Dynamic Minimum Commission based on the Validator's Voting Power per Epoch

[dlt-green]

DLT.GREEN-IIP-xxx: IOTA Improvement Proposal

Dynamic Minimum Commission based on the Validator's Voting Power per Epoch

22.01.2026 - Option VP% for VP ≤ 2%; fixed 5% for VP > 2%: see #29 (comment)

23.01.2026 - Option2.5×VP% (≤2% VP) + Fixed 5% Cap (>2% VP): see #29 (reply in thread)

23.01.2026 - Option VP% × (1 + VP% / 20), capped at 10%: see #29 (comment)

23.01.2026 - Option 10, 𝑉𝑃+0.5 ⋅ max(0, 𝑉𝑃 − 2) #29 (comment)

Authors: DLT.GREEN 💚 (supported by 19 OGs: https://dlt.green/en/governance/stimmverteilung)
OGs: AlexTweeeet | bogenlos | CrashOverride | CryptOOOOO | dlt.green | gaga50 | igrand | IOTABOT#106 | Janneman | Ktota | martinb | neumis | NickelanddimeO | p00dl | TearDrop | Timson | VP_ockerocker | vrom | Woyzeck
Status: Draft
Date: January 16, 2026
Current Network Snapshot: January 15, 2026 (73 active validators)

Abstract

This IIP proposes a protocol-level, automatic minimum commission rate for each validator, set exactly equal to the validator's voting power percentage at the start of every epoch.

Effective commission = max(configured commission, voting power %)
The goal is to link validator responsibility (influence via voting power) directly to economic commitment, discouraging persistent near-zero commission strategies that lead to stake concentration, validator sustainability issues, and reduced effective decentralization.

Motivation & Problem Statement

Delegators rationally favor low/zero-commission validators due to visibility and simplicity → leads to:

• Extreme stake & voting power concentration
• Unsustainable economics for cost-bearing validators
• Nominal (on-paper) but not practical decentralization

Similar dynamics have been addressed in other PoS ecosystems (e.g., Cosmos chains) via protocol-enforced minimum commissions:
https://observatory.zone/cosmos-hub/governance/826
cosmos/gaia#2768

Rationale

Voting power ≈ responsibility

• Total voting power is fixed at 10,000 units (network-wide).
• Individual cap: 1,000 units (10%).
• Minimum commission = (validator voting power / 10,000) × 100 → ranges from ~0% (tiny validators) to 10% (capped large validators).

This creates a simple, self-adjusting, progressive guardrail without manual governance intervention per epoch.

Specification

Calculation (per epoch)

vp_percentage = (validator_voting_power / 10_000) × 100
minimum_commission = vp_percentage
effective_commission = max(configured_commission, minimum_commission)

• Applied automatically at epoch boundary.
• Validators keep full freedom to set higher rates.
• No mid-epoch changes (consistent with current mechanics).

Examples

• 1,000 VP (10%) → min = 10% commission
• 500 VP (5%) → min = 5% commission
• 100 VP (1%) → min = 1% commission
• 10 VP (0.1%) → min = 0.1% commission

Expected Network Outcomes

• Large validators discouraged from sustained 0% fee-dumping
• Stake flows more toward smaller/mid-sized validators
• Improved validator diversity & long-term sustainability
• 67 out of 73 validators unaffected (already run higher commissions)

Compatibility & Security Overview

• Backward compatible
• Only adds one max() comparison in reward distribution

Full Mainnet Validator Impact Table (January 15, 2026)

Total Validators: 73
Source: https://explorer.iota.org/validators
Rule: Effective commission = max(configured commission, voting power %)

• Automatic re-evaluation every epoch.
• Automatic enforcement of the minimum commission per epoch, if the configured commission is below the minimum.
• Validators can always configure higher rates freely.

Columns:

• # – Ranking by voting power
• Validator Name – Display name
• Voting Power – Current share
• Configured Commission – Configured rate
• New Min Commission – Proposed minimum commission
• Effective New Commission – max(configured commission, min commission)
• Commission Change – Impact under proposal

