i cannot imagine a reasonable scenario for operator to put a 30% ceiling. i think it’s not existing and its quite strange to me that you guys are voting for it tbh
- Comparing the minimum wage and Profit margin is not quite correct for the following reasons:
a) Different Indicators: The minimum wage is the minimum level of labor remuneration established by law, which the employer is obliged to pay to its employees. Profit margin, on the other hand, is a business efficiency indicator that shows what proportion of total revenues a company retains as profit after accounting for all expenses.
b) Different Goals: The minimum wage is intended to protect workers’ rights and provide them with a decent standard of living. Profit margin, on the other hand, is used to assess the efficiency of a business and its ability to generate profit.
c) Different Influencing Factors: A multitude of factors such as economic conditions, politics, inflation can influence the minimum wage. On the other hand, Profit margin depends on factors such as cost structure, pricing, sales volume, etc. Therefore, comparing these two indicators directly would be incorrect as they reflect different aspects of the economy and business. They serve different purposes and are regulated by different factors. Therefore, any conclusions made based on such a comparison may be misleading.
Setting a minimum Operating cost has a more adequate comparison with setting a minimum wage. Here’s why:
a) Operating costs and the minimum wage are both expenses for a company. They directly affect how much money a company spends on its operations.
b) Operating costs, such as wages, rent, utilities, are an integral part of running a business. They affect how much money a company can earn.
c) The minimum wage is a legislatively established minimum that a company must pay its employees. This is also part of a company’s operating costs.
Thus, comparing the minimum wage and operating costs makes more sense, as both of these indicators reflect a company’s expenses. However, Profit margin is a profitability indicator that depends not only on expenses but also on a company’s revenues. Therefore, comparing the minimum wage and Profit margin can be misleading.
- I didn’t quite understand your math, and how you came to the conclusion that the node will ultimately receive 70-80 NYM?
25% saturation - this is 250,000 NYM
At the moment, there are 108 nodes with delegations from 300K to 250K NYM, of which 52 are in the active set and 56 are in the inactive set. This indicates that nodes with such saturation spend most of the time in the inactive set (for approximate calculations, let’s take the coefficient 0.5).
Node rewards for the month = 250,000 * 15% / 360 / 24 * 720 * 0.5 = 1562.5 NYM
Node profit at PM 3% = 1562.5 * 0.03 = 46.875 NYM
Node profit at PM 30% = 1562.5 * 0.3 = 465.75 NYM
In case the node operator sets the Operation cost (OC) equal to 500 NYM
The remainder of the node’s rewards after paying the OC = 1562.5 - 500 = 1062.5 NYM
Node profit at PM 3% = 1062.5 * 0.03 = 31.875 NYM
Total node income = 500 + 31.875 = 531.875 NYM
As you can see, correct operation and setting of PM and OC allows the node to receive fair income. Administrative introduction of a minimum PM violates the principles of healthy competition and allows “whales” to unjustifiably enrich themselves at the expense of other network participants.
I made an approximation based on what I would earn with a node similar to mine in terms of aspects and costs, but with half the profit margin. In fact, the ideal is to use the formula, not to make approximations (sorry I was lazy :/). I think this could be a good opportunity to debate the distribution formula within the community.
I quote from the whitepaper:
“ 1. The amount of rewards apportioned for the i-th node and its delegates is equal to Ri =PFi ·R·(σi′ ·(ωi ·k)+α·λ′i)/(1+α), where σi is the total stake delegated to the i-th node, λi is the stake that the operator has pledged to their node, σi′ = min{σi, 1/k} and λ′i = min{λi, 1/k}. We observe the following budget balance property k
XRi ≤R. i=1
This follows immediately as Pki=1ωi =1,Pki=1λi ≤1and(σi′ ·k)≤1fori=1,…,k.
Note that the above ensure that there are no incentives to delegate more than 1/k of the total stake to one node and that stakeholders are incentivized to create k nodes.
- Given the above, the i-th operator is credited with the following amount: [min{PP(wi),Ri}+(PMi +(1−PMi)·(λi/σi))·(Ri −PP(wi))]+, where [·]+ = max{0, ·}, P Mi is the declared profit margin of the i-th operator, while a delegate with delegated stake s, receives [(1 − PMi) · (s/σi) · (Ri − PP(wi))]+," (pg 30)
Could you tell us how you determined each of these values? (PFi, R, σi′, ωi, k, α, λ′i).
About 1:
You are simply not abstracting the role of the concept. You should look at the role that the concept assumes within a situation. This is an analogy, so a level of abstraction is required.
Another important point: you were comparing minimum wage with profit. Not minimum wage with minimum profit margin per node. The correct analogy would be salary - profit (even if different, some analogies and correlations would be possible) and minimum salary and minimum profit margin.
I’m repeating myself: the common role is to protect the side with the least bargaining power. Nodes with a high saturation have more power to play with a lower profit margin and attract more stakers, just as the employer has more power to determine someone’s salary, since there is a mass of unemployed labor and the employer determines who is hired or not.
