Should we have a cooldown period to unlock masternode collateral?

As part of our tokenomics discussion, I was also having an informal discussion with Poramin @poramin on things he thinks might also be worth considering.

Masternode systems that we know of currently do not have any restriction in transfer of collateral meaning you can register a masternode and then deregister it immediately by transferring collateral out.

This has several drawbacks:

  • One is that it means that there is a theoretical attack where someone with a lot of FIRO (for example an exchange) can register a lot of masternodes and if he decides to deregister them this may cause masternode quorums to fail. He can then possibly much more easily 51% attack the chain and further more use the unlocked collateral to do reverse transactions (like what happened with the 51% attack last time). This of course is not a simple to pull off attack.
  • What is probably a bigger question is that having no transfer restriction allows more speculative registration of masternodes with the knowledge that the collateral can be moved or sold at any time without penalty instead of people who are more invested in the long term security and success of FIRO. While this allows more people to participate in masternodes safe in the knowledge they can liquidate at any time, it also means a more fluctuating masternode numbers which we have seen during big upward price movements.

Many other chains do have some sort of unbonding period or unstake period which varies from a couple of days to about one month. Notably from my checks (correct me if I’m wrong):
Solana: 2-3 days
Cosmos: 21 days
Polkadot: 28 days
Ethereum: Not an unbonding period but the unstaking process can take a couple of days and if there’s a long queue, can take up to 2 weeks. Currently it takes 13 days.

Some of the rationale behind having an unbonding/unstake period are as follows:

  • Security: Lock periods help secure the network by ensuring that validators have a vested interest in the network’s well-being for a certain duration.
  • Stability: By requiring validators to lock their tokens for a period, blockchain networks can maintain a more stable set of active validators. This stability is crucial for the network’s consensus mechanism and overall security.
  • Incentivization: Lock periods incentivize validators to act in the best interest of the network. Since their tokens cannot be immediately withdrawn, validators are motivated to perform their duties diligently to earn rewards.

When broaching the topic with Peter our lead dev, in thinking how might this be implemented he jumped the gun and has it implemented about 70% in here. In his implementation, masternodes even after calling the ‘deregistration’ can still continue to receive rewards until the cool down period ends as long as their masternode remains up and continues providing service. This incentivizes them to continue to serve their functions until the end and also gives more predictability of masternode numbers and security. Other protocols often stop their entitlement of rewards during the cool down period but they also might have ‘slashing’ mechanisms which we don’t have.

We are doing a community sentiment check on this and would like your feedback!

  • Should we implement a cool down period to unlock masternode collateral?
  • No, keep status quo.
  • Yes, lock for a few days
  • Yes, lock for a few weeks
  • Yes, lock for a month.
0 voters
2 Likes

[edit]
After hearing all arguments it seems better option to keep it as it is.

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There seems to be two reasons to implement a cooling down period:

1 - protection of the Master Node network from attack:

If someone has enough Firo to impact the Master Node network by deregistering that many nodes they likely have enough Firo to do the 51% attack without access to the Master Node collateral - so locking the Firo up for any amount of time may not prevent an attack from someone who is just being malicious - and would inconvenience everyone else because of something that ‘may’ happen.

2 - incentivize people to keep their Firo in a Master Node and not sell:

This may have the opposite affect than people may think. Rather than setting up a Master Node and keeping their Firo there - some people will just keep their Firo in an exchange ready to sell immediately - this could reduce the number of Master Nodes in the long run, and will make it actually easier for some people to dump their Firo with no effort. After the halving when rewards aren’t worth the effort of setting up a Master Node this will get even worse. Right now many people keep as much Firo in Master Nodes as possible and only remove it when they need the ‘cash’ or have an opportunity they want to take advantage of - not for day-to-day speculation.

Personally I think the status quo makes the most sense.

Many people invest in Firo and store it in Master Nodes specifically because there is no lock-up period - a cooldown period may be a disincentive for some people.

6 Likes

No lock-in period is precisely a big advantage of FIRO nodes.

2 Likes

What if it was just for a few days?

1 Like

Good points.

Not a fan of locking. Maybe it makes sense for security aspects but I had bad experience with other coins with cool down periods > 21 days and i missed to sell at a high price because the coins were locked. From my point of view if you introduce it, it shouldnt be more than 1 or 2 days. When the bull market comes the long term holders shouldnt have a disadvantage to sell if they want to.

5 Likes

Hello Team,
Thank you team for the new cooldown, here are some responses:

  1. For the 1st drawback (from @reuben ): Agree

One is that it means that there is a theoretical attack where someone with a lot of FIRO (for example an exchange) can register a lot of masternodes and if he decides to deregister them this may cause masternode quorums to fail. He can then possibly much more easily 51% attack the chain and further more use the unlocked collateral to do reverse transactions (like what happened with the 51% attack last time). This of course is not a simple to pull off attack.

In order to take out the quorums, power-off the computers is enough. Locking the collateral now can prevent the attacker to use the unlocked collateral as reverse transactions of 51% attack. And with the new deregister, we can even predict the time when those MNs completely de-registered and take nessessary action.

