I’m opening this topic to discuss a question raised by @rblode in another topic:
Indeed, requiring collateral for node operators can be an effective way to create additional demand for a project’s token. It can also act as a stake that’s liable to loss if the node operator misbehaves.
A collateral requirement in itself doesn’t stop farmers from selling their rewards. It may help to offset these sales by generating additional demand, assuming there are also farmers adding new nodes to the system simultaneously.
Locking tokens does prevent farmers from selling. This is part of the v3 farming spec which wasn’t implemented but has been discussed as perhaps a good idea recently. In a way, it’s also similar to collateral, just accumulated after the node spins up rather than after.
The downside of an upfront collateral requirement is that it limits the rate of growth of the network, and also places an additional barrier to entry. Perhaps the first point isn’t a big concern right now, since the overall utilization rate is low. The second point is important to me though. ThreeFold farming is one of the most accessible ways to participate in a decentralized network and earn income.
Perhaps you’d say that farming should be less accessible, given the low utilization rate and low token price. In my view though, it’s still best that farmers invest in hardware and infrastructure, rather than needing to buy tokens to get started. One of the big distinguishing points of the ThreeFold Grid is that only farmers running on bare metal get paid. That’s a big distinction from other networks where the providers can have nothing more than a bag of tokens and a VPS rental from a centralized cloud provider.