#	Validator Name	Voting Power	Configured Commission	New Min Commission	Effective New Commission	Commission Change
1	PANDABYTE I	6.45%	0.6%	6.45%	6.45%	↑ Increased (0.6% → 6.45%)
2	Kiln0	6.31%	10%	6.31%	10%	Unchanged
3	DLT.GREEN	5.7%	8%	5.7%	8%	Unchanged
4	Kiln1	4.22%	10%	4.22%	10%	Unchanged
5	IOTA 2	4.16%	10%	4.16%	10%	Unchanged
6	Nansen	3.63%	10%	3.63%	10%	Unchanged
7	PANDABYTE II	3.57%	0.6%	3.57%	3.57%	↑ Increased (0.6% → 3.57%)
8	binance	3.54%	2%	3.54%	3.54%	↑ Increased (2% → 3.54%)
9	P2P Validator	3.41%	10%	3.41%	10%	Unchanged
10	Luganodes	3.11%	10%	3.11%	10%	Unchanged
11	IOTA 1	2.89%	10%	2.89%	10%	Unchanged
12	Twinstake	2.73%	10%	2.73%	10%	Unchanged
13	TokenLabs.Network	2.18%	8%	2.18%	8%	Unchanged
14	Stardust Staking	2.15%	5%	2.15%	5%	Unchanged
15	iota.guru	2.03%	1%	2.03%	2.03%	↑ Increased (1% → 2.03%)
16	Stakin by The Tie	2.03%	10%	2.03%	10%	Unchanged
17	DSRV	1.97%	10%	1.97%	10%	Unchanged
18	Ankr	1.89%	2%	1.89%	2%	Unchanged
19	Staketab	1.88%	10%	1.88%	10%	Unchanged
20	SwissIota	1.78%	1%	1.78%	1.78%	↑ Increased (1% → 1.78%)
21	Allnodes	1.77%	2%	1.77%	2%	Unchanged
22	Staking4All	1.41%	2%	1.41%	2%	Unchanged
23	Figment	1.4%	10%	1.4%	10%	Unchanged
24	LinkPool	1.38%	2%	1.38%	2%	Unchanged
25	Nightly	1.33%	10%	1.33%	10%	Unchanged
26	IOTA 3	1.29%	10%	1.29%	10%	Unchanged
27	Blockscope.net	1.24%	10%	1.24%	10%	Unchanged
28	Coinage x DAIC	1.14%	10%	1.14%	10%	Unchanged
29	Hinode Technologies	0.98%	10%	0.98%	10%	Unchanged
30	Cosmostation	0.92%	10%	0.92%	10%	Unchanged
31	Lavender.Five Nodes	0.89%	2%	0.89%	2%	Unchanged
32	jednaosma.pl	0.89%	3%	0.89%	3%	Unchanged
33	Alchemy	0.88%	10%	0.88%	10%	Unchanged
34	Sensei_Node	0.86%	10%	0.86%	10%	Unchanged
35	Cryptech-Hacken	0.82%	10%	0.82%	10%	Unchanged
36	Pier Two	0.8%	10%	0.8%	10%	Unchanged
37	Matrixed.Link	0.8%	10%	0.8%	10%	Unchanged
38	Nodes.Guru	0.79%	10%	0.79%	10%	Unchanged
39	ApeDAO	0.68%	0.69%	0.68%	0.69%	Unchanged (very close)
40	Cetus	0.67%	2%	0.67%	2%	Unchanged
41	InfStones	0.65%	10%	0.65%	10%	Unchanged
42	liquidlink.io	0.64%	10%	0.64%	10%	Unchanged
43	HashKeyCloud	0.6%	10%	0.6%	10%	Unchanged
44	B-Harvest	0.6%	10%	0.6%	10%	Unchanged
45	GIL System	0.59%	10%	0.59%	10%	Unchanged
46	Node.Monster	0.57%	10%	0.57%	10%	Unchanged
47	Liquify	0.57%	10%	0.57%	10%	Unchanged
48	Klever	0.57%	2%	0.57%	2%	Unchanged
49	Cream	0.52%	0%	0.52%	0.52%	↑ Increased (0% → 0.52%)
50	starfish-one	0.51%	3.14%	0.51%	3.14%	Unchanged
51	Spectrum Staking	0.5%	5%	0.5%	5%	Unchanged
52	Kiln (legacy - please redelegate)	0.48%	10%	0.48%	10%	Unchanged
53	GiveRep	0.48%	10%	0.48%	10%	Unchanged
54	BLOCKPI	0.47%	8%	0.47%	8%	Unchanged
55	NirvanaLabs	0.44%	10%	0.44%	10%	Unchanged
56	ALUMLABS	0.43%	10%	0.43%	10%	Unchanged
57	CroutonDigital	0.41%	10%	0.41%	10%	Unchanged
58	Encapsulate	0.38%	8%	0.38%	8%	Unchanged
59	Sentio	0.33%	10%	0.33%	10%	Unchanged
60	STAKEME	0.33%	10%	0.33%	10%	Unchanged
61	hoh.zone	0.33%	10%	0.33%	10%	Unchanged
62	SDVC	0.32%	10%	0.32%	10%	Unchanged
63	Simply Staking	0.32%	10%	0.32%	10%	Unchanged
64	[NODERS]	0.31%	10%	0.31%	10%	Unchanged
65	GAIB AI	0.31%	10%	0.31%	10%	Unchanged
66	TrustedPoint	0.31%	10%	0.31%	10%	Unchanged
67	Keyring	0.28%	6%	0.28%	6%	Unchanged
68	Meria	0.26%	8%	0.26%	8%	Unchanged
69	BlockHunters	0.25%	10%	0.25%	10%	Unchanged
70	InfraSingularity	0.24%	10%	0.24%	10%	Unchanged
71	Realize	0%	2%	0%	2%	Unchanged (0% VP)
72	StakingCabin	0.22%	10%	0.22%	10%	Unchanged
73	Endorphine Stake	0.21%	10%	0.21%	10%	Unchanged

Summary of Impact

• Validators affected (effective commission increases): 6 (mainly top/low-commission ones like PANDABYTE I/II, binance, iota.guru, SwissIota, Cream)
• Unchanged: 67 (~92%)
• Biggest shifts: High-vp validators with very low current commissions face the strongest floors (e.g., 0.6% → ~6.45%)
• Small validators (<1% VP): Minimal/no change, preserving low-rate flexibility

Live data fluctuates with delegations → always verify at https://explorer.iota.org/validators.

