(Any views expressed in the below are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.)
Feeling a bit clueless about the delegating game? Don’t worry, our meme CEO has got your back. He’s taking time away from his imaginary obligations to drop some hot tips. So c’mon man! Stop rolling that 84-sided dice. It’s time to do your Delegator Due Diligence. Let’s get into it!
(This article is a follow-up to the previous one for governance. See Zenon Network: An Introduction to Governance)
Disclaimer: This article is not financial advice and may contain speculation.
1. “Knowing yourself is the beginning of all wisdom.” — Aristotle
What kind of delegator are you? Are you a yield-chaser who only cares about slurping more coins? Are you a based-alien who only cares about supporting pillars delivering value for the ecosystem? Or are you a hybrid-citizen who cares about both?
If you want to be a hybrid-citizen, consider creating multiple addresses and splitting your ZNN across them. This way you can delegate to 2 or more pillars as you please, allowing you to find a good balance between chasing yield and supporting key players.
2. “But the worst enemy you can meet will always be yourself; you lie in wait for yourself in caves and forests.” — Nietzsche
Yield-chasers are solely concerned with delegating to pillars that give them the most amount of ZNN in return. They want to fill their bags, even if it means delegating to the devil. But what is the point in filling your bags with coins that are worthless? You’re shooting yourself in the foot. You may be better off trying to make sure that the coins going into your bag have value, and that means supporting pillars that are good for the ecosystem.
This doesn’t mean you can’t chase any yield. But in the words of our meme Secretary of Defense: “Switching your delegation just to chase an extra 2% APY is pure cringe!”
3. “Past behaviour is the most reliable predictor of future behaviour.” — Livingston
An important and regular destination for any active delegator is Zenon Tools, a community project which relays on-chain data regarding many things, especially for the Pillars. The stats give a good insight into the past and present across a variety of metrics. These metrics displayed on the main page are subject to changes so keep an eye on them!
Pillars which have behaved well in the past have surely earned our trust, and our delegation weight. If they consistently produce momentums, vote regularly, engage in discussions on the forum from time to time, share their rewards, are active in the ecosystem in other ways — these are obviously good candidates for your support.
That said, I don’t want to condemn anyone who has been slack or underperforming in the past. I absolutely believe that change is possible, and predict that as the network matures some people will grow too and decide that they want to do better than they have previously been doing. Obviously they are going to have a tougher road back to a good reputation, but my point is that the road is there, they need only to take their first step.
4. “Nothing is enough for the man to whom enough is too little.” — Epicurus
Real-time APY is useful for yield-chasers who regularly switch up their delegations. But people could decrease their reward-sharing parameters suddenly, or maybe a load of weight is added overnight which dilutes the rewards. For this reason, it makes sense to also consider their historic APY over the past year or their lifetime. A high historic yield is a good sign of someone who keeps their reward-sharing parameters relatively constant.
For anyone who wants to do a back-of-the-napkin calculation for the yield of a pillar, to verify it for themselves — for two pillars of the same delegation share %, look at their weight and their momentum share %. You want a high momentum share % relative to their weight; so perhaps go M/weight and compare that ratio between pillars. But pillars outside of the top 30 receive momentums far less often, so there’s that to consider as well.
5. “Someone struggled for your right to vote. Use it.” — Anthony
The current voting metric tells you the percentage of proposals they have voted on. A number less than 100% may be explained by there being a spam of non-serious proposals, or perhaps by the time they logged on to vote the proposal had already been passed or rejected by the pillars.
A pillar which has never voted or almost has never voted though? That should be a red flag; it signals a lack of interest and commitment to the network, and I’d be hesitant about allocating them greater capital with your delegation support.
The voting number is still only a guide; to do your full due diligence you’d be well-advised to click on specific pillars. Look over their entire voting history to see how they vote, if it seems sensible and agreeable to you.
6. “Great power involves great responsibility.” — Roosevelt
A pillar’s weight is how much ZNN has been delegated to them. It is a metric for the pillar’s level of community support. In saying that, it is an imperfect reflection of a pillar’s community support because the person running it can delegate to themselves, and they can do this from known or unknown addresses. Also possible is a lone whale delegates to them, contrary to what the majority wants. But with no alternative, this remains the best metric we have for community support.
