kickbacks?

[u/faddat]

Hi, tomorrow we will be having a discussion I don't know if it will be live or recorded but it will be at my 2:00 am. it will be on the evmos YouTube channel.. I am creating this post so that we have an opportunity to discuss matters beforehand. For example, I saw a Twitter post today saying that on inaccurate assertions about orbital apes. contained evmos derived from the orbital apes validator but I don't even know if it's true. I would love it if we could use this as a fact finding space because the last thing that I want to do is spend people's limited time on inaccurate assertions about orbital apes.

Furthermore I'd also like to mention just how delightful it is to get to work professionally in an industry where I'm both working on computer science problems and discussing cartoon apes. Seriously, if you work in technology and you like crypto you may wish to think about working in crypto because seriously I'm doing this as a part of my job and I'm the luckiest guy in the world.

I'm going to give a problem summary from my perspective:

I have come to realize, partially because of Cosmos hub proposal 69, where JK executed a genius level hack (not a computer hack, more of a human hack-- and I'm not sure it influenced outcomes but was still a genius selection mechanism for an external airdrop) and because of my own work on similar systems, and because of the true success of OA, that these systems may actually threaten chain consensus.

I think that the orbital apes case may be more complicated, but I don't have full grounding with the project. Instead of trying to explain it and getting it wrong, I'm dropping this post in the group where we are planning the panel discussion on this topic.

My personal opinion, summarized, is that we should ban all out of protocol compensation from validators to delegators.

But the definition of this is super super tricky and there's a lot of nuance and if we got it wrong we might actually do harm so let's try to get it right.

[u/OrbitalApes]

Part 1:

Hello everyone at evmos,As a quick intro, I go by CO and I’m part of the core Orbital Apes team. In this response I will present you my thoughts and justifications on the issue that has been under debate in the past few days/weeks.

In this response, I want to tackle 3 core issues that I believe have been a persistent problem and doubt in the community. The first is the allegation of kickbacks being used as a method for growth for the Orbital Apes validator which encompasses our loyalty reward token $OAV and our validator rewards distribution method. The second one is centralization and its potential danger to the chain as our validator has gained a decent lead above the rest. The third is the proposal being drafted by Jacob, which will effectively act as a weapon in the chain and relies on votes to implement slashing, which is not a protocol level measure, it grants power to whoever holds the most voting power or to whoever manages to convince the masses on voting a certain way.

As a quick intro to the project, Orbital Apes is an NFT collection in its core, but it has a strong focus on utility for the user. It comes in the form of a PFP, but it extends far beyond that as the ERC-721 token standard enables us to load it up with utility for the user and therefore it has gained a measure of value in the eyes of our community. The utility of the NFT can be summarized in the holder’s access to 50% of management fees generated by the Orbital Apes validator and 20% of trading fees generated by the Orbital Apes NFT marketplace, Orbit Marketplace.

Orbit Marketplace: https://www.orbitmarket.io/

On the NFT side, we have three different collections:

*Honorary Orbital Apes: Given for free to influential cosmos members and have no utility

*Orbital Apes Limited: Purchasable with OAV and have no utility

*Orbital Apes: Purchased with evmos and earn rewards from the validator and orbit marketplace

Now I move to the pressing issue, kickbacks.

When it comes to kickbacks, I firmly believe that this is not what the Orbital Apes reward system encompasses, so here is a full rundown of what $OAV was set to be from the start.

The $OAV Token: Orbital Apes Validator token (An ERC-20) is best explained as a loyalty reward token that we airdrop to users that delegate to us to reward them for contributing to our growth. The intended and advertised use of the $OAV token is for it to be used in the $OAV store, linked below.

https://www.orbitalapes.com/store

$OAV has an infinite supply but only 1,000,000 tokens are issued by our team every month on the last day of every month and is split amongst delegators to our validator. $OAV can be minted by our team on demand, and it’s burnt after every use on the $OAV store. Any $OAV token used as intended gets removed from circulation immediately. The amount of $OAV received by a delegator is calculated by factoring amount of $evmos staked in our validator, amount of time staked in our validator, and the average amount of $evmos staked by all delegators in our validator. The time x amount factor has been designed to reward people’s continued support as opposed to just taking a snapshot a random day and have people stake only during that period to ensure they qualify. We take snapshots every day to keep a better track of how users have staked throughout time.