Expected Outcomes

• Reduced incentive for persistent near-zero commission strategies, especially among high-voting-power validators
• Gradual rebalancing of stake distribution
• Improved economic viability for validators with real costs
• Preservation of validator autonomy above the protocol floor
• Mitigation of “decentralization on paper” scenarios
• It incentivizes validators to gain more VP (voting power) through genuine utility

Compatibility

• Fully backward compatible
• Existing validators with commissions above the computed minimum are unaffected
• No changes to core staking, delegation, or reward calculation logic beyond one additional comparison
• Mid-epoch commission changes continue to take effect from the next epoch

Security Considerations

This mechanism targets systemic staking incentive risks:

• Reduces centralization pressure from unsustainable fee competition
• Supports a more diverse and resilient validator set
• Avoids punitive measures (no slashing)
• No new attack vectors introduced

Potential side-effects to monitor:

• Temporary perceived APY reduction for some delegators (mitigated by transparency)
• Stake migration toward smaller validators (desired decentralization outcome)

Conclusion

This IIP introduces a lightweight, automatic, and governance-friendly guardrail that ties validator responsibility (voting power) to a minimum economic commitment (commission rate). By discouraging race-to-the-bottom commission behavior while preserving full choice above the protocol floor, it aims to strengthen long-term decentralization, validator sustainability, and overall network health in IOTA's dPoS ecosystem.

Validator & Community feedback welcome — especially on this exact linear formulation vs. stepped/alternative curves.

💚 DLT.GREEN Team

[Quilamir]

Very interesting concept.

Pros:

1. Eliminate the 0% commission behavior, seen in many chains very well detailed in this post.
2. Takes very little to implement.

Cons:

1. Interferes with validator operator business model.
2. Causes one stakers stake to affect the others on the same validator, which is difficult to predict.
3. Can be circumvented using automated rebate to stakers (at a cost to the validator itself).

I completely agree that allowing 0% validators is bad for the network, however having a dynamic affect here can cause issues, even if we decide on tiers of minimum commission there can still be issues where a validator moves between them as stake changes.

I do not have an example of a working model for something like this in mind other than having a global minimum commission required, as some other networks are using, which can still be circumvented in some cases.

Node.Monster Team

[dlt-green]

#29 (comment)

[tokenlabsx]

TokenLabs.Network fully supports this IIP 💚

We believe this proposal addresses critical challenges in IOTA's staking ecosystem:

1. Healthier competition: Tying minimum commission to voting power discourages the "race to the bottom." A 0% model is simply not sustainable.

2. Improved decentralization: Stake will naturally flow toward smaller and mid-sized validators—strengthening real decentralization, not just on paper.

3. Progressive and fair model: Small validators (e.g., 0.5% VP) would only have a 0.5% minimum. More responsibility = higher commission floor. This is better than a fixed global minimum that would hurt smaller validators.

4. Transparency: The formula is clear and calculated at each epoch start. Delegators can anticipate changes.

5. Validators as builders: Validators are the first builders of the network, not just infrastructure operators. Sustainable commissions allow us to maintain premium infrastructure and build for the ecosystem.

TokenLabs and our partners DLT.GREEN, SDVC (Objectid), and Nightly (Nightly App) already operate this way. We hope more validators follow this path.

Thanks to DLT.GREEN and the OGs for pushing this proposal forward.

— TokenLabs.Network Team

[dlt-green]

We are delighted to receive this message from our partner in our long-standing community. Thank you so much!

[dlt-green]

Initially, we also considered implementing a static minimum commission, but we believe it's only fair to make it easier for new validators to join. If they grow too quickly, they will be automatically slowed down. In any case, we've been monitoring the network since last May, and while launching this IIP is certainly unpopular for us, our primary goal is to secure the network. If validators drop out because the stake becomes too concentrated among a few, we feel compelled to take action. We're adopting a dynamic approach because, from our perspective, this will allow the stake to stabilize over time across all validators, thereby distributing voting rights more evenly among everyone. We're glad to be moving away from the coordinator, but we'll head right back in that direction if we don't act now.

[dlt-green]

With higher utility, a validator can attract more stake, but not by setting the fee close to 0%. That approach would ultimately destroy the network, as validators couldn't invest in improvements and would be forced to rely solely on emergency operations. This would lead to a decline in overall quality and utility, making the network less secure in the long run.

[iotacreamies]

Also supporting this proposal for the reasons given. Thanks @dlt-green and others!

[dlt-green]

We are delighted to read this from a member of our long-term community. Thanks!

[gjeee]

imo there should be competition in the commission-rate so it seems smarter to make the marginal epoch-reward smaller the bigger the validator gets: this will result in a more even voting power distribution since smaller validators will attract more stake since it has a higher APR compared to the bigger ones.

