A Conversation with X-Node Community

General
1

There have been a lot of good internal conversations within the Xnode telegram/community and we wanted to start a thread to engage with the Foundation about some of the concerns we have.

A lot of the recent discussions have centered around the Galaxy Member NFT system, and how dApps like veDelegate are providing regular users who don’t engage actively with dApps on the DAO, the highest amount of rewards for the least amount of effort. They are not incentivized to upgrade their own GM NFTs, because why buy the cow when you can get the milk for free?

Some other X-nodes will chime in here and speak more eloquently on the issues than I, but just wanted to get the conversation going.

8 Likes
2

Here’s my two cents on critical analysis on VeBetterDao

  • There’s currently not enough incentive for anyone to pay for B3MO upgrades (as one can just delegate thier vote to vedelegate or vestation and recieve the highest available multiplier). This frustrates high level xnodes as it nullifies their benefits.
  • Voting on proposals isn’t incentivised as if the proposal isnt successful you miss out on both voter rewards and also the ability to vote for your favourite dapps. It’s safer to never vote on proposals ensuring you always get weekly voter rewards and ability to support your favourite dapps. But you sacrifice improving the DAO.

Having said that i am super impressed with the Dao. But i look forward to efforts improving these two areas.

4 Likes
3

Delaying higher tier GM NFT releases to qualifying X node holders feels like another massive PowerSlap™ in the face for “the backbone of the community”. The current policy of waiting for hugely expensive GM NFT upgrades to match projected X node GM NFT holders effectively means that these higher tier GM NFTs for Strength/Thunder/Mjolnir X nodes will likely never be released, or at least not for some considerable time. Releasing all the GM NFTs now would be the fairest move to reward the most loyal core members of the VeChain Community and would still allow those wishing to upgrade to do so. @vineet-codes

1 Like
4

Here are the problems that we see with the current GM system:

GM upgrades/Parity between Node holders and non-node holders
According to Vineet, these two numbers need to match, otherwise it will create imbalance in VeBetter governance. Those numbers currently do not match, and I don’t know the updated numbers to see if more people are upgrading or not on their own.

PROBLEM: what is incentivizing non-node holders to upgrade their GM NFTs, when they can just use veDelegate and earn the highest % bonus of governance, even without owning a GM NFT?

(i.e. why buy the cow when you can get the milk for free?)

But the real problem I believe is below:

GM NFT abuse through the delegation system
Even if all GM NFT tiers were released now, VeDelegate can use the highest tier NFT with pooled votes and reward users with the highest multiplier, which completely dilutes the pool for distribution.

As veDelegate’s GM NFT tier surpasses each X-node tier, all X-nodes will be essentially forced to use veDelegate to earn top rewards at their 10% fee.

This workaround basically rewards users the highest amount of governance rewards for the least amount of effort, while those that actually interact with the dApps and the DAO on a regular basis are doing more “work” and making less in comparison to those that sit back and delegate. Feels backwards!

Not only that, but as a dApp on the DAO that rewards passive users, veDelegate essentially snowballs their VOT3 for their own dApp, which also takes away from allocations/rewards from other dApps that actually provide rewards for sustainable actions.

This is a problem, and it needs a solution.

Proposed Solution #1
GM NFTs cannot be used in delegation wallets where the number of delegated users exceeds 1. This allows node holders to still delegate their nodes to hot wallets, while hopefully stopping services like VeStation and VeDelegate from rewarding greater number of users with their GM NFT. Not sure how feasible this is, but just trying to get some ideas that could turn into better or more feasible solutions.

Proposed Solution #2
Amend the GM NFT system so that the % gain is diluted by the number of users delegated. This would probably just result in smaller pools, but would help dilute the rewards more than its current form.

Would love to hear more thoughts and ideas from VeChain devs, X-nodes or dApp devs that are more technically saavy than myself.
@vineet-codes
@favo

5 Likes
5

Some spontaneous feedback, @mrwhittleman:

  • What’s the problem? Lower Nodes with their free upgrades get less rewards than someone with higher upgrades. This is skewed by pooling currently 5M (3%) of B3TR with veB3TR.
  • I believe it’s impossible to prevent pooling, because technically it’s always possible to have a certain balance and get rewards for it. It’s impossible to distinguish if it’s from a single or multiple users. For example: someone with a lower tier NFT could also “lend” their B3TR to a higher tier friend for higher rewards.
  • Quadratic rewards would prevent bigger wallets from earning more, but this would also remove the benefits for bigger balances in this environment as well.
  • Voting with bigger balances, which veB3TR is, does lower the allocation impact. It’s less impactful for better rewards.
  • I don’t see a “snowball” effect, because users decide their voting preference and only about ~9% of the B3TR in the veB3TR pool is voting for veDelegate.
  • Voting yourself is always better than voting in a pool with fees. More impact, more rewarding.
  • Allowing all NFTs to be released would be only fair, especially because it would also allow going for the paid upgrades.
  • Holding off on the upgrades to prevent someone from paying a significant amount of B3TR, measured in USD, for the ability to make adjustments to the GM NFTs can be a good decision too. I believe that allowing all tiers to be available would be best for all nodes; however, delaying their release for now provides some breathing space for possible adjustments.
2 Likes
6

Hi @favo,

Thanks for your feedback. To rebuttal:

  • What’s the problem? Lower Nodes with their free upgrades get less rewards than someone with higher upgrades. This is skewed by pooling currently 5M (3%) of B3TR with veB3TR.