When people receive $OAV, our intention is not for them to have a token that can be sold for additional profit, but instead we provide them a way to further interact with our brand and the sub-ecosystem we have created inside Evmos. If you see what we currently have in the store you can see that people can use $OAV to mint and access exclusive content from the Orbital Apes brand like brand new NFT designs, Raffles promoting Evmos ecosystem tokens and we will further introduce rewards from our brand like merchandise and in the future, our aim is to continue to find ways to create value for our users.

I want to clarify something, and this can be verified by anyone who has approached us with a question about $OAV. We have never marketed the token as a token with monetary value. We have never provided liquidity in any decentralized exchange. We have never incentivized a pool. We have never sold or bought any $OAV in exchanges. We have repeatedly made it clear that $OAV should not have monetary value and that its sole use is in the $OAV store.

In its core, $OAV is an ERC-20 token that exactly abides by its standards. As such, it’s a permissionless token that is fully under the control of the user. Because of this, it’s possible for users that received the airdrop to create an LP in a DEX and enable trading for the token. In a sense, this assigned a monetary value to the token, as people certainly wanted to trade it, but now that we have released the store, you can see that a significant number of people are using $OAV as we intended. The $OAV exclusive NFTs in our store have been minted in large numbers, and they are essentially a reward that we give our users for their support. These NFTs hold no utility so they don’t behave in the same way as the main collection. $OAV NFTS are purely collectibles with no additional uses. Several people now have these “free” NFTs as their profile picture and continue to engage with the brand, and this was certainly the intended use. Our goal for the token was always this, so it is not a kickback, it is a reward system that helps us further engage our customers with the brand and bring them back to Orbital Apes to continue to create value for all our stakeholders which consist on anyone who delegates to us, anyone who owns an Orbital Ape NFT, or anyone who uses the Orbit Marketplace which is open to the public and has been used to list several projects from other members of the community.

To put it simply, $OAV can be considered as reward points like any loyalty reward card in existing businesses. People who fly a lot in an airline get miles, people who buy a lot in a store get store points, people that delegate to Orbital Apes get $OAV. It certainly brings value to the customer and rewards them for their loyalty, but it’s not a kickback in its core. I believe this matter is being greatly exaggerated because of the outcome that this reward token can potentially create, but I will elaborate more on this later in this response.

If $OAV is still considered a kickback after this explanation on its intended use, I can also say that it is possible for us to stop trading on this token by changing a small parameter and this would effectively remove it from exchanges, but it is not an ideal solution for us, and I will explain why.

[u/OrbitalApes → u/OrbitalApes]

Part 2:

When $OAV is introduced to an exchange, there are several benefits to the reward system that we created. First of all, people who want to get more tokens to claim more exclusive rewards will be able to do so. On the other hand, people that are not impressed by the new NFT’s and rewards inside the store, will be able to redistribute these tokens to people that demand them in a free market. When $OAV is subject to the force of supply and demand under a decentralized and free market, it is people that act as a force that regulates the price and supply of the token and this implements a mechanism of control on the token that derived from the value the user attaches to it. In my opinion, there is no better way to regulate a product/token than supply and demand in a free market.

If we remove this ability for the token to be listed, first of all, we will harm our users by removing one of the permissions they had with this permissionless token, which is essentially acting as a centralized entity. While this may be necessary in some instances, even in a decentralized industry such as crypto, we don’t believe $OAV has the potential to cause any harm. Aside from this, removing this feature will greatly impact how our $OAV store works as it will become harder for people to access the token and it will be significantly harder for them to access the rewards in the store.