For now, the top-30 system means that the top 30 by weight receive more momentums and thus more rewards. Therefore, a key consideration for delegators is to make sure that the pillars they are supporting stay in the top 30. Alternatively, they want to make sure that a pillar they are supporting (which is not currently in the top 30) stays close to that cut-off point, in the hopes that it will one day be pushed over the line.
In the future a more linear system is possible, where more weight means more momentums and more rewards. This would incentivize every pillar to vie for support. Either way, a pillar’s weight can be thought of as its socially assigned value. Therefore, validators mint ZNN in proportion to their socially assigned value.
7. “Idleness is the dead sea that swallows all virtues.” — Franklin
A metric not so easily quantified is a pillar’s activity within the ecosystem. Say what brah? Fine I’ll keep it real: Aside from consistently voting and producing momentums, is the pillar doing good stuff for Zenon? If it is, that should be a significant factor in your decision as a delegator.
Not that we want to be too biased here, as it’s intended to be a neutral article, but for the sake of clarity we should go over a real example — one that is legitimate and fair at the time of writing. The Ignition pillar is run by our meme Junior Barista George, an outstanding community member who has done a lot of good things and has more planned for the future. Starting the Zenon Builders tg chat, starting the NoM and Chill podcast, the Go SDK, significant contributor for both the ZIP framework and the Zenon Deck, his progress for Bitcoin Atomic Swaps using HTLC/PTLC … and we hope there’s more to come from this heavyweight community dev.
While it’s true that Zenon is leaderless in the sense that no one has authority over the network, there are still individuals and groups who people naturally look up to, or maybe they just respect what they say and do. Like I said earlier, it’s a bit hard to find this out from Zenon Tools, unless they include a “why delegate to me” link for each pillar. Even if they did include such a thing, you’d still need to verify their claims elsewhere. So check out discord, telegram, the forum, twitter … and ask around. Find out who is putting the extra effort into Zenon, and factor that into your decision as a delegator.
8. The Limiting Reagent
If a reaction requires 1 unit of A and 2 units of B, but you happen to have 1 unit of A and 4 units of B — A is the limiting reagent. It doesn’t matter if you keep adding more of B, you’re not going to get more of a reaction or more final product because you’re limited by A.
In the game of Pillar valuations, Momentums are the limiting reagent.
This is because Momentums are crucial to the security and functioning of the network itself. With regards to how often a pillar votes, how generously they share rewards, how productive they are in the ecosystem — none of that matters if the pillar is not producing momentums or they are very sketchy at producing momentums. A pillar poor at producing momentums can be considered a liability to network security and survival, and for many this would taint their brand.
That said, with true decentralisation we do have a big variety of people around the world running validators. It’s inevitable that some will run into trouble from time to time. If it’s only minor trouble and it rarely happens, then you can make a case for being understanding of this. Possibly there was a technical problem, or the crashed price and no liquidity making it difficult to afford their expensive VPS … these things happen. Sometimes the pillar will even announce a period of increased rewards to apologize to their delegators.
Useful metrics are recent momentums produced as well as historic momentums produced. Even if a pillar is producing well now, what if its 1-year or lifetime average is significantly lower than others? Why support a pillar which is a liability to the network? Or if you want to delegate then forget about Zenon for a while, go on a holiday, how will you feel if you come back and find that their pillar was down the whole time or they dropped their rewards to 0/0? It could be a good idea to sacrifice a couple of yield % points and go with a pillar that has safety and reliability. The phrases better the devil you know and if it ain’t broke, don’t fix it come to mind.
There we have it, we have discussed 8 tips for delegators. I hope this helps some ZNNAliens out with their decision-making. Bear in mind that this is just advice — feel free to discuss, disagree or disregard anything that doesn’t resonate with you. We are still early and it will be both fascinating and awe-inspiring to see how we evolve. Delegate wisely to supercharge that evolution! Until next time …
Take care and WAGMI!