discussion: how can we minimize unintentional stake centralization in top validators?

[AlpinYukseloglu]

Background

A whale recently delegated a large amount of OSMO to a top validator apparently, causing our Nakomoto coefficient to drop from 15 to 6: https://twitter.com/blockpane/status/1543699870292365313

While we cannot feasibly stop stake centralization if it's intentional, I wonder if it would make sense for us to set up guardrails to at least prevent unintentional stake centralization. I've listed a few ideas below, but I'm sure there are many other ways to approach this problem, so let's discuss!

Suggested Designs

Idea 1: Keplr UX changes

Main idea: change the default delegation UX from a single-select validator menu to a multi-select one, potentially even adding a minimum (e.g. must pick at least 3 validators to delegate to)

Pros:

• Doesn't directly limit validators/incentivize weird behavior
• Nudges retail stake to be split across multiple validators, reducing risk of unintentional retail stake centralization

Cons:

• Could add friction to staking UX
• People might still end up just picking the top 5-6 validators which wouldn't help much (could address this by requiring at least one to be not top 10, but that would just add even more friction)

Idea 2: Cap OSMO that can be delegated in a single tx

Main idea: set some high cap (well above average amount for a delegation tx) for how much OSMO can be delegated to a single validator in one transaction

Pros:

• Nudges whales to delegate to more than one validator
• Makes whales hyper-conscious of how much they are centralizing their stake (importantly, even for whales who we don't know/can't reach directly)

Cons:

• Can be pretty easily avoided with scripts if it gets annoying
• Adds a decent bit of friction for a soft nudge
• Can make paperwork unbearable for institutional holders (e.g. large investors)
• If the cap is set too low, it can kill staking UX for whales

Idea 3: Relative caps for validator delegations

Main idea: cap the % of total staked OSMO that a single validator can have delegated to it
(note: not my favorite, just including since we've discussed this before)

Pros:

• Most top validators are companies with unique brands, so it's less feasible for them to sybil to get past this
• Would prevent the currently stake centralization momentum from getting out of hand in the short term

Cons:

• Weird implications if total OSMO staked goes down
• Might penalize validators a bit too much (i.e. they can't grow their stake past a certain point)
• Can lead to odd behavior where lesser known validator companies run multiple validators
• Risks making stake centralization a hidden issue that we can no longer track
• Some validators would likely already be at whatever cap we decide to set

[AlpinYukseloglu]

cc: @ValarDragon @alexanderbez