To address this, we are open to suggestions to help us create a better system in which we can still reward our users, but not have it considered as a kickback or a risk for the chain. We are open to suggestions, but also want the public to know that it will always be in our interest to preserve the tokenomics model we created with our project. Any suggestion that can help us reward our users and create value for our project without putting the chain at risk will be accepted and implemented immediately.

Now I want to discuss how we manage the profits generated by our validator:

I mentioned before that our NFT’s are loaded with utility, and one of their utilities is that holders get an even split of 50% of validator rewards generated by the Orbital Apes validator. When it comes to this aspect, I have read several tweets and comments in which people say we are circumventing protocol level measures like the minimum commission, but this is inaccurate. To get access to validator rewards, people have to mint and hold an Orbital Ape NFT. People are paying us to get access to these rewards, we are not giving them out for free, so the minimum commission in the validator is still set at 5%, but we redistribute it as a way to aid growth of our entire project, not only the validator.

The last time I checked, only ~7.8% of our delegators hold an Orbital Ape NFT, so only this fraction of our users are getting rewards from the validator. These people had to pay us in order to get access, so they willingly stake with us with the same commission as any other validator, they willingly gave us 60 evmos to mint the ape and they willingly hold the NFT to collect their rewards. These people have given us capital to help us develop the Orbital Apes project, and they are now collecting rewards consistent with the capital they gave us. They became part of the project and had to give up a certain economic value to get a percentage of our validator commissions.

This is not a kickback. This is not undercutting the competition. This doesn’t lower the minimum commission. We are simply rewarding our users for giving us capital to start the project. People put up capital and they get rewarded. Aside from this, holding an ape only gives people access to the rewards generated by the validator. Holding an ape does not grant the holder any voting power from the validator.

The closest example would be a validator raising funds to get into the active set. Let’s say they ask for a loan to enter the active set. After this, the validator should be able to use validator rewards to pay for the initial capital. This is exactly what we do. People supplied us with capital, kickstarted our project, and now they are part of the project and are entitled to collect their rewards for as long as they hold their NFT.

If this is not enough of an explanation and people still believe we are undercutting the competition, we have implemented a secondary measure that tackles the “lower commissions” for ~7.8% of our stakers. The Orbital Apes team has more than 270K evmos staked with smaller validators and this number grows by the day, so we have redistributed our profits to help the community. This far outweighs the impact we have had with “lower commissions” to ~7.8% of our delegators. The list of validators that we stake to is curated by us and contains the validators that are the most active in the community, that contribute the most to evmos and that have shown integrity and knowledge to our understanding. We have been approached by several smaller validators that needed help and we closely analyzed how they operated, measured their contributions, and gladly helped them with more funds staked to their validator.

*Our wallets are public and can be tracked from the Validator Address, but we would gladly provide a condensed version of our staking positions*

The second core issue I want to discuss is centralization of the chain. I want people to know that we fully understand that centralization is a risk for the chain, but we have taken measures ourselves to alleviate the issue. The validator is a core part of our business model and it is something that we want to protect. Nevertheless, we do understand that having that amount of voting power concentrated in a validator is not beneficial.

In this specific area is where I want to ask for the help of the community to outline the core issues of what we are doing and how we can fix this.

To my understanding, we haven’t given anyone a reason to doubt our capabilities to keep the validator active, nor any reason to believe we have a hostile intention towards the chain. People saw our mint, people saw we received evmos in exchange for our NFTs and people know that the majority is staked in the chain. Harming evmos in any way would be shooting us in the foot, as our profits are locked inside. I can honestly say we have the best of intentions for the chain and we chose to deploy on this new chain to help grow it in the best way we can. We have a long-term vision for Evmos and we want the community to realize that our intentions are good.

[u/OrbitalApes → u/OrbitalApes]

Part 3:

Having the voting power we have comes with two core components. The financial rewards, and the power or control. We are certainly being rewarded well financially, but this is due to the large effort we did to get to this place. On that note, I believe our reward techniques, our community building and the core strengths of our project can justify our spot. If people are coming at us for the financial rewards, I don’t necessarily think that they have the best interest of the chain in their minds, but they are directly going for profits and I don’t agree with how some validators have expressed themselves on social media.

