Harmony hosted a public AMA with Delphi Digital team and our Co-Founder Nick White in Harmony’s Telegram community. This is a transcript of the conversation.

Nick White [Co-founder Harmony]:

Alrighty, it’s my pleasure to welcome @YanLib1 from Delphi Digital. Here to talk to everyone today about our cryptoeconomic model. Does anyone have any burning questions?

Yan Liberman [Delphi Digital]:

Hey everyone!

Nick White [Co-founder Harmony]:

So let’s start out with Yan, can you introduce yourself and Delphi Digital?

Yan Liberman [Delphi Digital]:

Thanks, Nick. Hey Everyone, I’m Yan Liberman here with Delphi Digital. We’re an independent research and consulting firm focused on the digital asset space. We all came from the traditional finance world (equity research and leveraged finance) and wanted to bring that type of analysis to the crypto space.

Nick White [Co-founder Harmony]:

I’ve had the pleasure of being on Delphi Digital’s podcast with Tom Shaugnessy. They have an incredible team that bridges expertise in crypto and traditional finance, a very powerful combination.

So Yan, can you walk us through some of the research that went into the Harmony staking model?

In the meantime, guys, please ask any questions you have about Harmony’s staking model and crypto-economics in general.

Yan Liberman [Delphi Digital]:

Absolutely. In our approach, we wanted to focus on security and longevity, while mitigating the cost for them (which can be thought of as issuance). Our goal was to create a dynamic structure with built-in incentives to keep a consistent amount of nodes operating at our target stake.

Nick White [Co-founder Harmony]:

Exactly! We need to balance security and longevity for the network. @YanLib1 what do you think the flaws are in having a hard cap on token supply?

Yan Liberman [Delphi Digital]:

Hard caps certainly have their benefits when it comes to SoV characteristics, but it does create significant sustainability risks. It requires you to accurately predict when network fees will really pick up, which is extremely difficult. If mistimed, sustainability can be put at risk as the network can no longer reward miners/validators before a thriving network can be established.

Nick White [Co-founder Harmony]:

Indeed. While having a fixed supply is nice on paper it also introduces potential instability for the protocol in the future.

@YanLib1 what are the important slashing/bonding mechanisms that contribute to security?

Yan Liberman [Delphi Digital]:

Slashing/bonding are great instruments to bolster security by increasing the opportunity cost of an attack. With slashing you’re able to penalize malicious nodes by slashing away part of their stake. Bonding is very useful for making large scale attacks uneconomical because it creates a delay between when an individual chooses to withdraw their node and when they actually get the underlying coins back. This allows the network to determine which nodes are malicious and penalize them directly.

Nick White [Co-founder Harmony]:

What kind of due diligence did we do to ensure that the staking yields are profitable for validators running nodes?

Yan Liberman [Delphi Digital]:

We (Delphi and Harmony) went through many many iterations of structures as we analyzed every potential setup to make sure nodes were properly incentivized. We factor in different cost structures, different staking levels, and even what competitors are doing to make sure operating a node was both profitable and appealing use of capital.

Nick White [Co-founder Harmony]:

@YanLib1 can you describe the path to economic sustainability for blockchain protocols?

Yan Liberman [Delphi Digital]:

Issuance, particularly when on the high end, can be thought of as a bootstrapping mechanism for protocols. The goal is to use issuance to support the security of a network as applications get built on it. With those applications, you develop a thriving fee market that can eventually replace the early issuance. The use of the network effectively supports its security.

Nick White [Co-founder Harmony]:

Thanks for that @YanLib1. Great insight!

Jacek [Community Member]:

What is the biggest challenge when building #defi?

Nick White [Co-founder Harmony]:

I’ll take this. I think an interesting challenge to consider when building DeFi is how staking rewards factor in. In a sense, staking rewards and any interest earned via DeFi protocols are competitive with one another

So a high enough DeFi return could lure away assets being staked which could undermine the security of the network

An interesting development in this area is that of staking derivatives which may allow you to simultaneously stake your coins and submit them into DeFi protocols as collateral.

Sonny [Harmony CM]

@nickw123 Got this question earlier from a community member who wants to know if you can disclose the identity of the third-party auditor.

Nick White [Co-founder Harmony]:

I’m not sure yes or no on that one. I’ll have to check.

Sonny [Harmony CM]

They also want to know if the audit will be made public in any form.

Nick White [Co-founder Harmony]:

Not sure. I will check.

Mario Boy🙋‍♂️, [Community Member]

Hi. Another relates to the stability of the relay, in which many transactions occur in one time, causing the moon competition to be matched in a specific time while basically not having. Which transaction happens in another time. So does the relay not always work?

Nick White [Co-founder Harmony]:

Not sure exactly what you’re asking here. But perhaps you’re wondering about composability? Composability is certainly an important aspect of DeFi as it allows multiple protocols to be used together to achieve a more complete financial product.

Lex De F, [Community Member]

What are your main milestones for 2020?

Nick White [Co-founder Harmony]:

Coming soon in a blog post/newsletter!

Lord Click [Community Member]

Has Harmony factored in manipulation to their tokenomics.

Nick White [Co-founder Harmony]:

What kind of manipulation? Exchange manipulation? Unfortunately, certain kinds of manipulation cannot be addressed within the economic model.

Jacek [Community Member]

What could trigger the number of validation nodes and how it will impact a staking model?

Nick White [Co-founder Harmony]:

What do you mean by “trigger”?