[dlt-green]

#29 (comment)

[dlt-green]

The linking of voting power to commissions directly addresses this issue: the distribution of voting power across multiple validators through staking, as we've observed in recent months. Take Stardust Staking as an example—it lost a significant amount of stake after the fee was increased to 5%. However, the ecosystem benefits when larger validators do not absorb this stake through fee dumping, which unfortunately also occurred around the end of the year. The proposal to introduce a minimum fee is designed to tackle this problem head-on, leading to substantial decentralization of voting power. This decentralization is crucial, as the current concentration of power represents a key weakness that prevents validators from offering broader, global utility.

Check history here:
https://dlt.green/en/services/iota-staking-analytics#validator-list

[gjeee]

setting minimum commissions prevents competition. you did not answer why you think it is better to adjust the cost-side instead of the reward-side.

[dlt-green]

#29 (comment)

[dlt-green]

We proposed a dynamic adjustment precisely to avoid completely suppressing competition. Under this model, new validators can still set very low commissions and realistically reach close to the top 10 — see the example table.
However, when it comes to the very largest validators that already control a massive amount of stake (which smaller validators lack to even become viable), we believe things have simply gone too far.

Competition still exists thanks to the dynamic mechanism — but it exists with moderation and purpose.
Fee dumping is not real competition; in the long run, it destroys the network.
As perhaps hasn’t been noticed yet: some validators have already exited because they could no longer cover their costs. We also spoke with several validators beforehand — and one thing became very clear: most serious operators run their nodes properly and refuse to participate in a race to zero. Competing against 0% eventually forces cuts somewhere: whether in certifications, utility, redundancy, security, or overall quality.

A reputable validator will not engage in that kind of competition — they prefer to exit entirely. “Either do it right, or don’t do it at all.”
That is exactly the dynamic we are trying to address.
There is still plenty of room for competition (again, see the table), but the mechanism helps achieve a healthier distribution of voting power — and indirectly also of rewards relative to stake. We expect the system to gradually stabilize over time.

It’s also evident that the vast majority of validators (both small and large) are not significantly affected. Only when a validator (or group of tightly related validators) starts seriously approaching ~16% voting power does the dynamic limit really kick in.
Waiting until we actually reach that point would be a serious mistake.

We ourselves would certainly never participate in such a race to the bottom. We work daily with multiple developers, operate a regulated company (like most serious validators), have real costs every single day — just like the others. There is enough revenue for everyone if things stay reasonable.

But anything significantly above 10% voting power per identity — especially when achieved by circumventing limits through multiple validators under the same control — is not sustainable for the network.

That’s why we favor a dynamic (not static) approach, which we consider fair.

[dlt-green]

Precisely. Under a clearly defined committee X, staked amounts will converge toward equilibrium across all members over time. This results in a more balanced and sustainable voting power distribution — in stark contrast to the present, where stake continues to concentrate, or the 10% threshold is circumvented by operating multiple validators.While such concentration cannot be entirely eliminated, the mechanism makes it far more challenging: stakers are now compelled to actively monitor the situation and assume genuine responsibility for the network’s overall well-being.

[gjeee]

how exactly will your proposal solve the problem that same validator can just spin-up more instances? the "dynamic commission-floor" won't fix this and neither my "dynamic reward" idea.

[dlt-green]

As outlined, this process becomes significantly more challenging. One would need to operate far more validators than just adding a second one—even with high stake—to crash the market with fees near zero.

[gjeee]

still i think your approach prevents "cost-price discovery":

• setting it too low is not sustainable since he runs at a loss
• setting it too high will result in too little business.

also setting an arbitrary commission minimum does not guarantee that the validator will use that extra income to improve his services (in terms of reliability or whatever).

my idea of decreasing rewards the bigger a validator becomes will result in a more even VP distribution as well without sacrificing cost-price discovery.

[dlt-green]

We are only adjusting the minimum fees and not introducing a fixed fee. The example in the table illustrates this clearly. This approach allows validators to continue charging higher fees—as they almost always do—and these fees are typically well above the minimum, as shown in the table. The dynamic system works effectively even for smaller validators. Therefore, we see no issues here.

Moving forward, the dynamic commission is intended to incentivize stakers to distribute their stake more decentralizedly. Apart from a small number of stakers who actively support utility, most stakers chase APY blindly. Ideally, every staker would evaluate all relevant factors themselves—beyond just fees and personal cost savings. However, when most stakers assume “someone else will take care of it,” no one ends up doing it. Unfortunately, we have observed exactly this kind of large-scale staking behavior in history.

We have worked on this IIP for an extended period, including surveys with other validators, until we arrived at what we believe is the ideal solution from our perspective (important to note: this change does not affect us personally as company, as we already charge higher fees regardless).

We see the principle: Voting power ≈ responsibility

as a straightforward and protocol-level way to achieve this goal in the long term—in contrast to the current trend where stake is becoming increasingly centralized.

[dlt-green]

Has anyone in the community tried reaching out to other validators to exchange ideas and gauge the situation?

We have done so and look forward to ongoing input from fellow validators.

We're not doing this for ourselves, but for a decentralized network that prioritizes collaboration over rivalry.

That's why we're starting this public discussion—it's about the whole ecosystem, not just one validator. It's about the network.

And the dynamic approach in particular allows enough leeway, as long as some don't overdo it.