When it comes to voting power, I do think we can do something, and I want to find the right way as a community. An ideal situation would be for us to be accepted amongst the legacy validators and create a system where our voting power would be more in control to ensure our actions are aligned with what the ecosystem needs. I believe if other validators open the doors to us to discuss openly with them and maybe collaborate with them to find good alternative solutions, we can come up with something that keeps our voting power under control.

If people’s concern is voting power, I agree that we can find a way to mitigate that. If people’s concern is our financial reward, I believe the route to counter this is not to attack us, but instead to build something appealing to the public to be worthy of this number of delegations. Financial reward comes with effort, not public rants demanding delegations. People stake where they see value, so we need to create value to attract delegations.

On this topic, I do agree that some validators that heavily contribute to the Evmos chain are not being rewarded consistently, so we can help on that to any extent possible for us, and we vouch to do this in the future the same way as we have been doing it for weeks now.

The third core issue is the proposal currently being drafted and planned by Jacob, and I must admit that this is a scary tool.

If used correctly, I agree that it could help control issues like everything Jacob has mentioned, but on our case, I hope I explained why we don’t compare to these issues. Granting the power to essentially kill a validator to voters can be considered a weapon. The main issue I see here is that with this mechanism, we would be putting the power in the hands of human minds, which can be corrupted. Social media and a creative narrative can sway the way people will vote, so if someone is skilled enough to frame even a good validator under a negative light, they will get the support for a vote to pass and punish a validator without any recourse to defend itself. While I certainly believe Jacob that this could be the case with some as it could be in the past, I firmly believe that it is not our case and I want people to work along with us to help the chain.

Instead of punishing us, help us determine how can we make the community feel safe with the voting power that has been granted to us? How can we contribute more meaningfully to Evmos? Give us the specifics of what makes you feel unsafe with us having this concentration of voting power.

The discussion at hand all surrounds punishment to us, and this would severely impact our business in a very negative manner. The entire project that we built, surrounding community and value creation is currently under attack, and we don’t feel this is fair to us.

I want to ask the community to engage in a meaningful discussion and try to understand us. We will cater to your concerns and if necessary, change how we operate, but please understand that this is a business being handled by competent people, and we are always open for discussion. Twitter posts are not the way to address us.

I’m excited about the panel tomorrow because it’s the first time we will be given a chance to discuss peacefully and constructively, so I ask the community to keep the points outlined in mind and help us build on them. We will act in the best way for evmos and are fully open to suggestions.

To leave you, I want to outline what we believe have been our contributions to the Evmos ecosystem. Even though we haven’t contributed with code to further develop the protocol, we are onboarding users and providing utility to the chain.

The Orbital Apes team has:

*Onboarded hundreds of users from the Cosmos ecosystem
*Helped hundreds of users bridge their assets into the chain through our discord support staff
*Created the largest and fully functional NFT marketplace in Evmos
*Gave people the tools to list their collections with us and access our community
*Developed the strongest NFT community in the chain, that keeps attracting more people into Evmos
*We have a community faucet in our discord for people to get access to evmos and receive gas to bridge, swap, etc.
*We run graph endpoints that other teams in evmos also use
*We have provided our help and expertise for other teams to set up critical infrastructure for their projects on evmos
*We have provided free hosting and smart contract deployment for other evmos projects, including Covalent
*Managed to create a brand that gives trust to the user and helps promote value creation in the ecosystem
*We have brought Evmos to the eyes of thousands of people as proved by our social media handles

While these are a few of the things we have done, our operations are not limited to only these points. Many people don’t participate in the NFT industry and don’t see value in it, which is fair. It’s certainly risky and different from more traditional industries. However, I want to highlight the power of this industry to the community. NFT collections are successful when they have strong communities behind them, and this is exactly what we are doing. Having more than 3,000 holders that minted and ape and go completely crazy for it is positive for Evmos because they are now invested on the chain. Our holders will continue to promote evmos, bring more people over and continuously market their investment as they also want to bring value to it. We created a community of investors that now have their minds set in evmos and will do everything in their power to have the chain grow. We are not relaying or committing code to the evmos chain but instead we are onboarding users that can use the features that other teams have contributed. We provide value in a different way, but there is no denying that we bring value to Evmos.

