Increasing Delegation Limits for Small Validators to Enhance Income and Decentralization

[mahofmahof]

Problem

According to the Avalanche whitepaper, "The maximum weight of a validator (their own stake + stake delegated to them) is the minimum of 3 million AVAX and 5 times the amount the validator staked. For example, if you staked 2,000 AVAX to become a validator, only 8000 AVAX can be delegated to your node total (not per delegator)." This rule limits small validators with 2,000 AVAX stake to accepting only 8,000 AVAX in delegation. With a typical commission rate of 5%, this results in low annual income (e.g., approximately X AVAX per year, depending on network rewards). This low income discourages small validators, favoring larger players and reducing network decentralization.
Instead of starting validation small validators delegate their avax and validator count is going down

Proposed Solution

I propose modifying the delegation limit to allow small validators to accept more delegated stake. For example:

Current Rule: max_weight = min(3,000,000 AVAX, 5 * validator_stake), where max_delegation = max_weight - validator_stake. For 2,000 AVAX stake, max_delegation = 8,000 AVAX.

Proposed Rule: Increase the multiplier to 40x (or another value), so max_weight = min(3,000,000 AVAX, 40 * validator_stake). For 2,000 AVAX stake, this would allow up to 78,000 AVAX in delegation (total weight = 80,000 AVAX).
Alternatively, a tiered system could be considered (e.g., 40x for validators with <5,000 AVAX stake, 5x for larger stakes).

Benefits
Increased Income: Small validators could earn significantly more through higher delegation, making validation sustainable.

Enhanced Decentralization: Encouraging more small validators strengthens the network’s resilience and diversity.

Broader Staking Participation: Higher limits incentivize more AVAX holders to delegate, increasing overall staked AVAX and network security.

Potential Risks

Validator Stability: Larger delegations could strain small validators’ infrastructure, increasing crash risks. This can be mitigated by maintaining minimum hardware requirements.

Network Performance: Increased delegation could impact P-Chain performance, which needs testing.

Questions for Discussion

What should the new delegation multiplier be? (e.g., 40x, 20x, or a tiered approach?)

How can we balance increased limits with network stability and security?

Are there other mechanisms to support small validators ?

Should the 3,000,000 AVAX cap be adjusted alongside the multiplier?

I’d love to hear the community’s feedback! Would you support increasing delegation limits for small validators? Any suggestions to refine this idea?

[burcubaydar]

I strongly agree with you. Thanks for explaining decreasing number of validators and its solution in detail.

[minivipers]

n the current system, a fixed delegation multiplier is applied. However, this limits the income of small validators and negatively impacts decentralization.
Instead, a dynamic delegation multiplier based on a validator’s performance history could be introduced. For example:
Validators with fewer validations completed (e.g., <10) would have a lower multiplier (5x–10x).
Validators with 10, 20, or more successful validation periods could gradually receive a higher multiplier (20x–40x).
Proven validators earn more delegation and achieve sustainable income, new validators still face an entry barrier, but as they demonstrate reliability and consistency, they gain greater support and Network security and decentralization improve by incentivizing long-term and stable node operators.

[Fatihk35]

I support your proposals for stronger decentralization. Thank you.

[alperdemiral]

Your suggestions are very appropriate and should be taken into consideration.

[yasibeyli]

I support the proposal as the current fee structure does not pay for the infrastructure cost needed for validation, especially for small number of avax stakes. I see the risk of degreasing number of small stake validators and a threat for the decentralizaton of the network.

Below questions should also be studied, though:
-Is the staked avax tvl saturated? Would changing the structure create more avax stakes or just redistribute already saturated tvl. (I think, there is a risk that this might be the case, so what could be done to create more avax staked?)
-Is there an impact on avalance consensus algorithm, if the solution is implemented. (I guess not)

[zybk70]

The solution to the problem depends on providing a support and incentive model that will increase small validators. I don't think increasing the validator limit alone will provide any practical benefit. Statistically, a large portion of small validators already fail to meet their current limits.

Therefore, my suggestion, as Kârūn The Rich noted is to focus on solutions that bring the Gini coefficient closer to 0. One of the most important factors in decentralized networks is the Gini coefficient, a measure of statistical distribution intended to represent income inequality, wealth inequality, or consumption inequality within a nation or social group.

Today, the vast majority of the total TVL staked by Avalanche validators, approximately 75%, is generated by larger validators. Therefore, their staking revenue is higher. My proposal is to gradually implement a tax on larger validators, including the foundation, and distribute this tax as an incentive and support to smaller validators downstream.

[giuseppefrancaviglia]

For sure it is more encouraging for small validators to participate in the network if they can receive more delegations. Probably some assumptions related to the original model will be invalidated, and a new adaptive formula should be evaluated in order to do not have thousands of validators running on a toaster machine, decreasing the network performance?

Generally speaking, I agree that an incentive for small validators can be beneficial for the network.

[iJaack]

currently, 40 out of 855 validators have less than good uptime on Avalanche. That's 4.5% of the network. I'd assume it's a right number, and there are safe measures to make sure that delegators delegate to validators that have historical and current good uptime.

[jzu]

I'm all for incentivizing small validators in order to attract more of them. But something must be very clear: unless they come in droves, and I mean a really massive onboarding, they won't change anything to the decentralization of the network. 1000 new validators at 2000 avax? That's not even one single whale at 3M avax. More whales are needed, too, in order to provide a counter power. Simply put, more validators are needed regardless of their size.