🤝Cross-Chain Validator Groups

In the realm of Web3 and Proof-of-Stake ecosystems, validators often find themselves in a commoditized environment, where differentiation based on performance or reliability is minimal. This commoditization is a common characteristic across various blockchain networks, rendering validators virtually indistinguishable from their peers within their native ecosystems.

Consider, for instance, five distinct blockchains labeled A, B, C, D, and E. Within Blockchain A, validators A1 and A2 are largely indistinguishable due to this commoditization effect. However, a novel approach to this issue could involve the formation of cross-blockchain validator groups.

These groups could be established through a tokenization mechanism. In this scheme, a proprietary token would be "mined" by validators from multiple networks by contributing revenue to a shared underlying protocol. The utility of this token would be its ability to be burned in exchange for enhanced staking rewards, effectively serving as a mechanism for discounted commission rates.

For example, a group comprising validators A1, B1, C1, D1, and E1 could mine and utilize a token named "Alpha." Conversely, another group, "Beta," could consist of validators A2, B2, and C2. In this configuration, staking with A1 would offer delegators exposure to blockchains D and E, a benefit not available when staking with A2.

This approach not only allows for differentiation among validators within the same blockchain but also provides additional value to delegators by offering exposure to multiple blockchains through a single staking decision. The three problems causing centralized stake are therefore solved by this approach as follows:

Economic Rationality

1. Current Challenge: Delegators are economically rational and will typically stake their assets with validators that offer the best returns, which often means established validators with a proven track record.

2. Solution: The introduction of a proprietary token adds an extra layer of economic incentive. By staking with a validator in a cross-blockchain group, delegators can earn this token, which can be burned for additional staking rewards or other benefits.

3. Outcome: This creates a new economic rationale for delegators to consider smaller or newer validators that are part of these cross-blockchain groups, thereby leveling the playing field.

Lack of Differentiation

1. Current Challenge: Validators within a single blockchain ecosystem are often indistinguishable in terms of performance and reliability.

2. Solution: Validators in a cross-blockchain group offer a unique value proposition: exposure to multiple blockchains. This is something that a validator operating on a single blockchain cannot offer.

3. Outcome: Validators can differentiate themselves based on the unique combination of blockchains they offer exposure to, making them more attractive to delegators seeking diversification.

Network Effects

1. Current Challenge: Established validators benefit from network effects, as more stake means better rewards, which in turn attracts even more stake.

2. Solution: By forming cross-blockchain groups, smaller validators can collectively offer something that individual large validators cannot—diversification across multiple blockchains.

3. Outcome: This could disrupt the existing network effects that benefit large, established validators, as delegators now have a compelling reason to consider staking with smaller validators in these cross-blockchain groups.

By addressing these challenges, this approach could significantly alter the dynamics of validator competition and delegator behavior, making the Web3 ecosystem more equitable and robust.