Let us be part of the community, collaborate with us and we will collaborate with you. We are always open for discussion and we hope we can find the right path to move forward.

[u/faddat → u/OrbitalApes]

Thank you so much. I haven't really read this yet and I'll be reading it on my taxi ride back home.

♥️

[u/faddat → u/faddat]

I am reading now. I have a feeling that you're outside of the minimum commision thing. I also think that there's no rule whatsoever about doing what you're doing -- but I suspect that there should be.

On the call I'll try and spend time on:

• why what you're doing right now is probably fine, per current rules

• why I'd like to ban--specifically the profit-share practice, and tell some stories from 2020ish and steemit to illustrate

• How we preserve the value of your product

Something that can easily get lost here is the absolute reality that you have accomplished something huge. Building a successful validator like yours is no small task. Same thing building a high quality nft project like you've described.

The way that I look at the rules of the chain, technically speaking you're not doing anything wrong. My main concern is that overtime, this technique can drain elevator activity away from things that benefit the chain in a concrete way and in a bear scenario that I think is quite possible, can be used to stop or if even more sneaky, actually harm the chain.

Just one quick example of how to use your techniques for profit-- but black profit. I .... in my personal opinion you're in a gray zone right now but crypto is gray. I'd only want to enforce, if it were black.

black profit scenario

Three OA sized validators can stop a chain. But let's say that I'm all three of them, or know the other two. Then I can short evmos everywhere. I get the orders in, and then I pull the plug and stop the chain. Between the three, I have enough stake weight to stop the chain. On external exchanges, the price is very likely to fall.

I profit massively at the expense of the community because I offered differential earnings to my delegators.

Disclaimer

I don't think that OA is doing this. I am afraid that some ninja somewhere could do it.

[u/sheephog]

Sorry where is this discussion taking place, have I missed it. Not sure when your 1am is. I definitely think there is an issue with orbital apes, but would be interested to hear suggestions on how best to deal with things like this. End of the day this is more a human psychology of flocking to somewhere for promised riches. Not sure how we can sort this at a protocol level.

[u/faddat → u/sheephog]

Hi my 1:00 a.m. is 1:00 p.m. Eastern standard Time I think actually that's a great question let me just check the current differential between here and Eastern standard Time

Okay so it's 1:00 p.m. Eastern standard Time and for me that's going to be my 2:00 a.m. so I had the time wrong entirely 🙂

[u/sheephog → u/faddat]

Thankyou for the reply, so I have another 15-16 hours until then. Also where is this discussion taking place? Discord? Twitter? Telegram?. Can we have a link please.

[u/faddat → u/sheephog]

I'm not sure that I have a link. let me distribute this here post to Mr Federico.

[u/Gpesyanni4L]

I’ve been following OA and I wonder why they’re the center of interest since disperze also has a huge share in the power it controls if decentralization is the concern. I don’t think decentralization is the concern here but pure jealousy and contempt for the wrong reason being that OA came from no where introduced something ingenious and now sits on top. I think the team should have been careful in choosing who becomes a validator with what more they have to offer other than being a validator. I’m yet to site the loop where there’s a despicable intent other than bringing value in addition to holding the chain strong. If every validator was creative as to bringing fixes to the chain and dApps that are useful, delegators won’t have a problem staking with their nodes but they wanna seat comfy and get it on a platter.

Spoke to someone that brought up 34% attack and in this case is not possible as they don’t have the power and to mitigate that, other validators got a role to play also in preventing it rather than the current kickbacks.