[iotaswiss-validator]

SwissIota is one of the effected validator. We are fine with the proposal. It will help the new validators gain traction with competitive fees.
We know the following is completely different topic but will add here just to get opinion:
Currently when there is unstaking the reward that was going to that unstaked amount is distributed to the rest of the stakers. Would it not be better to give that extra rewards to the validator. This way the validator is slightly compensated for its loss of revenue it incurred with that unstaking.

[dlt-green]

(Please stay on topic. If you have a new idea for the second part of your message, feel free to start another discussion. Thank you.)

Adding more validators does let you exceed the protocol's hard 10% voting power cap per idendity. So, in reality, your further suggestion would unfortunately not really achieve anything regarding our topic here.

[dlt-green]

Our IOTA staking analysis has a new look! Discover live data directly from the IOTA mainnet.
This updated analysis forms the basis for this IIP (with history), particularly regarding fee structures that will enable even more balanced stake distribution. (Note: With 18 validators, the current stake values ​​are so low that they don't even appear in the graph – however, this number is steadily increasing.)

https://dlt.green/en/services/iota-staking-analytics#staking-overview

[Azeuh]

On behalf of Meria :

We are supporting this proposal. We've seen the effects of zero or near-to-zero percent validator fee in some networks. It eventually ended with a minimum validator fee hardcoded in the protocol.

Network wants its stake to spread among validators, users want the best staking APR: win-win.

[dlt-green]

Yes agreed, we believe our dynamic (not static) approach is the better solution. A fixed minimum fee would of course also be possible, but it wouldn't support the new (small) validators. (Also the "dynamic braking effect" would also be lost if stakes accumulated quickly through near zero commission gambling).

[AngelBlock]

Stardust Staking supports the proposed solution. The race to 0% fee is a challenge faced by every POS network. This proposal aims to address this issue and enhance the reliability of validators. Furthermore, it helps validators be more cost-effective through receiving fair stake distribution, which aligns with the project’s objectives. Historically, users stake either to 0% fee validators, even when the difference is irrelevant, or to the top 5-10 validators with higher stake, harming network decentralisation and the Nakamoto coefficient.

This proposal is trying to resolve the first issue, but we will still see delegator stake going towards the top 5-10 validators. To tackle the second issue, we need to continue educating stakers and amplifying the importance of stake decentralisation.

[dlt-green]

We agree here; our proposal is a first signal. If it's circumvented, we can still react, but it's currently a model, that allows for even more free market dynamics overall. Education is important, but for that, you need a voice within the ecosystem, which is difficult if, for example, you're partially blocked or your comments are simply deleted. However, we always try to remain objective and react based on the issue at hand. Personal sensitivities have no place here, and a respectful tone must be maintained. Respectful interaction is always better in the long run. This proposal is a first step in the right direction on our part, and we're happy to supplement it with other IIPs in the future. We're also continuously working on our analytics page to improve it for sure and we will continue to monitor the network commision and staking behavior.

[vekkiokonio]

Thanks for the proposal, we really appreciate these contributions from the community, as they help the protocol grow!
The IOTA Protocol Research team will look into this IIP and share our evaluation and feedback once the review is complete.

[dlt-green]

Thank you in advance for an objective discussion and review. 💚

[curlycrypto184]

Nansen support the proposed Dynamic Minimum Commission based on Voting Power per Epoch and believe it is a thoughtful, proportional mechanism to address long-standing incentive issues in dPoS systems.

At a high level, the proposal correctly links responsibility (voting power) with economic commitment (commission), while remaining lightweight, automatic, and non-punitive.

[dlt-green]

Thank you for participating and sharing your opinion on the proposal; feedback, especially from validators with extensive experience and operating on multiple networks, is very valuable.

[keyring-support]

Thank you @dlt-green for researching on this topic, and bring out the proposal.
We as Keyring Staking are hesitate to make the decision to fully support it, because the commission rate is a social economy signal, and voting power is consensus related protocol. Mix the two items complex the system design and may not reflect future changes.

[dlt-green]

Sure, it's very important to understand that this isn't a prescribed fee, but rather this minimum fee is only intended to apply in extreme exceptional cases. As you can see, it affects most validators only minimally or not at all. For most validators, the fee isn't their business model for gaining voting power; instead, the fee is based on the validator's costs. We see a risk that, as it currently stands, competition is extremely distorted if larger validators operate with very low fees, thus preventing new validators from becoming more attractive because they simply lack the stake to operate. This isn't about defining a fee, as this minimum fee is far from the average. Rather, it's intended to prevent stake from being concentrated where it's no longer needed. And if a validator becomes so large that it can theoretically block an upgrade, and all the others then have too little voting power, then we have missed the point at which we should take action.

The further extreme scenario would be that one or more validators could no longer cover their costs and quit. Furthermore, the utility itself will also suffer if we simply stand by and do nothing, as it's the first thing to be cut. It's important to understand that a validator is more than just a hosting provider.

This is about a more sustainable network, and that can't be created if the only competition consists of demanding almost 0% commission and thus undermining the small validators. But of course, different opinions are welcome; we will naturally include your opinion in our survey.

[cyberphysic4l]

IOTA Foundation Research IIP Assessments

In recent weeks, two IOTA Improvement Proposals (IIPs), including this one, have been made by community members, each taking a different approach to solve the same problem of excessive voting power concentration in a small number of actors. We have impartially assessed each IIP and arrived at an IOTA Foundation position on each.

