ACP-247: Delegation Multiplier Increase Maximum Validator Weight Reduction

Abstract

This Avalanche Community Proposal advocates for two targeted adjustments to Primary Network validator staking parameters: (1) reducing the maximum validator weight from 3,000,000 AVAX to 1,000,000 AVAX to prevent excessive stake concentration; and (2) increasing the delegation multiplier from 5x to 24x to enable validators to efficiently serve larger delegated bases within the new weight constraint. These changes maintain the 2,000 AVAX minimum validator stake and focus on improving capital efficiency for existing, well-capitalized validators rather than broadening participation.

Motivation

Current Capital Efficiency Problem

The Avalanche Primary Network currently limits validators to a 4x delegation multiplier, creating suboptimal infrastructure utilization. A validator with 2,000 AVAX self-stake can accept only 8,000 AVAX in delegations (4x multiplier), yielding a total weight of 10,000 AVAX.

Economic Reality at Current 4x Multiplier (at $20 AVAX, 8.25% APY, 5% delegation fee):

This marginal profitability (~55% margin) creates structural problems:

• Many validators operate below capacity (not 8,000 AVAX fully delegated)
• Some validators forced to run multiple nodes to achieve sufficient scale
• Infrastructure investment is heavily underutilized
• Validator economics are fragile, attracting only well-funded entities
• Sensitive to delegation fee pressure (any reduction below 5% hurts profitability)

Real Network Evidence: Validator Underutilization

Real validator distribution data (as of October 28, 2025) provides empirical evidence of the problem:

Critical Finding: Over half of all validators have zero delegations despite having the technical capacity for up to 8,000 AVAX under current 4x multiplier. This reveals:

1. Validators don't put much effort into collecting delegations because they can't really make a business out of it
2. Delegation is highly concentrated among only ~100 top-performing validators
3. Current system severely underutilizes validator infrastructure across the network
4. Small validators (2k-5k AVAX self-stake) cannot compete for delegations

Validator Self-Stake Distribution:

• 447 validators (52.3%) have only 2k-5k AVAX self-stake
• Most of these are probably unprofitable or barely breaking even
• They cannot attract delegations at current economics
• Our profitability calculations ($180/month) match their behavior

Maximum Validator Weight Centralization Risk

The current 3,000,000 AVAX maximum weight limit allows individual validators to accumulate excessive stake (0.42% of 720M AVAX total supply).

Proposed 1,000,000 AVAX cap would reduce this to 0.14% per validator, promoting more distribution in both self- and delegated stake.

Proposed Solution

Implement two complementary changes:

1. Reduce maximum validator weight to 1,000,000 AVAX - Prevents dangerous concentration
2. Increase delegation multiplier to 24x - Increases the maximum potential rewards that validators could receive from delegations, not changing any of the underlying incentives of delegation if not flipping the perception of maximum rewards for validators on Avalanche.

Resulting Economics at 24x Multiplier (at $20 AVAX, 2,000 AVAX self-stake, 8.25% APY, 5% delegation fee):

This transformation:

• Makes validators economically viable at 50%+ delegation capacity
• Eliminates need for multi-node operations for profitability
• Unlocks dormant validator capacity (current 52.8% with zero delegations)
• Enables sustainable single-node operations at scale

Specification

Technical Changes

Change 1: Maximum Validator Weight Reduction

Current Parameter:

MaxValidatorStake = 3,000,000 AVAX

Proposed Parameter:

MaxValidatorStake = 1,000,000 AVAX

Implementation Details:

• Affects calculation of maximum validator weight (stake + delegations)
• Existing validators exceeding 1,000,000 AVAX weight are not immediately affected
• New delegations to validators at or above 1,000,000 AVAX total weight are rejected by consensus
• Validators already exceeding 1,000,000 AVAX continue earning rewards until staking period ends
• Upon period end, rewards paid and stake returned; new staking cannot exceed 1,000,000 AVAX

Rationale: Prevents single validators from accumulating excessive network influence while allowing existing large positions to mature naturally.

Change 2: Delegation Multiplier Increase

Current Parameter:

DelegationMultiplier = 4

Proposed Parameter:

DelegationMultiplier = 24

Calculation Formula:

MaxDelegatorStake(validator) = Min(ValidatorStake * 24, MaxValidatorWeight - ValidatorStake)

Example for 2,000 AVAX validator:
MaxDelegatorStake = Min(2,000 * 24, 1,000,000 - 2,000)
MaxDelegatorStake = Min(48,000, 998,000)
MaxDelegatorStake = 48,000 AVAX

Implementation Details:

• Applies uniformly to all validators
• Only validators with 40,000+ AVAX self-stake cannot utilize full 24x due to 1M weight cap
• All 2,000 AVAX validators can deploy full 24x multiplier
• Non-breaking for existing delegation relationships

Unchanged Parameters

The following parameters remain UNCHANGED:

Economic Impact Analysis

Validator Profitability Scenarios

All scenarios calculated at:

• AVAX Price: $20 USD
• Annual APY: 8.25% (average, varies by network conditions)
• Delegation Fee: 5% (fee validator charges on delegator rewards)
• Monthly operational costs: $150 (cloud hosting, bandwidth, monitoring)

Scenario 1: Solo Validator (No Delegation)

Conclusion: Solo operation equally profitable in both cases; validators must attract delegations for profitability.

Scenario 2: 50% Delegation Capacity

Conclusion: 24x multiplier increases profitability by 90.2% at 50% delegation capacity. Validators reach break-even and profitability much more easily.

Real Network Impact: Current data shows 52.8% of validators (451) have ZERO delegations. At 50% capacity with 24x, these validators become economically viable, incentivizing them to accept delegations.

