6

I am wondering if my baker will miss any endorsements (or blocks) being 100% delegated.

I have heard that they still must have some free capacity because required deposit may vary from cycle to cycle and at some point it may affect staking bond and/or staking capacity and/or available capacity.

What may happen potentially to those bakers who have negative available capacity? Will it affect their delegators?

It looks like amount required from baker each cycle reminds a saw, and it is not constant.

6

Unless you have infinite funds, you cannot prevent from being over delegated, since you cannot prevent users from delegating to you.

So, you shouldn’t care too much about it, maybe only give rewards to the delegators that were the first to contribute to the 100%, and not reward the other ones. This way, it is a clear incentive for them to find another delegate.

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    Okay that part is clear but the reason why I am worried is because my efficiency my drop should I be over delegated. As result my ROI may drop, and as result everybody may be affected, even those people who did not cause over delegation – indigo Feb 24 at 11:26
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    What matters is not if you miss extra baking slots, it is not to miss the ones that you should have done, i.e. you should almost always have all your balance frozen in deposits. If you miss a block because you have not enough deposits, it’s not your fault (but you should warn your delegators of the situation). – lefessan Feb 24 at 13:18
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    one of the reasons people pay bakers a fee is also to monitor over delegation in order to avoid being diluted in such a circumstance. People pay the fee in order not to have to monitor this metric day-in, day-out so i don't believe it is appropriate for a baker "not to care too mcuh about it". The actual policy of who takes the hit first in case of over delegation (FIFO, proportional etc..) is an orthogonal consideration – Ezy Feb 24 at 15:51
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    How should a baker avoid over-delegation ? Yes, they can remove their address from advertising sites, but still, they cannot reject extra delegations. The only way they have is to add money to their balance, but for that, they need to that money. For me, the fee is only for the work of maintaining a server online and securizing the system. – lefessan Feb 24 at 16:03
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    Being unable to avoid over-delegation is correct however this does not mean that the baker should not care too much about it this is the reason i downvoted your answer. Also it does not reflect the actual behavior of baker around this important question: most bakers do care much about over-delegation and communicate accordingly around it. – Ezy Feb 24 at 16:15
10

From a purely theoretical perspective, when you are a baker who is capable to reaching 100% target of its priority 0 baking rights, the optimal situation in terms of your capital is to have all of it blocked as security deposit because it means that all your capital is working. In such situation as soon as some bond is unlocked it would get relocked again by a new baking and at the same time you would never miss a single block/endorsement baking right. To be in this situation means that the baker is exactly 100% delegated at all times: there's just enough delegators pointing to you as your capital can absorb. It is the optimal situation for both the baker and the delegators.

In reality, bakers are rarely in this situation, in practice they are either "under"-delegated or "over"-delegated.

  • If you are under-delegated: it is suboptimal for the "baker" this means that you could have accepted more delegations and received more baking rights without impacting your success rate, your personal ROI is suboptimal. On the other hand this situation is fine for delegators because they still receive 100% of their expected rewards on average for their level of staking (minus the baker's fee of course), their personal gross ROI is optimal (assuming you don't make any operational mistake while baking of course).

  • If you are over-delegated: is is suboptimal for the delegators because your capital is not enough to cover for all the baking rights of the operation. There's less rewards coming in the bakers' account than the expected amount to pay all the delegators. In such situations the baker usually pays himself first (his personal ROI is optimal) so he received his expected value however the effective amount received by delegators will depend on the policy of the baker (pay those who came first in priority? Or distribute the loss equally to everyone?). So in this scenario the baker rewards are usually "covered" by the baker policy but not the delegator's rewards (the delegators gross ROI is suboptimal).

So all in all, given that delegators often enter into a delegation and do not monitor day to day situation of the baker's bond and pay a fee to that baker, they usually expect the baker to do this monitoring job and give them a heads-up if they believe they might get over-delegated in the near future in order to give appropriate time for delegators to find an alternative.

For example in the beginning of mainnet, as per the protocol the initial bond requirement was kept intentionally low (started from 0%) and gradually ratcheted up over the cycles. This means that many bakers have been to start their operation with quite small actual bond requirements which allowed them to ride the opportunity and accept much more delegations than their capital would allow once the bond requirement would achieve its long term level (512XTZ per block and 64XTZ per endorsement). This created a situation where a number of baker got not immediately over-delegated but forward-over-delegated.

5

Bakers who are over-delegated will miss bakes/endorsements due to insufficient bonds. Depending on your baker's policy, everyone may be diluted rewards-wise, or the last delegators will simply receive no rewards.

The bond requirements do vary, so it's good if bakers have some reserves to cope with this. As staking increases (e.g. the % of staking out of the circulating supply increases), bond requirements will start to drop as bakers receive less baking rights for the same stake.

2

when tokens that are not secured by a deposit come to the baker, these particular tokens are redundant. I'm talking about the fact that it is on them that extra blocks fall. thus no one loses anything. the baker also eats out what he has previously (the number of blocks). and the extra blocks he should not have baked., before he became redelegated. so who came and spoiled everything, he will not receive a reward. and the baker stayed the same as before.

It should not be very worried that there is not enough deposit.

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    I apologize but it is not easy to understand what you are trying to say. Could you please try to reformulate ? thanks! – Ezy Feb 25 at 21:44
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    when the delegate came and redelegated you, he is superfluous. You do not have enough security for his new tokens. but for everyone who was with you earlier, they have enough as before. no new blocks are baked on these new tokens (on the tokens of the new delegate). Therefore, it does not matter that there is not enough deposit, as it (the new delegate) is superfluous in your bakery. and all who came before him are also provided with your deposit. until the moment when the new delegate came (who redelegated you). – SemElVik Feb 26 at 8:46
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    the new delegate - baker redelegated; who was before him - they continue to bake on your deposit; the new delegate - does not bake. You do not have a deposit; new delegate do not receive new tokens; this is a problem new delegate. since all past delegates are provided with your deposit before it. – SemElVik Feb 26 at 8:47
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    disagree for 2 reasons 1) you assume FIFO for the rewards but not all bakers do like that 2) baker will have a lot of missed baking rights now and it is hard to tell whether because of overdelegation or just baker skill so his ranking will become worse. – Ezy Feb 26 at 12:21
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    skipped rights begin when a network deposit ends. deposit is the same as it was before the new delegate. all who previously delegated will not receive less. these are new rights. - I do not know what FIFO is – SemElVik Feb 26 at 14:38

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