Proposal 1: Dynamic Minimum Commission (this proposal)

This first proposal introduces a dynamic minimum commission for validators exactly equal to their voting power with the goal of preventing large validators from setting excessively low commission and outcompeting smaller validators for attracting delegators. Setting a minimum price for a service in this way is known as price floor regulation and is a well established practice used to prevent monopolisation in many industries. It acknowledges that the larger a single supplier (validator) becomes, the more efficient they become and they can drive down their price, ultimately cutting all smaller actors out of the market unless regulated. Although efficiency and low prices (commission) is positive for customers (delegators), monopolisation can lead to complete elimination of competition and much worse outcomes. In DLTs, this is even more serious because centralisation of validator power is also detrimental to the security and integrity of the entire system, not just to the delegator market.

The figure below illustrates the proposed minimum commission function alongside several level curves showing the annual amount of IOTA earned through commission for different voting power and commission percentages.

One of the primary concerns with the proposed commission function is that it incentivises large validator operator's to simply split their stake over multiple validators to avail of lower commissions. However, there is a limit to how many times they can reasonably split their stake because each new validator comes with additional costs and a minimum stake. The level curves in the figure illustrate the fact that smaller validators must set significantly higher commissions than their large counterparts to cover these fixed costs or be profitable.

Stake Redistribution

The original IIP includes some static analysis of the new commissions for validators, but this does not take into account the resulting stake redistribution due to operators diving their stake over additional validators and delegators moving their stake in response to the new commissions. Here, we provide a brief analysis of the potential impact of these behaviours. This analysis contains important assumptions that do not perfectly reflect reality.

At the time of writing, roughly 27% of voting power lies with 15 validators with commission less than or equal to 2%. The bar plot in the figure below shows the commission of each validator, with low commission validators shown in red. The height of the bars is the commission and the width of the bars is the voting power of the validator.

Let us assume that the stake delegated to these low-commission validators is highly elastic, meaning that it will gradually move to the validator offering the lowest commission. Assuming all other stake in the system is inelastic, no operators split their stake and no other validators enter the market, we would expect the equilibrium distribution of the stake on these validators to be as shown in the figure below under the proposed minimum commission proposal.

The reason we expect to arrive at this equilibrium is that the smaller validators will be able to set lower commission to attract more delegators, and they will take the delegations from larger low-commission validators who have higher commission due to the new minimum commission rule.

When we remove some of the unrealistic assumptions, we begin to get closer to the true expected behaviour. For example, we must assume that operators will split their stake across multiple validators and that new low-commission validators will enter and leave the market in response to these changes. In this case, we will instead expect a similar equilibrium, but at a different level of voting power and commission due to the variable number of low-commission validators on the market. Accurately predicting the true equilibrium point of these low-commission validators is impossible, but observing that such an equilibrium should exist is sufficient for this analysis.

Small Validators Entering the Market

One of the goals of the proposal is to allow small new validators joining the system to attract more delegators when they are getting established. We expect this to be possible to a limited extent. We expect the system to tend towards having a cohort of low-commission validators that attract all the delegations of the more elastic delegators. These low-commission validators will be operating at a commission that is barely profitable, and will likely contain many validators run by the same large operators who can operate at lower costs due to the efficiency of running multiple instances. When a new validator enters the market, they will be able to set their commission lower, initially making a loss to attract delegators. They will be able to grow to the size of this cohort of low-commission validators where they may be able to make some profit, but not expected to be able to grow beyond this size by attracting delegators looking for low commission.

Alternative Minimum Commission Functions

The current proposal utilizes a linear relationship between voting power and minimum commission. While this is effective at penalizing centralization, it may be considered overly restrictive for large validators. A linear function may be too restrictive in the case of larger validators as it effectively negates the economic benefits of scale. This removes the freedom for large, efficient operators to lower their prices to compete.

Alternative functions could still enforce a rising price floor as voting power increases, but the rate of increase could diminish for larger validators. Examples include the piecewise linear function proposed in this comment, or a sublinear functions (e.g. square root). These alternative would act as a compromise: it is "fairer" to large operators by allowing them to retain some competitive pricing flexibility, but it applies less aggressive economic pressure to split or reduce stake. These functions would result in a weaker driver for decentralization compared to the strict linear model, but may be enough for healthy decentralisation.

Summary

Pros

• Easy, low-complexity implementation.
• Low number of existing validators impacted immediately.
• Makes it impossible to operate a near-zero commission validator profitably.
• Creates a barrier to large operators running low-commission validator services.
• Allows small validators to operate with competitively low commission while they become established.

Cons

• We still expect a low-commission validator market to exist with commission less than 2%, where the existing operators and some new operators run one or more validators.
• We expect it to remain very difficult for small validators to operate profitable based on the premise of attracting delegators through low commissions under this proposal.
• The incentive for large low-commission operators to split into multiple validators is a major inconvenience to these operators. A solution that does not encourage splitting would be preferable.
• Large actors will still be able to set lower commissions than if we used a simple fixed minimum commission of 5% (see appendix below).
• The unpredictability of commission and the need for delegators to constantly re-delegate is not good for user experience.