Scenario 3: Full Delegation Capacity (100%)

Conclusion: 24x multiplier increases profitability by +152.8% at full delegation. Transforms validators from barely-profitable to highly profitable operations.

Sensitivity Analysis: Impact of Different Delegation Fees

With 50% delegation capacity filled:

Key insight: 24x multiplier provides 1.5-2.5x better economics across all fee rates. Current model is highly sensitive to fee compression; 24x multiplier provides a financial buffer.

Fee Market Implications

Current 4x Model:

• Validators barely profitable even at 5% fees
• Significant pressure to accept low fees to attract delegations
• Unsustainable economics push toward multi-node operations
• 52.8% of validators choose NOT to accept delegations (uneconomical)

Proposed 24x Model:

• Validators achieve healthy profits at standard 5% fees
• Can sustain competitive fee discovery without margin pressure
• Enables single-node operations at scale
• Market-based fee competition works as intended
• Expected outcome: More validators accept delegations, earning fees

Network Impact Analysis

P-Chain Load Considerations

The 24x multiplier change has minimal impact on P-Chain resources:

Why minimal impact?

• Validator count unchanged (no new validators)
• Each validator has same duty requirements
• Delegations already tracked; multiplier doesn't add overhead
• Maximum weight cap prevents runaway growth

Consensus Security

Sybil Resistance: Unchanged

• 2,000 AVAX minimum stake maintained
• Economic cost to create malicious validator unchanged

Centralization Risk: Improved

• 1M AVAX maximum weight reduces concentration
• Individual validators limited to 0.14% of maximum supply (vs 0.42% current)
• Prevents dangerous mega-validators

Consequences Analysis

Positive Consequences

1. Validator Capital Efficiency Improves (Very High probability, High severity)

• Single validators serve 6x larger delegated bases (8K -> 48K AVAX)
• Infrastructure investment better utilized
• Eliminates need for multiple-node operations

2. Validator Profitability Increases Substantially (Very High probability, High severity)

• Fully delegated validators earn 152.8% more ($180 ->$455/month)
• At 50% delegation: +90.2% improvement
• Makes validator operations genuinely profitable
• Attracts professional infrastructure operators

3. Unlocks Dormant Validator Capacity (Very High probability, High severity)

• 52.8% of validators (451) currently have zero delegations
• Improved economics incentivize these validators to accept delegations
• Converts uneconomical validators into active, capital-efficient operations
• Significantly increases network capital deployment

4. Fee Market Stabilizes (High probability, Medium severity)

• Validators can maintain 5%+ fees without margin pressure
• Sustainable economics support long-term operations
• Delegators benefit from stable, profitable validators
• Competitive fee discovery enabled

5. Prevents Dangerous Centralization (Very High probability, High severity)

• 1M AVAX cap prevents mega-validators
• Individual validator influence limited to 0.14% (vs 0.42% current)
• Maintains security through diversification
• Real data confirms no validators exceed 2.5% currently

6. Minimal Network Disruption (Very High probability, Medium severity)

• No new validator cohort entering (no min stake change)
• Validator count unchanged (~854)
• P-Chain load impact minimal
• Easy implementation (2 parameters only)

Negative Consequences

1. Delegation Concentration Risk Increases (High probability, Medium severity)

• Larger multiplier enables validators to accumulate more delegations
• Top performers may attract disproportionate share
• Network vulnerable to large validator failures

Mitigation: 1M AVAX weight cap prevents validators from becoming too large. Current 2.5% max means risk is contained.

2. Geographic Diversity Unchanged (High probability, Low severity)

• Entry barrier remains $40,000 (unchanged)
• Validator count unlikely to increase (~854 baseline)
• Cloud provider concentration persists

Mitigation: This proposal optimizes efficiency only; separate initiatives address diversity.

3. Fee Market Competition May Decrease (Medium probability, Low severity)

• Fewer new validators entering (no min stake reduction)
• Existing validators less pressured on fees
• Delegators have same validator options

Mitigation: 24x efficiency enables competitive fee discovery without external pressure.

4. Network Accessibility Unchanged (Very High probability, Low severity)

• $40,000 entry barrier maintained
• Small token holders cannot become validators
• No improvement for less wealthy participants

Mitigation: This proposal optimizes efficiency, not accessibility. Different ACPs can address participation barriers.

Backwards Compatibility

Breaking Changes: None

This proposal maintains full backwards compatibility:

1. Existing Validators: All continue operating normally
2. Existing Delegations: No modifications required
3. Reward Calculations: Formula unchanged
4. Staking Durations: All parameters unchanged
5. Uptime Requirements: 80% threshold unchanged

Transition Mechanism

Phase 1 - Activation:

• New parameters take effect at specified block height
• Existing validators with weight > 1M AVAX continue operating
• New delegations to validators > 1M AVAX weight are rejected

Phase 2 - Maturation:

• Existing large validators' delegations mature naturally
• Upon maturation, new stakes must comply with 1M AVAX cap
• Validators rebalance to optimize under new parameters

Phase 3 - Equilibrium:

• Network reaches new steady state
• Validators optimize delegation capacity within constraints
• Fee market establishes new equilibrium

Open Questions

Core Question: "Should Avalanche prioritize validator capital efficiency through multiplier increase and weight cap reduction?"

Supporting Questions:

1. Is 24x multiplier appropriate?
2. Is 1M AVAX the right weight cap?
3. Should minimum stake remain at 2,000 AVAX?
   • YES: Maintain current barrier (approved)
   • NO: Lower it (pursue separate ACP)

Copyright

Copyright and related rights waived via CC0.