The minimum wage guarantees a minimum margin of remuneration, avoiding a dispute of “who accepts/can work for less”. A minimum profit margin guarantees a minimum level of remuneration, and avoids a “who can sustain minimum profit” dispute. The same applies to the operation cost: a dispute over “who runs the cheapest” (putting cheap and bad servers on the network) or even people lying about the operation cost to attract more stakers.
obs: There’s a very good text on concepts such as “characters taking on roles”, actually the first and third chapters of a book called What is Philosophy? by Gilles Deleuze.
Which brings us back to the question: “If you believe a 30% profit margin is reasonable, what’s stopping you from setting that profit margin for your node now?”. You must try to understand the material dispute that conditions the possible field of action (freedom). In this case, you’re operating with concepts that aren’t embodied in reality and this is damaging your judgment.
Finally, I agree that guaranteeing a minimum hardware specs and operating cost (isn’t it 40 - 2000 nym already?) for servers can be very good for the network. Maybe we’ll start debating this after the minimum PM.
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anyway I vote for 10% )
If it seems good for u 
I appreciate everyone participating in this discussion. Different perspectives helps to shape our development. if everyone agrees without further discussion, if there is no divergent opinions, there will be stagnation. After having some discussions I have changed my vote to 30%. The reason for this is simple. Node operators are a backbone of the infrastructure and it is not shameful to get compensated for that. In my mind I was thinking that the more we are getting the less Nym is getting, as if it would compromise the project somehow. This is the profit margin, which means the rest goes to stakers if I’m not mistaken (please help me out if I misunderstood). I don’t think 30% is an unreasonable amount for doing all the work to maintain the nodes.
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Guys, don’t forget that we are currently voting for upper ceiling, not for the actual amount.
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If you want to continue the discussion in a constructive manner, please provide your calculations.
If you don’t understand how the monthly node reward is calculated not in theory, but in relation to current realities, let me explain:
Node rewards for the month = 250,000 * 15% / 360 / 24 * 720 * 0.5 = 1562.5 NYM
250,000 - the amount of delegations to a specific node
15% - the current network profit rate
360 - the number of days in a year
24 - the number of hours in a day
720 - the number of hours in an epoch (month)
0.5 - the coefficient reflecting the hit in the active set at the current moment for a node with the selected saturation range (300K - 250K NYM), taken based on the fact that at present there are a total of 108 nodes in the specified saturation range, of which 52 are in the active set and 56 are inactive.
The calculations show that if the node operator sets the Operating cost at 500 NYM and Profit margin at 3% (taken from your words), the total node income for the month will be 531.875 NYM, which is more if you set PM 30% and OC 40 NYM.
Thus, the calculations show that there is no need for an administrative setting of a minimum PM, which can lead to a serious imbalance in the income of network participants. The main beneficiaries of setting a minimum PM will be “whales”.
Regarding the first question, let’s return to practical aspects. As I have already noted and demonstrated with calculations, setting a minimum operating cost can be compared to setting a minimum wage. This is a more adequate comparison than comparing the minimum wage with the minimum profit margin.
Hi all and thanks for the interesting discussion so far and for the contributions to the Nym network.
As one of the people working on this rewarding system, I want to share some thoughts on the balancing act behind it.
The ultimate objective of the rewarding mechanism is to have an excellent network of highly reliable nodes that can support quality services for clients. A natural precondition to achieve this is highly motivated, well-rewarded node operators that make an effort to sustain this infrastructure. The current situation without any low limits on PM causes a race to the bottom, with most rewards going to stakeholders (delegators) and too little left for node operators.
The Cost parameter, as it has been mentioned by some in the thread, can also be used to guarantee a minimum income for nodes. There are however some downsides: as cost is deducted before profits are computed, this rises the bar for low-stake nodes to be attractive for delegates compared to higher staked nodes. Considering two nodes with a high cost value, one highly staked and the other with low stake: the highly staked node will be much more profitable for delegates than the low staked node, which may actually distribute zero rewards to delegates until costs are covered. This is because in the high staked node all the delegates “share” the cost, eating just a bit from each of their profits, while in the low staked node the one or few delegates have to cover all the costs, which may significantly reduce (even to zero) the delegation profits — until enough delegates have joined in, but you see the bootstrapping problem and how this may keep low staked nodes uncompetitive even if they have better performance. Profit margin on the other side is a constant share of delegate rewards, being much easier to understand and factor for delegates, even as a node’s total stake fluctuates.
As an aside, please note that there is a small difference between the paper and the implementation of the cost in the reward algorithm, as in the implementation the cost is refunded taking into account performance when participating in the active set (so a node with less than 100% performance gets its cost refund scaled down proportionately).
Now, focusing on profit margin, it’s clear that current common values of 5% or less are insufficient to node operators as a collective — while individual nodes are disincentivized to be the first to raise the PM as that may scare away delegates, meaning they lose out in the competition.
In this sense, a minimum PM sets a more level-playing field for nodes, where nodes do not need to be fully saturated to be reasonably profitable.
Is there a risk of setting a minimum PM that is too high? Certainly.
Some in the thread have mentioned diminished income for the wealth fund, but I want to bring up a larger risk: many delegates deciding that their APY for delegating to nodes is too low and moving away from Nym, diminishing the value of rewards for everyone.
