Delegating: Step 2 How to choose an indexer?

A guide on how to choose which Indexer to delegate to.

Many protocols have a form of “staking”, where you can make a good decision based on a few simple metrics like “% fees” and “% uptime”. Choosing an indexer to delegate to on The Graph Network is a much more nuanced decision. In this section, we will help you assess the indexers, so you can make a decision that is right for you.

It is important to understand that your revenue is dependent on your chosen indexers performance in the open data economy of The Graph Protocol.

As a delegator, you should approach the list of indexers as an investment opportunity. Some choices might be riskier, but with potentially higher rewards. Others might give a more stable, but lower income. Consider delegating to multiple indexers to mitigate risk. The graph network is still in beta, and metrics like uptime and past slashing are not easily available. Nor is there a reputation system in place. In this article, we will walk you through the available metrics on The Graph Network.

Risks of delegating

When delegating your tokens to an indexer, there are some risks to consider:

  • Volatility. Like every crypto asset, GRT is very volatile. Its dollar value can change rapidly.
  • Fees. When you delegate your tokens to an indexer, there is a 0.5% delegation fee.
  • Opportunity Cost. When undelegating, your tokens have a thawing period of 28 days. You do not accrue any fees or rewards during those 28 days.
  • Updated staking parameters. The indexer can change their staking parameters (Fee Cut and Rewards Cut). It is advised to regularly check your delegated tokens.

The Graph Network

We will take a look at the metrics that are available on the webpage of The Graph Network.

Let’s look at each of the columns

Subgraphs

This shows which subgraphs are indexed by the indexer.

Query Fee Cut

Query Fee Cut shows how much of the total query fees goes to the indexer. The rest will be divided among the delegators, proportionally to their share of delegated tokens.

Example: An indexer with 30% Query Fee Cut, will keep 30% of his query fees for himself. His delegators will get the remaining 70%, proportionally to the number of tokens they have delegated. A lower Query Fee Cut is generally better for the delegators.

Query fees are earned every time an indexer serves data.

Effective Reward Cut

Indexers earn indexing rewards for their own stake as well as delegated tokens. This metric describes the cut of your "share", the indexer gets for providing their services.

A positive number means the indexer is receiving a commission of your shares for providing his services.

A negative number means the indexer subsidizes his delegators with his own Indexer Rewards. While this is not sustainable long-term, some indexers might do this as a sort of promotion.

The network signals some subgraphs to be "valuable". When these subgraphs are indexed, indexing rewards are earned.

Stake owned

Stake owned shows how much GRT the indexer is “staking” on The Graph Network. If the indexer behaves maliciously, these tokens can be slashed by the protocol.

Delegated

Delegated shows how many tokens are currently delegated to this indexer.

A lower amount of delegated tokens means you will get a bigger “share” of the fees and rewards.

Query Fees

This is the total amount of query fees this indexer has earned. A high amount of fees generated, combined with a low Fee Cut and a small delegation pool would be ideal.

Indexer rewards

This is the total amount of indexing rewards this indexer has accrued. A high amount of indexing rewards earned, combined with a low Reward Cut and a small delegation pool would be ideal.

Calculating Effective Query Fee Cut

Unlike most other validator/delegator networks, the metric Query Fee Cut tells how much of the total query fees goes to the indexer. This is disregarding that the indexer himself may hold a significant stake in the token pool.

It is natural to think the indexer should keep 100% of the revenue accrued from his own stake in the token pool. As a delegator, we are interested in how much of our share of the revenue the indexer takes as a “commission fee” This calculation is a bit complex, but we have provided you with a calculator below.

Please use this tool to calculate the Effective Query Fee Cut:

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GRT
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Effective Query Fee Cut: %

Effective Query Fee Cut is how much of your share of the query fees an indexer gets for providing his services. A negative number means the indexer subsidizes his delegators with his own query fees.

Indexer Strategy

Indexer performance is more than just technical metrics. Indexers also take strategic choices that impact how much they earn in query fees and indexing rewards. Some of these choices are; What subgraphs do they index? What kind of fee structures will they employ?

For an indexer to keep earning query fees they would need to have a competitive strategy. Two such strategies could be:

  • Employing a competitive pricing strategy on a well known, well used subgraph.
  • Indexing lesser known subgraphs in order to have a higher market share (Or even capture the whole market for that subgraph).

On our page Indexer Profiles, you can read the profiles of some of the indexers on The Graph Network. The profile information was gathered from the indexers directly