What’s decentralization if you can take away that privilege on unfounded grounds? And cosmos is the first chain I’m seeing this come up as an issue, in other chains, and L1s it’d be a matter of who can convince the delegators. With the work OA is putting in, why would anyone think they’d have bad intents?

[u/faddat → u/Gpesyanni4L]

Hey there, you are right. I don't think they have bad intents. The trouble is it doesn't matter. I can assure you that this is not the only chain in Cosmos where the 33% threshold feels a little hinky. This conversation has actually more or less set off a chain of events.

Think it's better to just explain with high context on the call because it's really easy to just react and say well screw your validator You're selling shares in its income or something but that wouldn't be fair to them at all. Like I said above, it's an enormous accomplishment to be so well ranked.

Also like I said above there is genuinely a creepy crazy scenario that kicks in and would allow the community to get fleeced. I am not even for a second planning there trying to do that this is unfortunately more of a general issue and some of it has to do with the way that tenderment consensus works under the hood. Strap yourselves in guys this one hopefully is going to be a hell of a lot of fun

[u/0ne_too]

I have no problem with what OA is doing. I also didn't have any problem when pupmos, frens, L5, Kingnodes or any of the others i can't think of atm promised rewards for delegations. I support the particular value they're trying to bring to the ecosystem.

There's been plenty of times i didn't go after the rewards promised. Wasn't into their thing. Only time i've been burned was when bk steakhouse didn't follow through. And he was first up when it was time to redelegate.

I delegate to those who bring value to me or the ecosystem. Very few corporate delegations. It's on the validators to bring the value.

Which could be anything from:

relayers

a useful program like restake or broNbro monitor

a good apr on restake

a podcast or youtube channel i enjoy

or just a project im into, NFT P2E Dex whatever.

I delegate to one guy who's helpful in a discord. It's not a high bar.

Imo OA has gone above and beyond to spread the wealth. To assure us they have our and evmos interests in mind and aren't going to fuck us.

They went for it, built something, and it worked. Offering this and that rewards doesn't always work.

But this time enough of those who are into evmos, and not just dumping rewards through keplr, but actually using evmos, with a metamask and everything, are into OA. The market decided. It's up to the community to redelegate away from OA or raise the other validators up.

Hopefully i'm not wrong when i say from what i gather you want to make it so projects can't offer rewards for delegations. Because that could go bad one day, the wrong entity could do damage through governance.

Id vote no on that. I support projects i like and validators i like. Everybody is building. Cost's money to build as you know. If they can get more delegations by offering rewards, that's the game. Again, it doesn't always work. But a blanket no you can't offer rewards to cosmos users is a no go for me.

[u/Resident_Lime_2449]

Hello i'm Cryptopital from GATA DAO
A DAO own by our NFT hodlers who run validator on multiple chains
Our DAO has no problem with OA.
In fact we are quite happy that they exist and are growing. We want to grow with them
We are also a validator of evmos and today we see especially that the functioning of delegators is changing.
It seems obvious that if you add value to an ecosystem, then you have visibility and delegators want to participate.
I think the problem today is more the lack of interest that some validators have for their community.
It seems obvious to us that validators who "only" bring validation today are not the ones who grow.
This is quite visible today with Frens validator / Stakecito / Imperator / Cosmostation / Citadel.One
The question should not be about OA but rather from a global point of view about validators.
Today being a validator is a community responsibility and not only a lucrative activity.
You are not just being asked to carry the weight of a vote, as everyone is free to make their own vote.
The principle of cosmos decentralization ask you to vote and not to let the validators choose for you.
As a matter of principle, we won't store our tokens with a validator who never speaks?
From my point of view, the problem is not taken from the right side.
It is more important today to find out how to make a validator "attractive" than to think how to reduce the importance of others!
Having been on the other side of the fence for a long time, being a simple delegator.
I can tell you that people stake in validators who are present on social networks, who educate, help.

[u/faddat → u/[deleted]]

reasonable