How to Choose a Reliable Validator?

In choosing an appropriate validator for staking CROs, you must consider many aspects. Always do your own research first, because, when using the DeFi Wallet CdC’s (Crypto.com) ranking algorithm, it is not necessarily ranking the “best” validators, e.g., those in the top ten. Many factors are used to determine order. The following checklist provides some guidance as to what to take note of when selecting a validator for CRO staking:

(1) A trade-off between commercial and privately operated validators. Commercial validators are more likely to have a professional setup, but they may be less committed to the CdC project. This is because they tend to operate multiple validators on different blockchains, making it challenging to keep up with, e.g., updates and proper maintenance. As recent events have shown, this may lead to jailing. Privately operated validators may not have the appropriate infrastructure or technical expertise, but may be strongly committed to the CdC project. While it is impossible to assess the exact infrastructure of a privately operated validator, an inadequate setup can result in lower up-time and jailing if dropping below a certain minimum.

(2) Three indicators that provide important insights into the professionalism of a validator. They are: a) uptime, b) number of jailings, and c) participation in voting. Unfortunately, there is no single number that helps differentiate a professional validator from a non-professional, but the numbers taken together offer give a solid picture.

(a) Uptime: Overall uptime indicates the reliability of a validator. It is limited to 100%. However, it is not abnormal if a validator does not reach 100% uptime. This can occur for many reasons, such as downtime for, e.g., maintenance, Internet outages, or network glitches. Generally, most good validators have at least 99% uptime. Lower numbers may suggest a non-professional setup, negligence, poor internet connectivity, etc.

(b) Number of jailings: This metric gives a good indication of the professionalism of a validator. Jail is imposed if a validator misses validating at least 5% of the prior 5,000 blocks. Generally, professional validators should never be jailed, partly because they may lose delegations. This may lead to dropping off the Top 100 List, and delegators will cease to earn staking rewards with those jailed.

(c) Participation in voting: This measure is part of a validator’s community responsibility. It is vital for validators to stay informed about, e.g., upgrades, and to be part of discussions and voting. Active voting is an essential component for ensuring that upgrades reflect the community’s interests. Professional validators should be transparent about voting, and about their reasoning on respective validators’ websites. 

(3) Other important factors are validators’ “commission rates,” “max rates,” and “max change rates.” This information can be found at https://crypto.org/explorer/validators. The commission rate is the percentage the validator receives from the rewards. For example, assume a validator has a commission rate of 10%, and receives 100 CROs in staking rewards. The validator will keep 10 CROs as a fee for the staking service, and 90 CROs will be paid out to delegators. The max rate is maximum commission a validator can charge, and max change rate is the amount the commission rate is permitted to change every day. For example, assume for the above example a max rate of 40%, and a max change rate of 10%. The validator could bring the commission rate from 10% to the 40% maximum within three days. Generally, delegators should check that max rate and max rate change are “reasonable,” meaning it would not be possible to bring up the commission rate from 0% to 100% within a single day (assuming a max rate and a max change rate of 100%). It is also not reasonable if the max rate and max change rate are 0%, meaning the commission rate will be 0% forever, or if the validator is never compensated for staking services, which is not sustainable. Running a validator professionally comes with costs paid in hard dollars (equipment, AWS, etc.) and time. Therefore, it is expected that high-level validators will charge a fee, and this should provide delegators with some peace of mind.

(4) A significant amount in self-delegations. This ensures “skin in the game,” and that interests will be aligned with those of delegators. In the event of a jailing, it will hurt the validator, because the self-delegated CROs do not earn staking rewards during jail time.

(5) Paying close attention to soft facts! For example:

(a) Does the website look “professional,” with a professional custom contact email address?
(b) Is the team running the validator present on Discord, Telegram, or Reddit?
(c) Is the team running the validator responsive to questions?

(6) Avoid staking with official CdC validators. This is important to maintain network decentralization, because they have a combined voting power of at least 85%. This means the network is essentially centralized, and the community‘s interests may not be fairly represented.