Building a Community of Node Operators

In an earlier essay (Node Operators - A Return to Pre Industrial Farming for the Digital Age), I likened node operators as a type of digital agrarian economy.

I think what is occurring is that node operators will be doing a couple of things:

We are already seeing node operators diversifying across multiple blockchains, and it will be worthwhile to understand their thinking, strategy and approach to doing so.

This is likely not straightforward since they need to optimize for their time and resources devoted to a given protocol, while also having some kind of insight or foresight into the success, both in earning potential and in future upside of earned crypto tokens.

There will not be a way to create an index fund; the node operators need to be "stock pickers."

However, as cross-chain staking solutions continue to evolve, they may still be able to diversify their risk, perhaps even find arbitrage opportunities. But this is a hassle and my hunch is a service which helps them manage this could be useful.

The second area will be specializing in skills or services. As node stacks become more complex and the protocol service layers need to compete and also specialize, maintaining and improving those stacks will be important.

The third area which I think has yet to be fully explored is how node operators that do have allegiance across multiple protocols can, themselves, benefit from becoming a community of collaborators / competitors.

In ways, they do need to compete in a healthy way in some protocols which issue rewards based on service delivery. The best service provider wins. Many of these will be geo-dependent, so local competition could spring up.

At the same time, these should be ways to foster collaboration in the community; and I'm not sure exactly what the mechanism is for this.

The clearest example would be if there's public infrastructure or software that benefits them all, and they collaborate on both develop and deployment; there could be some free-ridership, but if the network effect can kick in -- those who don't contribute to development still add value to the network by virtual of deployment -- that seems to be a way to foster stronger community.

Direct code contribution will always be a minority; especially if the desire is for the community to expand beyond the deeply technical and have mainstream adoption of the node economy.

One way is pricing power with rewards or protocol providers.

This becomes interesting as a way for protocol providers who are concerned with supply side (Demand Side Token Design however should still take priority unless Unlocking Latent Demand with Blockchain Supply).

Related is feature development.

Protocols, however, offer this through xIP voting processes, so while it could help to have a community which helps distill the different xIP (similar to how, in the United States, local political parties have fliers on how to vote), it's not as strong as a value proposition.

It's not horrible, though. The Principal-Agent problem still applies.

One idea I have had is the idea of a token-based "affiliate" program. One of the challenges and risks is the scaling of node operations. For those that do have the capital, scaling can potentially add efficiencies; but this also adds some centralization risk. If the protocol is not well-designed, doing so could actually create moats around smaller node operators entering the ring.

The "affiliate" program could be one where a seasoned node operator takes on newbie "affiliates" who don't have the skills and they are provided mentorship, support, software stacks, to get started. A blockchain-based referral network then rewards the node operator for taking someone under their wing with profits (not just revenues) generated by the operations.

IF this were economically viable, it could allow experienced node operators to scale without putting up their own capital; other node operators who don't have as much experience get guidance and direction, put up the initial capital, and learn alongside, paying a tribute or percentage of profits that make both parties happy.

Those profits should be dynamic based on the actual resource costs to the newbie operator, while providing a meaningful return for their time and expertise.

The challenge is that to do when operations are not profitable, or how do we determine profits?

When profitability is based on the value of the tokens earned, an economic shock can turn everything upside down.

But, if a mechanism can be put into place, this can create a viable network and also create a treasury for this community for supporting and maintaining the software and mechanism in the first place.