[POLL] What should the ceiling of minPM, considering its impact on Squad Wealth Fund revenues?

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Summary

The Nym node operator community has passed a proposal to impose a network-wide minimum profit margin (minPM) with overwhelming support. This is a welcome change, as it will favour node operators and improve the prospects of operating Nym nodes for everyone.

This proposal is for @Nymja and @Shinobi, the stewards of the Squad Wealth Fund (SWF) to decide what the ceiling of the minPM will be. In other words, the maximum value of the minimum profit margin.

The income of the Squad Wealth Fund is delegator rewards accrued from Nym treasury delegations via the Nym Delegations Program. Imposing a minPM will reduce APY for delegations and therefore impact the revenue of the Squad Wealth Fund as well. The higher the minPM, the bigger the impact: for example, if a minPM of 50% is imposed, Squad Wealth Fund revenues will drop by half.

:red_circle: Closed: 2024-05-28T00:00:00Z2024-06-04T00:00:00Z, or until decided

  • 5%
  • 10%
  • 15%
  • 20%
  • 25%
  • 30%
0 voters

You can change your vote any time, until the topic is closed. Once voting closes you will not be able to change your vote. Please also share your thought process, concerns, questions and ideas below - let’s discuss the proposal and make decision together!

4 Likes

Hello guys,

I wanted to write because I think that this vote is important. Before voting, I visited the forum page, which contains the opinions of the operators on this issue and has a vote, and read the comments carefully. Of course, I want the friends who run nodes to earn a lot, but the Squad Wealth Fund plays an important role in the project’s ability to distribute tokens to people. Therefore, I think that results above 10-15% will not have a positive impact for future of the project. I would be happy if everyone would take these into consideration when voting. Best regards, have a wonderful day!

4 Likes

Good job, you caught the proposal even though it hasn’t been announced yet! :slight_smile: The announcement will go out as a blog post later today, with more information about the importance of the vote.

Thank you for the post and I whole heartedly agree, this is an important vote and I invite everyone to join the conversation as well. Node profitability and Squad Wealth Fund revenues are both crucial for the Nym community to thrive, and the ideal balance between these two will be determined by you in this vote.

2 Likes

Funny, I was thinking along similar lines but on a slightly higher level of 15-20%. This is a balancing exercise where we want to incentivize node operators, keep delegators happy and do not empty WSF quickly. On the other hand, we can have another vote later on if you will notice current minPM is now working for us. I do hope operators are going to vote.

1 Like

I can’t vote because “You need to be a member of Nymja,Shinobi to vote in this poll”.

@sudonym do you need to add me somehow, or is it something I need to do?

1 Like

@saliveja you have the Nymja role now :saluting_face:

2 Likes

I understand the struggles covering costs until now. I don’t think operators should do this at own expense. It’s not sustainable. I respect you all a lot for being a part of securing the mixnet. At the same time I don’t necessarily think that 30% reflects the interests for a squad opting for digital privacy which is not just covering our costs but ensuring longevity. We are a part of a growing ecosystem of lunarpunks, incentives is not primarily monetary I would dare to assume.

1 Like

Note: in the end, the weighted average of all votes will be taken as the result.

Right now as I am writing this the average is exactly 20%, which I personally think is around the sweet spot.

That would mean:

  • triple profits for a node currently with 7% PM
  • double profits for someone with 10% PM

While reducing Squad Wealth Fund (and delegator) revenues by only 14%. In other words, in the range of 20-30%, the impact on node profitability is way more significant that on SWF and staking revenues.

2 Likes

Hello guys Esa here. Just want to give a suggestion for this topic. For my point of view as a holder as well 15% is absolutely perfect for me? Why Its because this range is not to much. I believe we want a lot of income but if too much above 15% (guess 15% for me is max) it will impact to Squad Wealth Fund. So my opinion right now focus on longterm and I believe with range max 15% bring healthy for everyone not only for me as a holder of NYM but also Squad Wealth Fund as a project fund. Thank you✨️

1 Like

Hello

For this vote, I must say that we want the friends who manage the nodes to earn more, but at the same time, the Team Wealth Fund needs to distribute tokens to people to ensure the continuity of the project and to ensure that people trust each other. other. For the continuity of the project, more people need to be involved and continuity must be ensured. This should not be ignored either. It is necessary to look at the voting from a general perspective. Have a nice day!

2 Likes

I think 30% is a reasonable margin. It encourages people to be good operators, as there is a greater financial gain.

