Protected Staking Rewards and Delegation Strategy updates

The key item on the Marinade roadmap for the first half of 2024 is the introduction of Protected Staking Rewards in tandem with an update to the delegation strategy which currently delegates over 11M SOL to 100+ validators. The goal of this update is for Marinade to grow its support to the Solana network by delegating stake to as many validators as possible without affecting the overall performance for stakers.

Marinade would like to provide an update on this project’s timeline, which will also include the opportunity for the DAO to vote on three items:

Latest on Protected Staking Rewards

As of February 15th, the requirement to have a bond (no funding requirement yet) is live to receive a Marinade score and stake.

Marinade’s stake will now be slowly moved to validators that have initiated their bond, rebalancing 1% of the pool each epoch.

This trial will also allow validators to see the size of the bond that they will need to provide concerning the current stake they get from Marinade and will help validators and Marinade grow more familiar with PSR impact on performance overall.

PSR Audits:  They are currently underway and are expected to be completed and published in March.

Validator SOL bond commitment: The size of the SOL bond has been adjusted following feedback from the community. Validators will need to supply the bond with 1 SOL for every 10k of Marinade stake.

Marinade SOL bond commitment: The Marinade council has agreed to cover a part of the bond from the operational treasury for extended losses. Here’s an example of how the bond coverage is split:

If a validator is down for one hour, the validator covers 100% of the bond.

If a validator is down 20 hours, they cover 10 hours and Marinade covers 10 hours.

If a validator is down 50 hours, the validator covers 10 hours and Marinade 40.

Validators Bonus:  Validators can currently receive MNDE bonuses via Earn Season 2 based on their Marinade score. The rewards are retroactive from Jan 1. 2024 thru March 31, 2024. Validators must have a bond to be scored from February 15th through March 31.

PSR performance tracking: Starting in March, Marinade will publicly share performance updates to show how bonds will be used and the impact on scoring and stake.

DAO Vote on PSR:  Once the audits are completed successfully and the dry run has been ongoing, the DAO will vote on officially funding and installing PSR. If passed, validators will need to fund their bond to continue receiving stake from Marinade. After that, all validators staked by Marinade will be covering their staking rewards in full, with the first 20% covered by the validator themselves and the 80% left covered by Marinade if needed.

PSR set up: Marinade wants every Solana validator to be eligible for Marinade stake. To date, 308 validators have set it up. The setup can be done permissionlessly by running this package:  https://www.npmjs.com/package/@marinade.finance/validator-bonds-cli

Marinade Delegation Strategy update

After more than a year, Marinade and validators collected potential improvements to the delegation strategy. As PSR is rolled out, this was also a good opportunity for Marinade contributors to suggest improvements. This has been done to enable further decentralization of Solana stake, as the Nakamoto Coefficient has declined over the last year from the Mid-30s to 20.

The initial forum post and conversation can be read here:  https://forum.marinade.finance/t/delegation-strategy-updates-finally/

Marinade has created a playground to test different parameters of the proposed delegation strategy:  https://playground.marinade.finance/

Details of the new delegation strategy draft can be read in depth in this report and the core contributors are still taking feedback for consideration:  https://public.marinade.finance/MarinadeDelegationStrategy_draft-1.pdf

Key points of the proposed changes, which can be viewed  here, include:

The final piece of this update regards the Directed Stake weights:

Directed Stake weights vote

A new wrinkle for Marinade Earn Season 2, MNDE governors can receive more MNDE by participating in Directed Stake. They can also choose to vote for a validator or the Marinade Delegation Strategy to earn the Governors bonus.

This brings the question of whether to update the current directed stake weights. Currently:

The ability to now vote for the algorithm with either MNDE or mSOL means it’s possible to raise the percentage of algorithmic stake weight beyond 60%. That means it may make sense for the DAO to grant more weight to mSOL and MNDE holders.

Restaking/locking mSOL:  Consider this stake weight proposal with a recent forum post that explores the idea of “restaking” mSOL: locking mSOL up for a longer period to be eligible to receive additional MNDE rewards:  https://forum.marinade.finance/t/proposal-restaking-msol-to-direct-stake/983

Another alternative would be to move the mSOL 20% to the MNDE weight. Given the mSOL snapshots system is difficult to maintain with all the new integrations and updates across the DeFi ecosystem, in addition to the new Sanctum LST ecosystem, mSOL Directed Stake power could be adjusted, simplifying the system and pushing more stake power to MNDE.

There is time over the next several weeks for Governors to make their voices heard about these changes and the chance to vote on-chain in Realms will be coming up in March. In the meantime, share your feedback and thoughts in #Chefs or #Validators channel in Discord or on the Marinade forum:  https://discord.gg/yTdH8YkYKg