Since this comment is also relevant to this discussion (even though some of the details are slightly different - it still touches on the fundamental principle), including it here:
I understand the sentiment behind this proposal discussion, but what it ultimately will do is turn the staking system into a trading platform (to the detriment of network stability). The whole point of the lockup in staking is to provide stability, in terms of a time frame, for validators to run the network hardware. You can read about it in the whitepaper section 2.
Even though this proposal discussion proposes to leave the undelegation period at 21 days, rather than shorting it, what it ultimately does, in my estimation, is to undercut it all together with instant undelegation (although with a fee). It totally benefits the person who has delegated for the purpose of the rewards (as opposed to network stability as a whole, and validators particularly).
- 10% is a very small cost to pay to exit if the point is to provide stability in return for a reward (you get to keep all the rewards, and when the system is no longer profitable from the delegators perspective, they just exit). Lets say that Luna v1 had a sudden price drop, would not everyone pay the 10% fee to exit, leaving the point of providing network stability in jeopardy?
- In fact, in a way, this type of “exiting” situation is what happened in the Terra crash. Luna is the mining coin, it backed the value of the stable coins. When it began to lose market confidence, people exited at a loss rather than suffer the potential greater loss - however, this perpetuated the problem since Luna, as part of its design, was what was backing the stable coins (although for swaps in the system between LUNA v1 <> TERRA STABLES, at least those that use the market module, when activated, use an equivalent value in SDR). It is true though that after design, but before the crash, the Luna Foundation Guard was implemented as a real world entity to attempt to provide a backstop to the stable coins in regards to a supplemental reserve. So, the backing was exiting at the time it needed it most, and the market module swap system then minted more Luna v1 as part of the virtual liquidity pool that were swapped using the market module’s swap system (since Luna v1 was being sold off, it was now worth less than it had been before). This created the over supply problem that Luna v1 currently has. In fact, I would say that gross oversimplifications of the system led me to misunderstand how the system truly worked, and that misunderstanding brought me to advocate for something, at the time, that actually led to the problem (it was only when I truly began to study the market module, and how it truly works, that I understood the implications of those misunderstandings that I had - which took months of research time by multiple people - and at least in my circle, particularly @johny ).
Instant undelegation, no matter what the fee required, will undercut the network stability. The reward structure is designed precisely to reward those who stake for the 21 days, or more, of stability by locking their Luna v1 during that time - if they are not going to provide that stability, and take the risk during that time, then they should not receive a reward. Instant undelegation then turns the undelegation period into 0 days of stability. So, even though you may leave it at 21 days in word, in practice it would make it 0. That is dangerous in my personal estimation.
Here is something I mentioned, although more focused to no limits on redelegation, when someone asked about it previously, so including that for what it is worth (as my personal thoughts - and since in practice 0 days is less than 21 days, this would still apply):
Here are some possible thoughts: One consequence could be that people will game the validators. As time gets shorter, it can force every validator down to the minimum percent mark the lower the number goes for the days.
Undelegation period is meant to provide security to the network (and those who stake are rewarded for their providing mining power via stake - ie. they are rewarded for the 21 day period they exchange their stake for mining power).
Section 2:
- https://assets.website-files.com/611153e7af981472d8da199c/618b02d13e938ae1f8ad1e45_Terra_White_paper.pdf
For redelegation, it was allowed so that delegates had a way to hold bad validators accountable while also not having to wait the 21 days to undelegate to change. However, in order to prevent misuse of redelegation in a way that cuts against network stability, in terms of either mining power or consensus security, it only allows 1 redelegation per wallet for the particular staked LUNA away from a validator. It does allow upto 7 delegations to a specific validator per wallet account as well during that period. Here is a nice outline of the process:https://medium.com/cosmostation/what-you-need-to-know-about-cosmos-atom-redelegation-e45ca7da6fdf
The staking system is not really meant to be used as a trading tool (gaming validator commissions), but to provide consensus stability and security, and the rewards are more akin to a long term investment (pay back).
There may also be a practical side too, for consensus security as well as for tracking delegations for evidence slashing and jai[·]ling.
Here are some articles/docs on it (redelegation has been part of cosmos-sdk since v0.1.0-alpha1):
This is to say nothing of the potential issues, from an implementation perspective, that it could have for the evidence module (which makes sure that validators, as well as their delegates, since validation is a partnership between delegators and the hardware operator, are penalized for trying to abuse the consensus system), and slashing module (which disincentivizes any actions negatively affecting staking and the network that are defined in the system). You can read about it here.
Hope that helps a little bit, and that you have a great day today