Jacek [Community Member]

I presume that a bigger network usage could rise a need for higher performance (= one of the triggers).

Nick White [Co-founder Harmony]:

Oh, I see, you’re asking what would trigger additional nodes/shards being spun up?

Jacek [Community Member]

Yes, and as a consequence what will be the impact on staking?

Lord Click [Community Member]

What determines if more shards should be added to the network?

Nick White [Co-founder Harmony]:

New shards will be added when the capacity of existing shards show strains. The impact on stakers will be minimal. Only that more nodes will be available for people to run and therefore if the aggregate amount of tokens staked remains constant, the average amount of stake per node will decrease.

The added overhead cost of running the new nodes should be small enough not to affect validator returns.

Lex De F [Community Member]

Are you well-funded? Can you survive more than 2–3 years in a bear market?

Nick White [Co-founder Harmony]:

Yes, we can 😊.

Mario Boy🙋‍♂️ [Community Member]

Q2. There are a lot of projects using Blockchain protocols that approach sharding and PoS, Why can you confidently win against them? Tell me more about “deep sharding”.

Nick White [Co-founder Harmony]:

We are the first sharding PoS chain in production, so our time to market is a huge advantage. In addition to that, we target scalability not just on the consensus layer, but also on the networking layer. This approach that goes all the way down deep to the networking layer is what we call “deep sharding” and gives us tremendous speedups over other scaling approaches.

Lex De F [Community Member]:

Do you have an ambassador program?

Nick White [Co-founder Harmony]:

Yes, we do! PM me

Mista Vauros [Community Member]:

Will you be supporting Trust Wallet/One Connect platform for ONE staking?

Sonny [Harmony CM]

Yes. Check out staking.harmony.one

Mista Vauros [Community Member]:

I don’t see an option for Trust Wallet staking. When will it be available? I’m talking about staking from within the app, not using a browser extension or Ledger…

Nick White [Co-founder Harmony]:

No ETA yet. Will keep you updated

Crypto Doc [Community Member]:

No ledger support for bep2 tokens yet?

Sonny [Harmony CM]:

BEP2 support for ledger involves using Binance dex to interface with the device.

Duvidl Hearts [Community Member]:

Yan, have you worked on other cryptoeconomic models and how do you see the chances for Harmony on the future market?

Yan Liberman [Delphi Digital]:

I have certainly worked on other cryptoeconomic models, and I think Harmony’s is well structured for the future. While the structure is certainly important, other factors definitely come into play. Aside from all our calls and meetings, we had the pleasure of working on-site with the team for a few days. I can’t emphasize enough how impressed we were with their ability to deliver and just the general constructive atmosphere. A lot will come down to adoption, and I think their team will continue doing a great job of creating a system that encourages it.

C10NU7🇷🇴 [Community Member]:

So Nick 😁, when Epos it would be live from what i have read and understood, we will have 4 shards with 80 validators each, correct? How the 320 validators will be chosen 🤔 …based on …

Nick White [Co-founder Harmony]:

There will be 4 shards with 250 validators each, but each will only have 80 external nodes

C10NU7🇷🇴 [Community Member]:

My fault as I didn’t mention 80 ext. 😁

Nick White [Co-founder Harmony]:

So the 320 validators will be chosen based on which validators have the top 320 stakes.

Nick White [Co-founder Harmony]:

But where EPOS comes in is that has an equalizing effect on everyone’s stakes. The way it works is that the median stake determines a ceiling and a floor on rewards for all nodes

C10NU7🇷🇴 [Community Member]:

So the first served the rich 🤔 stakers.

Nick White [Co-founder Harmony]:

No, the purpose of EPOS is to balance that. Also, if someone doesn’t have enough stake to make the top 320, they can always delegate

Furthermore, in the future, there will be 1000 or more nodes meaning that you will not need so much stake to be included.

C10NU7🇷🇴 [Community Member]:

And how we can avoid an agreement between rate validators, the commission you will pay for the delegation 🤔.

Nick White [Co-founder Harmony]:

It becomes a competitive market

C10NU7🇷🇴 [Community Member]:

tbh with my 1.5 million tokens, I am afraid with that validator seat I am dreaming about 😂…but that’s it. I will delegate them if the fees set by validators don’t skyrocket 20% all of them 😁.

Nick White [Co-founder Harmony]:

So the rate is set by competition among validators. Yes, well another thing you could do is open your own validator! Then you could collect fees 😊

C10NU7🇷🇴 [Community Member]:

Yes, but if I will catch a seat between those 320 external nodes 😉 or am I missing something? 🤔

2% > 20% 😁

Nick White [Co-founder Harmony]:

you can create a validator and request people to delegate to you. Then you can get enough tokens to be in the top 320.

Jacek [Community Member]:

No cap on delegation?

Nick White [Co-founder Harmony]:

You can set a cap on how much delegation you will accept.

C10NU7🇷🇴 [Community Member]:

Hmm… Then I will ally with my Pangaeans brothers 😈😂…

Nick White [Co-founder Harmony]:

YES! That’s exactly the point.

Anton [Community Member]:

Will Harmony support 1-click migration from Ethereum?

Nick White [Co-founder Harmony]:

Yes, we want to make it as simple as possible to migrate

Anton [Community Member]:

Great. One more question I have is… Harmony seems to be the first PoS blockchain with full sharding. Why has the rest of the cryptocurrency industry not been able to solve this issue while Harmony supposedly has?

Nick White [Co-founder Harmony]:

The solutions are out there, the difference is the speed of execution!

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