The problem is that dApps like veDelegate can reward all of its users with 1 GM NFT (highest tier), thereby making the rewards skewed unfairly for other nodes. I do feel like this wouldn’t be as much of a problem if the Foundation hadn’t positioned the free GM upgrade for Xnodes as a unique benefit. But now it really is not that unique because I could just join veDelegate without any GM NFT and earn the highest rewards without even needing a node.

  • I believe it’s impossible to prevent pooling, because technically it’s always possible to have a certain balance and get rewards for it. It’s impossible to distinguish if it’s from a single or multiple users. For example: someone with a lower tier NFT could also “lend” their B3TR to a higher tier friend for higher rewards.

I agree that it is probably impossible to prevent pooling altogether. But lending B3TR to a friend with a higher tier NFT is one thing, doing it on a mass scale with hundreds (or thousands) of users, I think warrants a discussion. IMO our current system actually encourages pooling on a mass scale and deincentivizes users from upgrading the GM NFTs themselves.

  • Allowing all NFTs to be released would be only fair, especially because it would also allow going for the paid upgrades.

  • Holding off on the upgrades to prevent someone from paying a significant amount of B3TR, measured in USD, for the ability to make adjustments to the GM NFTs can be a good decision too. I believe that allowing all tiers to be available would be best for all nodes; however, delaying their release for now provides some breathing space for possible adjustments.

I think most of the hold off is due to parity within the system (Node GM NFTs = paid GM NFTs) but also to not skew governance rewards too much in the favor of those that hold the highest tiers.

While we wait, it would be worthwhile to discuss the potential impact of releasing all GM NFT tiers, especially as a dApp like veDelegate could potentially reward all of its users the highest NFT tier (assuming it has a Mjolnir X) to the detriment of other Xnodes governance rewards bonus.

Does that not create an endgame which would drive everyone to use services like veDelegate to get the highest rewards? As a low tier Xnode, what incentive do I have to use my own GM NFT and upgrade it? Would it not just end with everyone using 1 person’s highest tier GM NFT in a pooling system?

Does that make sense?

2 Likes
7

I was trying to rephrase the problem, I believe we have the same understanding. Lowering the incentive for upgrades is the second effect, beside skewing.

1 Like
8

I fully agree, if the foundation allows Dapps like Vedelegate, to give Rw users with the maximum possible gm node: 1 discourages users from purchasing GM 2 Nullify the only benefit x nodes received after believing and holding x nodes for years!

1 Like
9

I agree with the above, Dapps like Vedelegate should not be allowed to vote with higher tier GM NFT’s than the person they are voting for and only for that person.

If the NFT’s want to have more function they should be linked to each wallet and give a bonus for each action the perform. If not before every Dapp with have their own NFT that gets you more rewards than upgrading the vebetterDAO NFT’s.

Another thing what makes a x-node and different than a economic node? They are stuck holding their tokens and if they go below a certain level they lose it forever. With economic you can come and go as you please. I would like some clear guidance from the foundation as to why someone would want to have an xnode over an economic node.

The foundation kept saying they didn’t whales to be able to control the VebetterDAO but ST3PR is allowing that with people getting 1100% rewards.

1 Like
10

I know we won’t get an response from the foundation about what makes a x-node special. They know they got their use out of them it served the purpose at the time to lock up VET.

They don’t want to come out and say there is no need to have them around anymore but are hoping they they eventually die off so they aren’t asked for additional benefits.

1 Like
11

I am going to attempt to further clarify issue. The first point is if the foundation even intended pooling of the GM NFT system in this manner when they designed it and put it in the whitepaper. I’m hoping @vineet-codes will chime in. If not then a proposal to change it should be created with their support. It breaks the whole design of the GM NFT system by allowing 1 user to distribute the highest tier multiplier to regular users that were not intended to receive it per the whitepaper. This has multiple problems:

