The Dynamics of Bond Wars

How Validators Compete and Collaborate in Maya

• "Bond Wars" refers to the competitive race among validators in Tendermint-based networks to secure a spot in the active set by staking more tokens.

• Bond wars increase the network's overall security because validators risk having a portion of their bonds "slashed" if they act maliciously

• Maya has implemented an "Incentive Curve control mechanism" to balance out the economic effects of Bond Wars.

Today we’ll discuss “Bond Wars”, an informal term in the context of Maya and Tendermint-based networks. While the name might sound like a sci-fi thriller, Bond Wars emerge from the competitive dynamics between validators trying to secure a place in the network's active set and have mostly positive consequences for their protocol. Let's dive deeper into this phenomenon.

The Tendermint consensus engine behind blockchains like Cosmos and Maya underpins the concept of Bond Wars, so we’d recommend you review our article on the subject. In it, we describe how validators are computer nodes that validate and propose blocks in a blockchain, and how during the Tendermint proposal rounds, some validators become active and some others inactive.

Nodes earn the privilege to be active - and thus to earn lucrative Validator Rewards - primarily by bonding or staking a bigger amount of tokens. Because having nodes with higher bonds lead to more security, the network gives preference to them. Eventually, given the limited slots for active validators, a competitive race among nodes is created, where more nodes try to post bigger bonds than their peers continuously.

In simple terms, nodes increase their stake, hoping to secure or retain their position as validators. As one validator increases its bond, others follow suit, leading to a competitive scenario. This constant battle of increasing stakes is where the term "Bond Wars" comes from.

Implications of Bond Wars

The Bond Wars, at their core, are beneficial for the network. A higher total staked amount indicates greater network security as potential malicious actors would need to control a larger amount of the total stake to attempt an attack. Tendermint-powered blockchains are also allowed to “slash” a portion of a validator’s bond if they act maliciously or negligently, which is a strong disincentive against malicious actions.

Having said this, Bond wars can also mean that smaller validators get pushed out by wealthier ones constantly or that the network resources become unbalanced, with too many of its assets being hoarded by validators. In Maya, to compensate for that, an Incentive Curve control mechanism has been designed. 

The Maya Incentive Curve

This system programmatically adjusts block rewards and liquidity fees to increase or decrease depending on the total amount of assets being held by validators versus that being held in the pools. You can read more about it here.

Bond Wars are an extraordinary showcase of the liveness and the dynamic nature of DeFi. They underline the balance between competition and cooperation that is essential for the health and security of blockchain networks and serve as a great example of a self-regulating system. As the world of decentralized finance continues to mature, understanding phenomena like Bond Wars becomes more important, that is why we write and publish a new technical Maya Academy article every week. You can join our official Discord Server to let us know what you think about these, suggest new articles and stay in touch with our growing community. See you there!