.

The details of criteria for receiving and maintaining the NEAR Foundation’s stake are outlined in this blog post about the program, but primarily comes down to:

Reviewing application information potential validators submit in this form
Asking potential validators to outline goals and KPIs they have to better the NEAR community using this template as an example.
This “startup” stake funding from the NEAR Foundation will help validators earn a seat in the active set and earn staking rewards from the network. Over time, as the minimum stake to be an active validator increases, validators will need to find ways to attract more stake from the community in order to remain in the active set. Practically speaking, if validators receive NEAR Foundation stake, but fail to deliver on their community growth and marketing initiatives, they will fall out of the active set by not attracting enough community token holder stake to maintain their position. 

Foundation Delegation Pilot Program Recipients
We’re excited to announce that the Foundation has on boarded the first two organizations in this program to receive stake: Everstake and AUDIT.one.

Why Everstake
Everstake provided a solid growth plan, together with a strong track record in writing original contents for their community of token holders. They already published a blogpost providing basic information about NEAR, and were able to grow their staking pool size above 4 million tokens, even before the NEAR Foundation provided its official support. This is a great example of driving growth from an existing community of token holders. A copy of their submitted request can be found here.

Why AUDIT.one
AUDIT.one is the validator arm of Persistence.one, one of the largest blockchain organizations in India. AUDIT.one is built on the belief that the Validators of today will be the Auditors of tomorrow with economic skin-in-the-game. They are very active on Cosmos, and recently they started to support Polkadot.

Similarly to Everstake, they have a strong track record in generating high-quality content for their followers, along with the translation of technical documentation and papers.

Overall, Audit One becomes an ideal partner to include Hindi-speaking enthusiasts in the community, and help them delegate to a local validator.

Looking Forward
A number of great potential validator candidates have applied to the Foundation Delegation Pilot Program and we will continue to review and support the community as needed to foster the growth of a vibrant decentralized validator community on NEAR.

We encourage all token holders to get involved with the community and meet validator teams who are playing an active role in the health and governance of the NEAR ecosystem. The NEAR Foundation will continue to make this decision process for Foundation Delegation as transparent as possible, while encouraging validators who receive this temporary support to do their best to support the growth of the community as a whole.

In addition to technical prowess and uptime, validators who are providing educational content, exceptional customer service, and helpful tooling and explorers will be the best candidates for the future growth of NEAR. 

Join the Community
If you are interested in becoming a validator and participating in this pilot project, submit your application from this link.

If you’re just learning about NEAR for the first time and are seeing this post, we invite you to join us on the journey to make blockchain accessible to everyday people who are excited for the future of the Open Web with NEAR. If you’re a developer, be sure to sign up for our developer program and join the conversation in our Discord chat. You can also keep up to date on future releases, announcements, and event invitations by subscribing to our newsletter for the latest news on NEAR.