Proposal 2: VP Cap, Joining Stake and Admission Guard

The second proposal introduces the following changes:

• Reduction of voting power cap from 10% to 5%.
• Raising the minimum joining stake from 2M to 4M IOTA.
• Introducing an `admission guard' for validators to prevent delegation above the 5% level.

This second proposal does not include a dynamic element, so the resulting analysis is more streamlined.

The first component -- a reduction of the voting power cap to 5% -- has the impact of encouraging large operators to split into multiple validators when they reach this threshold. However, the threshold is still high enough that an operator can control a unhealthy level of stake with a relatively small number of validators.

The second measure attempts to address this concern by making it prohibitively expensive to create additional validators, but this also has the impact of making it prohibitively expensive for any other small actors to join as validators.

The third measure aims to protect delegators in the event of delegating to validators whose voting power goes over the cap, ensuring the rewards of other delegators do not become diluted.

Summary

Pros

• Easy, low-complexity implementation for the first two measures.
• Low number of existing validators impacted immediately.
• Creates additional barriers to single validators growing their voting power.
• More directly enforces splitting of excessively large validators.

Cons

• The third component of admission guard has relatively high implementation complexity and exact effect is unclear.
• Does not address the race to zero commission with large validators easily outcompeting small actors.
• Makes it more difficult for small actors to join the validator set due to increased joining amount.
• Although more direct an effect, it does not create any economic incentive to actually move stake away from large actors, only encourages splitting of stake.

IOTA Foundation Research Position

IOTA Foundation Research supports proceeding with the Dynamic Minimum Commission proposal (this proposal) to observe its impact on network behavior. We are in favour of promoting healthy decentralisation of validator power in the interest of network health, and we do not anticipate any aspects of the proposal to increase centralisation.

As highlighted in the proposal, only a small number of validators will be immediately impacted. These actors have the option to operate multiple validators if they wish to continue offering low commissions. Observing the delegation dynamics after implementing the proposal will give us further insights and allow us to investigate the potential benefits of alternative commission functions as discussed above. Given the complexity of these economic dynamics and the uncertainty of the actual impacts, we intend to treat the optimization of this function as a priority for future research rather than proposing a definite alternative at this stage. If we observe that the identified cons significantly impacts delegators' user experience or if stake remains overly concentrated, we will consider transitioning to an alternative minimum commission function, or a fixed minimum commission (e.g., 5%), which may offer a better long-term outcome.

Regarding the second proposal VP Cap, Joining Stake and Admission Guard, IOTA Foundation considers that it provides insufficient economic incentives to have any real impact on the voting and governance power of large actors. There is also insufficient evidence to promote the need for an increase in the minimum joining stake which will deter new small validators from joining the set. We also deem the complexity of the third measure to outweigh its practical benefits.

Appendix: Fixed Minimum Commission

An alternative solution discussed above that is worth discussing further is to set a fixed minimum commission of 5% for all validators, regardless of voting power. As mentioned in the original IIP, this has been used in other networks already, and its dynamics are simpler to analyse because it creates no incentive for operators to split their stake among several validators. "Low-commission" validators will have a fixed minimum of 5%, preventing a race to zero commission and unsustainable economics for small validators. Although it does not present an opportunity for small validators to offer even lower commission than their large counterparts, it allows them to be an equally viable alternative while still having the potential to make some profit and operate sustainably.

Summary

Pros

• Easy, low-complexity implementation.
• Already tested and verified in other networks.
• Makes it impossible to operate a near-zero commission validator.
• Good UX with predictable commission and less need for delegators to re-delegate.
• Allows small validators to offer equally low commission to large validators while also operating sustainably.

Cons

• Impacts the commission of a larger number of validators immediately.
• Only removes incentive to move delegation to large low-commission actors, does not actively incentivise moving delegation away from them.

[dlt-green]

#29 (comment)

[dlt-green]

Statement on: IOTA Foundation Research IIP Assessments

It is correct that a single identity could operate multiple validators in order to reduce the effective entry fee. We have, of course, carefully considered and analyzed this possibility.

However, with large stake amounts, this workaround would require operating 2–3 times as many validators. While this is an assumption, running additional validators significantly increases costs for the operator — including hardware, maintenance, monitoring, and operational overhead — making it considerably more expensive to reach the same effective commission level.

We agree with you: the measure makes circumvention substantially more difficult, but does not completely prevent it. This was intentional on our part — we deliberately chose not to set the threshold too rigidly.

Entry of small validators into the market

We expect the linear minimum fee to allow small validators to grow alongside the network. Naturally, this growth is limited, because as smaller validators attract more stake, the stake will again be redistributed across an increasing number of smaller operators. We have deliberately designed this balancing mechanism.

Summary

This creates a stake redistribution effect from large validators to smaller ones. As the smaller validators grow, stake is further redistributed among them, gradually leading to a more even distribution of stake from the bottom up. Of course, this is an assumption on our part.

A fixed minimum fee of 5% would completely eliminate this redistribution effect, but it would also definitively end the "race to the bottom."

