The Direction Channel has been discussing the idea of updating the staking rate compared to floating rate. When it comes to staking rewards and the ideal amount staked, we have generally kept to the idea of a 3:2:1 ratio between amount to be staked, amount to be locked up in parachain deposits and amount of float (not locked at all). In terms of percentages, this is 50:33:17 by design, so we target the "ideal" amount to be staked as 50%.

The problem

Since there isn't any parachain functionality enabled currently, the amount for parachain deposits (33%) has been accidentally aggregated into the floating rate, making an overall float of 50%. This in practice means that anything staked beyond 50% results in a reduction of staking rewards, affecting rewards and treasury funds immediately.

The design behind it

The conclusion of the team behind the design was that the 3:2:1 ratio would provide a good balance between network security, float (price discovery) and parachain deposit cost.The intention of the 3:2:1 ratio was, in part, to recognise that only a relatively small proportion of KSM needed to be floating, and this is clearly failing at the moment.

While there is no possibility of KSM being locked under parachain deposits at the moment, the options to maintain network security stable are:

1. The 33% assigned to the floating rate to be entirely under the staking banner (in which case the new ratio would be 83:17, staking:float)
2. Split it proportionally between both staking rate and floating rate (in which case it would be 75:25, staking:float).

No specific conclusion was made by the team on what should be done in the case that no parachain auctions/slots exist, but researchers stated that floating tokens represent a theoretical risk that they could be used against the rest of the stakers.

The first consequences of the update

The immediate consequence of this change would be:

• a decrease in treasury deposits,
• an increase in staking rewards.

This could also incentivise security on the validators side and an incentive to think about validator reliability. Most of the Council seemed to agree on the idea of increasing the "ideal" amount to be staked, with the condition to discuss the implications of this in the economic design. Ultimately, the ratio should change automatically based on how many parachain slots are available for rent, but it's unnecessary until the first auctions happen.

After agreeing in the need to update, the questions remaining are regarding the type of referendum to take place:

• With what kind of referendum should the update happen with? (positive turnout bias, negative turnout bias or straight majority) - for more info their differences, please check here
• duration of the referendum

The opinion changes depending on how the discussion unveils regarding voting participation, time to get informed and vote, and so on.

The discussion is ongoing and the expectations are to conclude this with a referendum that will enable the update. It's important for validators to participate in the discussion to agree on the specifications of the proposal.

We are now focusing on the 4 remaining questions discussed above:

1. Should the 33% assigned to parachains be entirely under the staking banner (in which case it would be 83:17, staking:float)?
2. Should the 33% assigned be split proportionally (in which case it would be 75:25 staking:float)?
3. With what kind of referendum should the update happen? (positive turnout bias, negative turnout bias or straight majority)
4. What should be its duration?

Current work: https://github.com/paritytech/polkadot/pull/1302/commits