The question of minimum profit margin for Nym nodes

Continually improving upon Nym token economics

Author: Nym

April 3, 20244 mins read

Continually improving upon Nym token economics

Updating the community on the minimum profit margin for Nym node operators.

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Last year, one of Nym’s core community members suggested a change to the Nym token economics: to set a minimum profit margin for Nym node operations. This would prevent a ‘race to the bottom’, whereby nodes competing for stake would lower their profit margin and costs to near 0 in an effort to attract stake. The proposal envisioned that a minimum profit margin would promote a healthy dynamic for operators, ensuring a minimum acceptable income for everyone.

This blogpost gives an update on the current state of this proposal and outlines a process for arriving at a decision. In short, there is currently a suggested minimum profit margin in the Nym wallet interface of 4% and maximum at 80%, as well as a minimum operator cost of 40NYM and max of 2000NYM. These are ‘nudges’ rather than dictates and can be bypassed in the CLI. As of yet no changes have been made on-chain.

What happened?

Following the community proposal in the early summer last year, a sentiment check was taken at the time with a majority of participants in favour. The proposal went to the core team for further discussion, but was not established as a priority at the time as there was little actual operational costs and network load and no clear evidence that a race to the bottom was occurring.

In the late summer a new behaviour was discovered: operators were setting very low profit margins and operator costs to attract stake and then radically increasing their operator costs shortly after. This led to renewed discussions by the core team leading to a proposal to set a minimum profit margin at 7% and a maximum operator costs at 2000 NYM.

This change was implemented on the wallet interface only, with on-chain changes to follow. With the latest release, min PM was lowered to 4% min and 80% max, and operator costs at min 40 NYM and max 2000 NYM.

This is a limitation on the wallet front end only and can be changed manually via the CLI.

What now?

The wallet interface changes are nudging operators to set a healthy PM and reasonable OC. This change was set to be implemented on-chain also to ensure equal rules for all, but has since been met with some disagreement among community members. This calls for a deeper discussion and potentially a vote if consensus cannot be reached on the change.

In the meantime, the change to the front end has the effect of potentially creating an uneven playing field for new operators: new joiners will be encouraged to set the min PM and max OC while older node operators can continue with their existing settings.

Countering this potentially unfair advantage, Nym Core team are running an official delegations program for high quality operators, giving them a leg up on stake. This has the effect of levelling out the playing field for honest, high quality operators.

What next?

Taking all these factors into consideration, there is no urgent need to make on-chain changes to profit margin and operator costs. Further discussions on min PM and max OC are encouraged in the Node Operator channel and during the regular operator AMAs (next one on next Tuesday 9th of April).

Nym core will also be hosting a larger Nym node operator Town Hall towards the end of April to present the Nym Gateway reward scheme following Smoosh and projections for the NymVPN.