  1. It dilutes the reward pool for those that have the higher tier GM NFT (x-nodes and those that have upgraded correctly)
  2. It negates a benefit that the foundation created for x-nodes
  3. It disincentivizes users from upgrading their GM NFT to receive the multiplier because they can get it from VeDelegate without doing so. This is preventing higher tiers of the GM NFT from being released because the foundation has stated they want the number of regular users that upgrade to match those given to x-nodes but this is unlikely to happen with pooling.
  4. Since VeDelegate is rewarding users with a multiplier they wouldn’t otherwise receive, they are essentially buying votes for the weekly allocation and taking VOT3 from dApps that are rewarding users for performing sustainable actions as the DAO intended. This not only dilutes the B3TR from the reward pool for GM nft holders, but also dilutes the B3TR from the weekly allocation for the dApps.
  5. If higher tier GM NFT’s were to be released this would just further break the system as they would obtain the highest tier and offer it to everyone completely diluting the pool, therefore negating the benefit for x-nodes and regular users that obtained the benefit at anything lesser than the highest tier, which essentially forces everyone to either upgrade to the highest tier (which wouldn’t make senses financially) or use VeDelegate and pay them a 10% fee which I’m doubtful was the intent of the system design.
  6. VeDelegate is not only keeping 50% of the weekly allocation pool received from buying votes by using the GM NFT in this manner, they are also taking a 10% cut from the rewards pool from users that wouldn’t receive it according to the whitepaper.
  7. It creates additional risk for users if there were to be a security incident by staking the tokens on VeDeleGate and not holding them in the Vechain wallet

While I understand that this issue of pooling and use of the GM NFT in this manner hasn’t explicitly been clarified previously, the question is if this was thought of by the foundation previously and should it be allowed now that everyone can see the implications of it being used in this manner. IMO it breaks the system design, is not good for the DAO, and the use of the GM NFT in this manner by any dApp should not be allowed.

2 Likes
12

Good discussion thread.

The incentive mechanism for higher-level GMs has faced challenges ever since the community voted to shift from quadratic to linear rewards. This change was a deviation from the original intent of the system’s design.

The Foundation will soon release a communication regarding higher-level unlocks, but it’s important to note that this will likely further amplify the issues with the current incentive structure. So in a sense, its not really a solution to solve the issue at hand.

Also, I kinda disagree with the previous comments that foundation doesn’t values X-nodes. Among many other things, see the new tokenomics of vechain that places x-nodes at the centre of it.

As DAO token holders, X-Node community members, and the DAO tech team, it’s crucial that we come together to address and resolve this incentive engineering problem. We’re open to hearing constructive solutions, proposals from the community, and I’m happy to offer my expertise in working toward a viable path forward. Let’s collaborate to ensure the system benefits everyone fairly.

Good time to utilise the power of DAO construct.

1 Like
13

So what I am gathering is that you are ok with the way VeDelegate is using one NFT and providing rewards to anyone that will pay

1 Like
14

that is wrong. i never said that. thanks

1 Like
15

I must be missing where you said that it isn’t the intention of the DAO to be ran that way.

16

@vineet-codes Do you have any ideas for possible engineering solutions to this problem? I would love to hear from your perspective some possible things that can be done to dis-incentivize pooling, at least more so than it is currently to do so.

I feel like it is a problem that is hard to solve because people will usually find workarounds (just like bot attacks/Sybil etc.) but I feel there could be a solution that would help mitigate the current reward outcomes.

17

@vineet-codes

You are correct that releasing higher tier nft’s will only amplify the issue, further dilute the pool, and negatively affect those not using VeDelegate. The solution to this is fairly simple and it’s to not allow VeBetterDao dApps to misuse the GM NFT system and allow any user to get a higher multiplier than they are entitled to in the VeWorld wallet. Pretty straightforward. If they do so then that dApp should not be allowed to participate in the weekly allocation. It’s this combination of getting extra rewards for the user from the multiplier and taking VOT3 from the weekly allocation that is allowing them to take a 10% cut, keep 50% of the weekly allocation, and still offer regular users higher rewards than they would get voting in the VeWorld app themselves which essentially buys votes by misusing the multiplier.

This creates an unfair advantage for dApps that can’t compete with this model and reduces their share of tokens received to reward users for sustainable actions as the DAO intended, rather than rewarding them for doing essentially nothing.

Also, If the new Vechain tokenomics APY is tiered and yields a larger percentage for x-node/eco node tiers and locking up more VET, something like VeDelegate will pool it and offer it to all the regular users and take a cut like the GM NFT system and break that system as well if a solution isn’t decided and implemented.

2 Likes
18

multiplier reward cap per NFT + Tiered diminishing returns could work. need to think it through though.

2 Likes
19

naah i gave that example to say importance of xnodes from foundation pov. no such issue there. its a different topic altogether.

20

I also post in here has x node holder.

I keep it short as most was already mentioned.

Main points for me:
-) release all GM NFT tiers up to at least the highest x node, even if it requires going back to quadratic voting rewards

-) limit the veDelegate pooling approach. I understand not enough about how pooling works to suggest a solution but it feels as veDelegate first value proposition was to provide voting automation for the lazy. But this has evolved now into providing automatically the most rewards at the highest level because they can run a high GM NFT. Now writting about it - can you not make a limit on the highest possible GM NFT linked to a pooling wallet/contract?
This could be an option to limit reward multipliers on polling wallets/contracts.

2 Likes