Some in the thread have used the analogy of minimum wage for the PM. I would have a slightly different analogy, where nodes are not “workers” but rather “small businesses” with operating costs (for running the node), investors that want dividends (delegates), and paid contracts (being part of the active set) for which they compete with other nodes.
If nodes have enough resources to self-fund (buy enough NYM to saturate themselves), then any discussions of PM are useless, as ALL rewards go to the operator anyway.
But that is not the standard case, where the operator puts in the expertise and the effort and delegates provide the stake. In this vote however the body of delegates is not really represented, so I want to caution about striking a deal that is too disadvantageous for them.
Nym currently provides rather high APY to delegates (about 13.5% on average), so there is space for reductions. Raising the PM will directly cut into this APY, as I’m sure everyone understands.
But beyond the current cut, please note that Nym rewards are currently made higher by having a target stake of about 30% of the total circulation supply. This means that maximum rewards can be distributed if 30% of NYM is staked in nodes. An increase in the target stake to, eg, 60% of the circulating supply would immediately halve the rewards per staked token and consequently the APY. This increase has so far not been necessary as many big stakeholders are not staking in the system, but it may change in the future if more NYM holders decide to stake, driving down APY per delegated token.
The two effects put together, ie, a raise in PM and a raise in total target stake, may drive down APY to the point that delegates consider the system uncompetitive compared to other chains. If a large section of delegates lose interest, then everyone will lose, including node operators who will be getting more nominal NYMs that are actually worth less in the market.
As you can see, it’s a delicate ecosystem with many participants each with their (somewhat competing) priorities.
All this considered, if I was voting I would go for something like 15-20% for the minimum PM (note that operators still can go higher than this), to still leave room for increases in target stake without jeopardizing interest from stakeholders that delegate to nodes
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As far as I understand, the initiators of the question and the introduction of the minimum profit margin are the participants of the “NYM Delegation Program”.
The conditions for participation in the program (https://delegations.explorenym.net/) are:
To join the queue, your node has to meet the following criteria:
IPv4 and IPv6 enabled
Maximum profit margin: 10%
Maximum operator cost: 600 NYM
Maximum saturation: 100%
Minimum average routing score: 90%
Those who voted for a minimum profit margin > 10%, do you realize that you will be excluded from this program?
Instead of limiting parameters at the smart contract level, which affects all participants and can cause imbalance in the network, it is necessary to discuss the possibility of increasing the size of delegations. For example, you can consider increasing from 250,000 to 500,000 NYM. This can stimulate the interest of operators and lead to a more balanced network. Mathematical calculations can be carried out to determine the optimal size of delegations, at which all interested participants will benefit.
I do not think people will be excluded from DP just because they voted 20,30 whatever. This will not be actioned tomorrow and everything will be adjusted (incl. DP requirements) to be consistent.
I don’t think that it is a good idea. It will lead to a more centralized network for those people who have a lot of money.
Btw, you are wrong, the proposal wasn’t made by participants of the delegation program. And the first vote was open to all operators not only DP participants
I would like to draw your attention to some observations I have made regarding the current situation in the project. It seems to me that there is a hidden centralization taking place. A large part of the active set is already under the control of “whales”. For instance, participants such as “No Trust Verify”, “Coin Metrika”, and “Swiss Staking” each manage 10-15 nodes, and the saturation level of these nodes is close to 100%. Just these three participants own about 20% of the places in the active set. I have nothing against these participants, I am just stating the facts.
At the moment, the distribution of nodes by saturation level is as follows:
More than 90% saturation - 134 nodes
70-90% saturation - 27 nodes
50-70% saturation - 9 nodes
30-50% saturation - 14 nodes
Less than 30% saturation - 583 nodes
Under the current conditions, nodes with a saturation level of less than 30% cannot expect income that would cover at least the rent of servers and cannot offer competitive conditions to their delegators. The introduction of a minimum profit margin for these nodes will not significantly change the situation, but may lead to even greater dominance of the “whales”.
I propose the following possible solutions:
- review the size of delegations within the “NYM Delegation Program”
- expand the active set, possibly with a review of the algorithms for selecting nodes in the active set
I urge the development team to pay attention to this situation, conduct an analysis of the current network metrics, and propose possible solutions to the community.
I believe that the proposal to set a minimum profit level of 30% was due to insufficient information and availability of network metrics, as well as a desire to find at least some way to compensate for the costs of maintaining their nodes.
I would like to emphasize for those who make comparisons with the minimum wage, that a progressive tax system is applied for a more fair distribution of resources and income.
Our goal is to create sustainable development of the NYM network, and for this, we need to develop rules that will ensure a more fair distribution of income between large and small participants. Despite the fact that there are significantly more small participants, they are currently struggling to compete with large players.
In this context, the team of developers should play a leading role, offering possible solutions for the community and ensuring fairness and equality of opportunities for all network participants. This will help us build a stronger, more sustainable, and fair community around the NYM network.
Remember that this process is not Pareto efficient.
This proposal was not about 30% but generally about an upper ceiling of minPM.
I see absurd voting results that seem to favor the interests of large players rather than small participants.