Know your validator: what type of validator are you staking with?
To many the role of a validator seems arcane and shrouded in mystery. We aren’t magicians and the work itself isn’t particularly complicated. Running a validator is quite simple but running a validator node with high availability can be complex.
The primary job of a validator is to participate in network consensus. For a block to be finalized sixty seven percent of the network’s validators must agree that it is valid. This is done by running a server with the blockchain software on it. Sounds simple enough, right? Not all can manage to do this task well, but many successful validators do much more.
Most validators fall within a handful of categories and often that category dictates how far beyond the basics they provide.
· Exchange validators are generally concerned only with generating profit. Most do not participate in any meaningful manner and are solely focused on extracting wealth. It’s often detrimental for a chain when an exchange becomes involved because they have an inordinate amount of power and can unilaterally affect the speed of a chain if their node has stopped working. It’s rare that they participate in governance, but when they do it is almost always the deciding factor and governance proposals pass or fail based solely on their vote.
· Foundation validators are usually found only on less established chains, have a majority stake, and are a warning sign that the network is either not healthy or that it is intended to be controlled by that entity. This is often controlled by the group that launched the chain and signals a lack of faith in decentralization or that the chain is decentralized in name only (DINO.)
· White-label validators are where an established validator operates nodes for another organization. This is often a company with substantial holdings looking to maximize their staking income. They might be an investment fund, exchange, or just a whale. Many organizations find that it’s hard to reliably operate a validator and outsource the work. This often leads to a disconnect between community interest with most white label validators being no more engaged than an exchange validator. A good example of a white-label validator is Bison Trails, now known as Coinbase cloud. How can you tell a white-label validator apart from the others? Often the best indicator is their downtime correlates to AWS outages.
· Brand-name validators are usually a value-add for an existing company, such as a wallet where they can extract additional revenue from a chain and leverage brand recognition, or present as the primary choice in their wallet as the default choice for staking tokens. Most brand-name validators have a reasonable level of governance participation and offer extensive value-added services to the community. However, the size of their operations often leaves the day-to-day operational details in the hands of less experienced staff and their reliability can sometimes suffer as a result.
· Corporate validators are organizations that are focused on running validators on as many chains as possible, usually have a large team led by a handful of experts and suffer from the same liabilities of brand-name validators in that they have staffing and experience issues.
· Developer validators are run by the (individual) core team members of a chain, and often have substantial stakes from token grants. They are usually very active in governance and care deeply about the operation of the chain.
· Independent validators are the backbone of most chains. These are small teams or individuals that specialize in running nodes. Many have many years of experience in development, operations, and/or security roles and have transitioned to working full-time in blockchain. They are normally very active in governance and very engaged with the community because their very survival depends upon community support. They often supply many value-add services attempting to differentiate themselves.
· Noob validators are just starting out, and often run nodes on PCs in their basements/bedroom/storage closet with low uptime, misconfigured setups, and struggle with availability. It’s the author’s opinion that it’s very healthy to help these validators. Every one of us started out here, and these noobs are how we keep feeding more hungry, independent validators into the system. Many are NGMI, but those that do are usually top notch and an asset to the chains on which they validate.
· Vampire validators are the least fortunate asset for the chains they participate in but tend to gain quite a bit of stake. These validators intentionally operate at a loss, use 0% commission, promises of slashing insurance that they can’t back up, never-fulfilled giveaways/airdrops and other gimmicks to get delegations. It’s very tempting for independent validators to take this route and as a result it’s a mixed set of results where many good validators that offer much to the network find themselves using these tactics to gain an advantage. Many however do not have honest intent and run low-quality operations in a desperate bid to grab profits that they do not deserve.