Currently, with 7% PM, I don’t make a profit, I just cover my VPS costs. I’m happy to contribute to privacy and Nym, but it would be nice to have higher pay for my work as a node manager, even if it means less income from other tasks (such as translations and dCM).

6 Likes

If you believe that a 30% markup is reasonable, what prevents you from setting such a profit margin for your node now?

Why does everyone forget about the existence of another parameter - Operating Cost? This parameter allows each operator to set a fixed value in NYM to cover the costs of maintaining their node. This can be a good solution for those who want to guarantee coverage of their costs.

Applying a minimum profit margin at the smart contract level can limit the flexibility of operators and lead to inefficiency.

The ability to independently set the size of profitability allows node operators to adapt to changing market conditions and their individual circumstances. If you set a minimum profitability threshold, this can lead to a situation where some node operators receive excessive profits at the expense of other network participants.

I believe the more profitable operating a node is the more people are going to want to do it.

With that, people will have to differentiate their nodes not by being cheap unreliable nodes ran on Contabo with low profit margin and op cost, but by being performative nodes that run on locations of interest for the network.

This way, elevating the profit margin for node operators will also elevate the quality of nodes and therefore the quality of the network itself. Which, in my point of view, is the most important thing for the project to work.

4 Likes

Of course, anybody can set up a different PM, this is our freedom. However, if the minPM is not enforced, a lot of operators will keep it [very] low to attract delegations and this is what happening now. Once minPM is enforced, this is not going to happen.

Also, do not forget that you are not always getting 100% of Operating Costs since your node’s uptime is not always 100%.

I’m part of the 30% gang too, what do the node runners think about it? :yum:

4 Likes

I think 30% gang is getting bigger :slight_smile:

1 Like

@nicklo_gw, answering your question:

“If you believe a 30% profit margin is reasonable, what’s stopping you from setting that profit margin for your node now?”

Competition is the reason. Nodes exist in correlation with other nodes, it doesn’t make sense to set a profit margin significantly higher than “competing” nodes. It drives away stakers and makes your node inoperable in the long run.

It’s the same debate as why there should be a minimum wage. Rhetorically asking: “Why wouldn’t a worker agree to work for 3000 euros or more a month?”. Because there are those who work for less, so they are forced to lower the value of their labor. That’s why a minimum wage is important to guarantee the integrity of workers. That’s also why most countries implement it.

In the case of nodes, a minimum profit margin ensures that nodes with less saturation have a financial return that makes them competitive against nodes with a lot of saturation. An operator close to 100% saturation with only 7% can make a profit and manage its node, unlike a node with little saturation. This has even led to an unhealthy dispute within the Nym ecosystem (there’s an article about this: Incentivizing privacy, not surveillance: Nym nodes approve min. profit margin | by Nym | May, 2024 | nymtech).

Also, the operating cost parameter does not guarantee that your profit will be higher if your profit margin parameter is low. To be redundant: what guarantees the profit margin you will have is the profit margin parameter…

In short: a minimum profit margin protects smaller nodes and prevents nodes with high saturation from centralizing operating profits.

3 Likes

Hi, could you give me a role please so I’ll be able to vote? Thanks

I categorically disagree with your arguments for the following reasons:

  1. Comparing the minimum wage with Profit margin is incorrect. These are two different economic concepts that operate in different contexts. It’s like comparing red with hot.

  2. For nodes with low saturation, Profit margin does not guarantee coverage of their maintenance costs since such nodes rarely fall into the active set and their income is minimal, no matter what the profit margin is. This underscores the importance of balance between node saturation and its Profit margin to ensure its competitiveness and profitability.

  3. As far as I know, Operation cost and Profit margin play different roles in the node economy. Operation cost refers to the costs of maintaining the operation of the node, while Profit margin refers to the profitability of the node. Moreover, Operation cost has the highest priority in the order of payments. In other words, Operation cost is paid first, and only from the remaining amount (if there is any left) is the Profit margin calculated and accrued.

  1. Both concepts have the role of protecting the side with less bargaining power from the side with more power. Go one layer further into abstraction and you’ll see that this is a very precise analogy. Unlike red and hot, which typically don’t have a role in common.

2 and 3. You just said it: “if there is any left”. Another example: 25% saturation, 3% profit margin, operational cost 30 dollars (180 nym). Operational cost high, profit margin low. This node doesn’t pay for itself, the operator would receive around 70-80 nym per month.

note: 25% is the amount invested by the delegation program. Even these nodes with a low profit margin don’t pay for their costs (nor can they imagine making a profit…)

It’s quite clear that this race for a low profit margin is not healthy for the network

2 Likes