  1. Prevent FIRO from dumbing I think it will work, but not much
    Collateralization rate now ~33%, that means the rest dump (66%) comes from non-MN.
    Firo that put into MN usully considered as a long-term investment and will no
  • For short-term FIRO (or cryptocurrency) trader, they just put the coin in wallets or on CEXs.
    It’s even worse if they set a Limit Sell Order; FIRO will be sold immediately after pumped.
    And the new cooldown will even give them reason to not create new MN
  • For long/mid term FIRO holder, I think the locking period is not a problem. They will continue to create new MNs, but with a new strategy to adapt with the cooldown.

The cooldown will prevent FIRO’s price from dropping quickly, but don’t expect significant results from it

  1. Number of MNs will be reduced
    As short-term buyer will not like to create new MNs, and with the upcomming halving, I think the number of MNs will be reduced.
    On the other hand, the less MNs on network, the more reward will come to MN owners. This will make the number of MN will be auto-balanced at a new number.
    The new number should be big enough to keep the network secure

In the bull market, people will don’t want to create new MN if the locking period is too long

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Immediate access to coins when less than 5% of MNs have been deregistered in the last 24 hours. If more than 5% of MNs have been deregistered, then 10% of collateral unlocks daily.

This is assuming that programming partial collateral unlocks is easy enough. Otherwise, collateral could use the same part (more than 5%) and then just put a waiting period of 7 days.

Or, a separate idea, any MN, when it is first registered, is locked for 7 days but then can unregister at any time and get access to collateral immediately.

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I suspect implementing a cooldown period will result in less MasterNodes, which could in turn result in less security. Personally if this is implemented I will probably reduce by half my MN involvement. Even though it’s a small amount, I still want to be able to use my coins immediately if necessary. I like that option.

Maybe another reason is the POSE score structure. What if I am hosting (either self hosted or with a provider) and I am continually getting bad POSE scores. I would like to immediately switch providers in that situation. There is a long list of other reasons why immediate access is a bonus popping in my head. Imagine a person living under a repressive regime. They might need to flee a situation in shorter than the amount of time it takes to cooldown. Could they loose their coins in that scenario.

The whole world seems to be going crazy. Having the ability to react immediately is becoming more and more important.

I understand what you say about increasing security. Which is certainly important. I vote for finding other ways if possible. To me the cooldown idea just feels it is introducing something that reduces privacy. Maybe just slightly, but that’s how it seems.

I don’t support an idea based upon what other coins are doing. FIRO is amazing because it does it’s own thing and figures out solutions that are better than the others. I am not smart enough to come up with another solution but I suspect the team is and could (just like FIRO did with exchange address) introduce something innovative that leads the pack in a new and stronger direction.

My 2¢,
Thanks

2 Likes

About this idea of blocking masternodes and about avoiding the closure of many masternodes during certain strong increases in FIRO.

It’s true that since the FIRO masternodes existence, I remember at least 2 times where the number of masternodes fell by 10% in less than a week. Ultimately it is few and in my opinion it does not justify a blocking period for all masernodes.
If we want to limit these grouped masternodes sales, rather than penalizing masternode owners, we could reward them, for their fidelity. For example, by giving them a bonus after 1 month, 1 quarter, 1 semester, 1 year and every year after (based on the date of the 1,000 FIRO collateral transaction). If these bonuses are incentive, masternode owners will prefer to wait for the bonus than sell their collateral.
Personally, it would seem normal that fidelity is rewarded for masternodes: collateralizing 1,000 FIRO for 7 days is good, collateralizing 1000 FIRO for 1500 days is even better, much better (and proof that we did not sell its masternodes during the rising phases).

3 Likes

Linear unlocking, triggering a cool-down period when a large number of unlocks occur

Ah that’s an interesting idea though would also require a serious rejig in tokenomics as the reward would have to come from somewhere.

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Just to clarify, if you change provider, you don’t need to move your masternode collateral. It’s just a pro_tx update thing that does not trigger the unregistering or lock in. In simple terms, this shouldn’t affect seamless changes of masternode hosting provider.

Would this affect your opinion?

Also nice to see you @SuperSpreader ! Welcome to the forums!

Having partial collateral unlocks does not work in the current masternode model that requires a single 1000 UTXO to qualify as a masternode. I think it would require too much work to implement this since it would be effectively a rethinking of the entire masternode infrastructure.

This is definitely much more achievable but I don’t know if it would achieve any meaningful difference as I think most people who register masternodes do not unregister after several days since they would have paid hosting for it etc. It is definitely something we considered too.

Could you clarify what does linear unlocking mean?

Also these suggestions of triggering a cool down period only when a large number of unlocks occur can in a way induce panic since it would lead ppl to rush to unregister masternodes at any sign they think others might unregister since it would lock other ppl in. It almost seems like one of those avoiding a bank run type of situation.

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How if Lock for a few months but we can put 10K coin in one masternode ? So we can reduce price for open 1 masternode.

I agree if less than 10 days.

I think we should keep the status quo.

A lot of non-technical people are hosting masternodes on allnodes and possibly other services and do not have full access to the masternodes’ details such as voting address, IP, owner’s address… and so on. Therefore, I doubt they can easily make any deregistration transaction using the Masternode tool. Tech-wise, we should make it simpler, not harder.

I think we should implement a function that regardless of the stake, a Masternode can still be functional until the end of the quorum that it was selected for.

1 Like