The minimum stake size is a critical yet inevitably imperfect network parameter – in simple terms, it is a trade-off between (1) economic accessibility to as broad a range of prospective node operators as possible, versus (2) ensuring the collateral locked is valuable enough to robustly incentivize/disincentivize staker behavior via mechanisms built on top – slashing, (withholding) rewards, etc.
In later versions of the Threshold network, individual applications (PRE, tBTCv2, Random Beacon, PRE-DKG) will have distinctive minimum stakes – along with splitting total issuance, this is a useful protocol lever available to the Threshold Council for distributing node operators across the applications, in a way that is most expedient to the network as a whole. For example, applications that require as many genuinely independent full nodes as possible might require a smaller minimum stake, but receive a larger share of the total quarterly issuance.
At genesis, the Threshold Council will determine the minimum stake parameter. However, this forum post is an opportunity to provide feedback ahead of their first meeting and deliberation (tentatively scheduled for w/c January 24th).
This proposal recommends a minimum stake of 40,000 T.
The thinking behind this figure:
- The primary principle is that no legacy NuCypher or Keep Staker should be left behind – i.e. that the minimum stake on Threshold should be equal to or lower than the previous minimum stakes on both networks. NuCypher launched with a minimum stake of 15,000 NU, which did not change. Indeed, many NU stakes were precisely 15,000. Keep’s minimum stake dropped over time according to a schedule – a straightforward <query> reveals that the smallest aggregate stake is 30,000 KEEP. Given the comparable USD value of NU and KEEP, we can conclude that NuCypher’s minimum stake is currently ~half that of Keep’s, and is therefore the lower common denominator for Threshold parametrization. According to the static NU-T token conversion <ratio>, this is equivalent to 48,888.64 T.
The secondary principle is that a reasonable proportion of those who have either wrapped into T (from NU or KEEP), or bought T on Uniswap, would be able to afford to participate as node operators. A cursory glance at on-chain events reveal that, roughly 92% and 45% of addresses who wrapped into T, and traded into T, respectively, would be able to commence staking if the minimum stake size were 40,000 T (calculated on a per-transaction basis).
Minimizing and stabilizing fluctuations in the break-even stake size is more important than finding the perfect minimum stake parameter. The first graph in this <analysis> demonstrates how the break-even stake size varied for NuCypher stakers between May & November 2021 – it was often far higher than the invariant of 15,000 NU, and rose and fell unpredictably. This third principle underpins the forthcoming Threshold <reward mechanism.>