Staking networks are maturing and so are the validators who underpin them. For these networks to reach their full potential, a variety of validator voices are needed.
However, due to the dynamics of validator economics, the validator set's voice is largely homogenous. Dissenting voices are largely absent. Those that dare speak out against the tide are quickly shouted down or otherwise ostracized. A self-reinforcing echo chamber results, one in which issues of inequality and centralized power manifest and become self-reinforcing. Compounding staking economics add fuel to the fire.
Inequality and centralized power, left unchecked or even encouraged, risk replacing the current economic system not with a more equitable, fair and inclusive alternative. Instead, these forces simply replace one centralized power structure with another.
The Lack of Dissent
Dissenting validator voices, otherwise introduced as activist validators, which I first wrote about in "The Rise of the Activist Validator" in the initial days of early staking networks, can act as a bulwark against these tides. When I wrote that post a few years ago, I recognized the need for a healthy tension between a network and its validator set. I called on validators to take an active role in governing the networks they support. I made the case for an active role to include not simply "jumping when the core team or foundation said jump" but to also think independently and push back when necessary.
Because in those early years I recognized a pattern of behavior in which validators jumped when networks said jump. Validator behaved this way beause they were afraid to bite the hands that fed and would continue to feed them.
As an aside, I first truly became aware of this behavorial pattern shortly after Terra's mainnet launch. Consequently, we took our infrastructure down at that time. It was the first network we stopped operating on in our early operating days.
Institutional-focused validators didn't and still don't want to upset their big bag clients. Retail-focused validators didn't and don't want to rock the boat either, at risk of losing delegations from Foundations or retail investors.
Not much has changed since then. In fact, given compounding staking economics and the increasing dominance of institutional money and the validators that serve it, this behavior has become more, not less, entrenched.
The Unbitten Feeding Hand
A few years ago I was feeling optimistic. My hope was that validators would form a first line of defense to defend crypto's core values against the tide of institutional, VC and other profit-only motivated entrants to the crypto, a.k.a. "web3" space. I held particular hope for Ethereum based on my early experience working within that community.
Today I feel less optimistic. As the years pass it's feeling harder and harder to find and connect with validators who are willing to stand up and support crypto's core values. Very few, if any, are willing to push back against or even lightly challenge direction provided by core teams and Foundations.
Larger institutional-focused validator companies and exchanges dominate the top 10 of stake-ranked validator lists. While they appear in these lists, they're nowhere to be found in the chats, making contributions or generally adding value to the networks they support. They're extracting much and contributing very little, if anything, to the networks they support.
These validators are net extractors whose investors and by proxy management discourage them from participating in any activity that doesn't contribute directly to the company's bottom line. They're far from activists, because they don't participate within the communities of the networks they dominate.
Even if they were to participate, it's unlikely they would go against the grain. Doing so would risk alienating their big bag clients and the networks they often invest in during early insider-deals. These deals, i.e. Foundations requiring validators buy their spot in active validator sets are becoming more prevalent as time goes on.
On the other hand, independent validator operators are hanging on to survive. There are a few notable exceptions on each network that do quite well. However, the majority of independent operators operate under the radar, have difficulty attracting stake and become increasingly reliant on foundation delegations.
This creates a dynamic where validators are expected to become cheerleaders for the networks they hope to support. For example, validators, when participating in incentivized testnets, are increasingly being asked to post supportive messages on social media, to increase the chance they are anointed with enough Foundation stake to operate in the active validator set when mainnet eventually arrives.
It should also be said here that these incentivized testnets, which used to be mostly merit-based, have become dominated by backroom deals and opaque criteria, inconsistently measured, reported on and rewarded. These conditions often lead to a situation where a subset of pre-selected validators work in a private chat channel toward launching mainnet, while the others, who continue to have a mainnet slot carrot dangled in front of them and still believe they have a shot at operating a validator at genesis, slug it out publicly, not realizing the odds are stacked against them. Foundations go along for the ride, implicitly and increasing explicitly, creating and fostering these conditions for their benefit.
It's also become common for Foundations to recruit a small subset of these pre-selected validators to liaison between the Foundation and validator community, representing the Foundation's interest, to receive a mostly guaranteed validator set slot and a higher Foundation delegation at launch. These validators often rally their peers in service of Foundation goals, while actively discouraging dissenting validator voices.
Given these conditions, the last thing an independent operator wants to do is go against the grain and say anything that might even vaguely be construed as not 110% positive about a network, its foundation and community. Doing so becomes a direct threat to validators' livelihood.
Don't Rock the Boat
To recap, the larger validator companies don't participate in network communities and would be afraid to rock the boat if they did. Independent operators, on the other side of the same hand, are afraid to rock the boat, as doing so becomes an existential risk.
Those few that do dare to rock the boat, even slightly, are quickly shouted down in chats and otherwise ostracized within the community. Attempts at self-defense are overwhelmed by those looking to further secure their spot with in the validator set by dismissing any dissension through varying degrees of aggression.
So What?
This lack of dissenting voices within validator communities create a self-reinforcing, good vibes only, echo chamber. What's missing is a system of checks and balances which is required to keep founder, core team and Foundation power in check.
Without this balance of power, the promise of progressive decentralization, a.k.a. we'll decentralize "later", never happens. One centralized plutocracy gets replaced by another.
The dynamic of validator favoritism, i.e. giving those that blindly support a network implicitly and explicitly, also exacerbates the rich get richer problem. Once mainnet launches with an active validator set, increasingly shaped by institutional and foundation delegations, the possibility of those not in the active set and without institutional connections entering the set are very limited. It becomes nearly impossible to break-into an active set after a network's been running for even 3-6 months. Financial power becomes too entrenched and compounding interest makes it imppossible for later entrants to catch-up.
Chainflow was boostrapped through incentivized testnet participation. We started with very, very little capital. Today we've been able to grow into a sustainable operation, enabling our team to do fulfilling work that aligns with their humanity.
We've maintained our independence through the years, by doing what we can to try out best to uphold crypto's core values. Admittedly, this may be a "bad" business decision, given the dynamics laid out above.
Yet this was possible because incentivized testnets, even a few years ago, were much more egalitarian than they are today. So it's no wonder that with the odds already stacked against them, independent operators are afraid to rock the boat.
Combining this independent validator reluctance with larger validator companies and exchanges unwillingness to participate or alienate their big-bag customers, networks aren't getting the benefit of healthy, constructive dialogue and operate within self-reinforcing echo chambers. As a result the best ideas are less likely to surface and centralized control and power is more likely to grow out of control.
Activist Validators for Stronger and More Resilient Networks
Today, the need for activist validators to push back on these trends is greater than ever, at least for networks who want to truly thrive long past their vested token lockup expiration dates. The questions are who will step up, what incentives will be put in place (or otherwise occur) to encourage them to do so and what level of accumulated capital will be required to cause them to be heard?
Because only then will these validators be enabled to exercise enough power to facilitate real and healthy debate, leading toward creating more resilient networks and communities, centered on a truly decentralized and censorship resistant future.