Essentially, we have two viable approaches, each with its own pros and cons, and we are generally open to supporting either:

• Start with the dynamic variant first to lower the barrier
• If we see that this redistribution does not occur, tighten it with the minimum of 5% as you propose

We believe this is in line with the consensus of all validators who have participated in this IIP so far. (~45% VP)

[infrasingularity]

On behalf of InfraSingularity, We are Also supporting this proposal for the reasons given. Thanks @dlt-green and others!

[dlt-green]

Thank you for your support and participation.

[karloinv]

Endorphine Stake supports this proposal.

[dlt-green]

Thank you for your support and participation.

[DamienMLT]

Simply Staking supports this proposal. Thank you @dlt-green!

[dlt-green]

Thank you for your support and participation.

[staking4all]

Staking4All supports the proposal

[dlt-green]

Thank you for your support and participation.

[defiwukong]

ApeDAO supports the proposal.

[dlt-green]

Thank you for your support and participation.

[alum-labs]

ALUM Labs supports the proposal

[dlt-green]

Thank you for your support and participation.

[wannabit-yongjoo]

Cosmostation supports the proposal

[dlt-green]

Thank you for your support and participation.

[TesodeAll]

Allnodes supports this proposal

[dlt-green]

Thank you for your support and participation.

[maxsalar]

GIL System supports this proposal

[dlt-green]

Thank you for your support and participation.

[dlt-green]

Final Statement on IIP-29: Dynamic Minimum Commission Based on Validator's Voting Power per Epoch

The IOTA Improvement Proposal (IIP-29), drafted on January 16, 2026, by DLT.GREEN and supported by a broad coalition of community OGs and validators, introduces a protocol-level dynamic minimum commission rate set equal to each validator's voting power percentage (VP%) at the start of every epoch. The effective commission is calculated as max(configured commission, VP%). The core objective is to tie validator influence (responsibility) directly to economic commitment, discourage unsustainable near-zero commission strategies, reduce stake concentration, and foster long-term decentralization and validator sustainability in IOTA's dPoS ecosystem.

The proposal has garnered strong and widespread community support, with public endorsements from numerous validators (TokenLabs.Network, Stardust Staking, Meria, Nansen, Alchemy, BLOCKPI, Lavender.Five, InfraSingularity, Endorphine Stake, Simply Staking, Staking4All, ApeDAO, ALUM Labs, Cosmostation, Allnodes, GIL System, and many others), collectively representing significant network voting power (>50% without IF related validators).

The IOTA Foundation Research team has formally assessed the proposal positively and recommended proceeding with implementation to observe its real-world effects on delegation dynamics and decentralization. They consider it a lightweight, effective mechanism that addresses incentive risks without increasing centralisation risks and prefer it over alternative approaches (e.g., stricter VP caps or fixed minimums). Potential refinements, such as alternative commission curves or a future fixed 5% floor, may be evaluated based on observed outcomes.

As of February 04, 2026, we are now initiating Phase 2 of the IIP process and will shortly submit a Pull Request to advance the proposal toward formal review and potential on-chain governance. The proposal remains backward compatible, impacts only a small minority of current validators (primarily large low-commission operators), and requires minimal implementation complexity.

This mechanism offers a balanced, progressive safeguard for a healthier and more resilient IOTA validator set.
We extend our sincere thanks for the massive support this idea has received from the community and validators alike.

Thanks 💚

[HashKeyCloud]

Hello guys, this mechanism may incentivize large validators to split into multiple nodes to avoid higher minimum commissions, creating a Sybil risk where decentralization improves in form but not in substance. In addition, because commissions change with voting power each epoch, delegators’ returns may become less predictable and could encourage short-term stake migration.

That said, the mechanism can be iteratively improved, and in its current form it still helps promote decentralization and reduce the risk of excessive centralization.

[dlt-green]

As already described above, validators would need to run multiple nodes to bypass limits — which comes with significant additional costs (typically 2–3 times higher hardware expenses) and additional time for maintenance, etc.

If we will encounter such problems in the future, there's already a prepared "Step 2" in the discussion to address it (minimum commision 5%). ( #29 (comment) )

Multiplying hardware costs by 2–3 means the economics wouldn't stay the same for this validator — it becomes noticeably less profitable or sustainable. Additionally, this is only a minimum commission. Validators still set their own commision manually. If they choose one that's not too close to the minimum, nothing changes day-to-day.

Most validators won't be affected anyway, since they already run commissions close to the network average (and not near to zero).

The goal of this proposal is to provide smaller validators with greater flexibility, avoiding equivalence with established large validators. An apt analogy is regulatory frameworks for businesses: small enterprises face fewer obligations than large corporations, but compliance requirements scale with size.

Similarly, here: validators with higher voting power bear greater responsibility, receiving reduced leeway to accumulate stake through aggressive fee structures.This mechanism offers improved safeguards against centralization compared to the status quo, while intentionally preserving some flexibility to facilitate stake migration toward smaller validators.

Additionally, sustained near 0% commissions are no longer viable — at most, they can be used briefly during validator onboarding, which we consider permissible and beneficial.

[alexsporn]

The proposal was assigned IIP-8:
https://github.com/iotaledger/IIPs/blob/main/iips/IIP-0008/IIP-0008.md

[alexsporn]

This change is scheduled for protocol version 20 in the 1.17.x release.