Minimum provider commission floor on the staking dashboard

[aminsammara]

Context

A large portion of the AZTEC supply becomes stakeable later this year. This creates a massive delegation event — and a game theory problem around provider commission rates.

The problem

Today, the median provider commission is 5%. At the current reward level (350 AZTEC sequencer reward = ~$7.84/checkpoint at today's prices), this is below the gas cost floor — providers earn $0.392/checkpoint in commission but pay ~$0.40/checkpoint in gas. Every provider at 5% commission is operating at a loss on every checkpoint they submit.

This is rational behavior: providers are subsidizing delegators now to capture market share, with the expectation of monetizing later. The long exit times make delegations sticky, so this is a customer acquisition investment.

The concern is what happens when the commission adjustment tooling ships (see #40). If providers begin raising commissions at different times, a concentration dynamic emerges:

1. Smaller providers feel the margin squeeze first as they have fewer delegations, less capital runway, and less brand leverage. They'll raise commissions first.
2. Larger providers can afford to subsidize longer. The top 5 providers control ~48% of the active sequencer set. They can hold rates at 5% while smaller operators raise to 10%+.
3. When new supply becomes stakeable, new delegators flow to the cheapest providers. Delegators are rate-sensitive at the margin.
4. Result: large providers capture a disproportionate share of inflows. The network ends up more concentrated, not less.

This is the Lido/Coinbase dynamic on Ethereum: stake concentration and a threat on the decentralization of the Aztec Network.

What I'm proposing

A minimum commission floor of 15% enforced at the staking dashboard level (not the protocol level). Providers who set their commission below the floor would be hidden from the default view on stake.aztec.network.

Delegators could still find and delegate to below-floor providers through direct contract interaction or via 3rd party dashboards, but the default UX over at stake.aztec.network would not surface them.

Impact on delegator APY

At the current set size (3,384 sequencers) and reward level (350 AZTEC), the impact on delegator returns is minimal:

Commission	Delegator APY	Reduction vs 5%
5% (current median)	21.5%	—
8%	20.9%	-0.7pp
10%	20.4%	-1.1pp
15% (proposed floor)	19.3%	-2.3pp
20%	18.1%	-3.4pp

A 15% commission costs delegators just ~2 percentage points of APY — from 21.5% to 19.3%. This is still far above Ethereum staking (~2.7%) or Solana delegation (~5.1%)

Impact on provider economics

While the delegator impact is negligible, the effect on provider viability is outsized. At 15%, the commission per checkpoint ($1.18) exceeds gas ($0.40) by a healthy margin.

This means more providers can operate sustainably, the barrier to entry for new providers drops, and the network is not at risk of provider concentration.

Feedback requested

1. Is a dashboard-level commission floor the right mechanism, or should this be protocol-enforced?
2. Is 15% the right floor? Should it be higher or lower?
3. Are there unintended consequences I'm not seeing?

[aminsammara]

While on the subject of the dashboard, I would like to also propose that providers be (by default) sorted on the basis of their checkpoint fill rate. Providers that miss the least checkpoints should rank near the top of the dashboard. This is the single best (currently useful) metric that ranks providers based on their contribution to the Aztec Network.

[EmrePiconbello]

I agree with checkpoint but the only reason I created a point system is that a provider with five sequencers can miss two or three checkpoints because it was 30 gwei at the time, which is an unrealistic number for anyone to propose at. That provider stays at a low percentage all the time, while one with more than 100 sequencers can mess up five to ten sequencers completely, even get slashed, and not be that affected because of the number of proposals they get so often. Also, any provider with just one or two sequencers becomes 100 percent because of the very rare checkpoints they have. The committee is small and attestations do not have weight. If we reach something like what is on Ethereum, we could have a very fair point system like the beacon score from beaconcha.in, which is explained here: https://docs.beaconcha.in/beaconscore/introduction. Until that time, I would suggest coming up with something similar to this: https://aztec.vision/docs/score. I do not have much free time to find a fair solution, as the only onchain metric was the checkpoint. With pipelining, this should also become 2x for the one missed and have no effect for the follow up miss. Sequencer activity and participation are so low and random at the moment, which is the main reason behind not being able to find any fair scoring system under the current parameters. Chain allows so we shouldn't come up with arbitrary weights and numbers to rank sequencers. If protocol level is fixed then that's a different case.