Anders Elowsson pfp

Anders Elowsson

@anderselowsson

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Anders Elowsson pfp
Anders Elowsson
@anderselowsson
One million validators. A reminder that there is a proposal for tempering issuance, which would bring many benefits. Would be great to see more discussion within the community on the proposal, and I'm available to answer any questions. https://ethresear.ch/t/reward-curve-with-tempered-issuance-eip-research-post/19171
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Anders Elowsson pfp
Anders Elowsson
@anderselowsson
There is a paradigm for the reward curve that I wanted to highlight: a reward curve with capped issuance. It is similar to the reward curve with tempered issuance. I outline the baseline design here and will return with a longer write-up. https://notes.ethereum.org/@anderselowsson/Reward-curve-with-capped-issuance
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Anders Elowsson pfp
Anders Elowsson
@anderselowsson
But it is important for stakers to keep in mind that they will ultimately gain by holding desirable money that imposes low costs on its users. An example of a hypothetical country adopting two competing currencies is provided to make this point a little easier to understand.
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Anders Elowsson pfp
Anders Elowsson
@anderselowsson
I have also updated the isoproportion map with tightly spaced isoproportion lines instead of a colormap. This map is an essential tool for stakers when they try to understand how a change in issuance policy will affect them, as described in the post.
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Anders Elowsson pfp
Anders Elowsson
@anderselowsson
Foundations of minimum viable issuance. A simple post on the core premise behind a change to Ethereum’s issuance policy. There are many benefits to minimum viable issuance; I wanted to emphasize how it inherently creates value by reducing costs to users. https://notes.ethereum.org/@anderselowsson/Foundations-of-MVI
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Anders Elowsson
@anderselowsson
I often come back to this paper, it is like re-watching a good old movie https://www.econlib.org/library/Essays/hykKnw.html
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Anders Elowsson
@anderselowsson
The post concludes by broadening the utility measure for token holders to incorporate the development of the entire ecosystem, by cautioning against exploiting users' bounded rationality concerning yield, and to urge the community to take a step in the right direction.
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Anders Elowsson pfp
Anders Elowsson
@anderselowsson
Section 6.3 explores the endgame. The proposed reward curve can be viable for a long time, perhaps forever. The analysis does not try to assert that it *must* remain in place indefinitely, just that it makes a rather suitable endgame, with clear improvements over the current curve.
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Anders Elowsson pfp
Anders Elowsson
@anderselowsson
The post takes a closer look at discouragement attacks and cartelization attacks in Section 5.3-4. The proposed reward curve has been designed to incorporate a sufficiently small issuance reduction so as to not exacerbate the risks of these attacks.
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Anders Elowsson pfp
Anders Elowsson
@anderselowsson
The blue-white isoproportion line of the equilibrium at the black square is steeper than the hypothetical supply curve. Therefore, stakers benefit from a reduction in issuance.
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Anders Elowsson pfp
Anders Elowsson
@anderselowsson
This figure shows an “isoproportion map”, where thin black lines indicate “isoproportion lines” along which stakers’ proportional yield stays the same. If the supply curve is steeper than the associated isoproportion line, stakers benefit from an increase in issuance, if it is flatter, they are worse off.
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Anders Elowsson pfp
Anders Elowsson
@anderselowsson
Therefore, even though the yield increases by almost 1 %, the supply inflation rate increases even more. Thus, remarkably, stakers are worse off under the current reward curve than under the proposed reward curve.
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Anders Elowsson pfp
Anders Elowsson
@anderselowsson
This is something that the reward curve facilitates. Would stakers prefer the equilibrium for the current reward curve at the black square instead in the last figure? The issuance level at the black square is around 1.7M ETH per year, i.e., almost four times higher than under the proposed curve.
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Anders Elowsson pfp
Anders Elowsson
@anderselowsson
The consensus mechanism essentially absorbs all delegating stakers with low reservation yields, just to push up the yield enough for solo stakers to still operate a validator at a profit. Regardless of whether this is desirable or not, for the sake of users, the upward shift must *only* take place if strictly required.
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Anders Elowsson
@anderselowsson
An upward shift to the equilibrium quantity of stake—from the blue star to the green circle—acts as a “safety valve”, which helps Ethereum neutralize the less desirable properties of a low quantity of stake under a lower supply curve.
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Anders Elowsson
@anderselowsson
Ethereum can fundamentally be designed to enforce an equilibrium at any point along the supply curve. Would an equilibrium at the blue star corresponding to 30M ETH staked and 0.37 % yield be better? Approaches that enforce a low quantity stake might make conditions for solo staking particularly unappealing.
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Anders Elowsson pfp
Anders Elowsson
@anderselowsson
A scenario with a very suppressed supply curve is analyzed as shown in the figure. Although it may seem improbable with such a low supply curve, it is important to understand what would happen in more improbable scenarios. With the proposed reward curve in green, the staking yield becomes 1 %.
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Anders Elowsson pfp
Anders Elowsson
@anderselowsson
To balance trade-offs, the proposed reward curve offers a positive yield across the full range—low enough to make a high quantity stake unlikely, yet sufficiently high as to never force out solo stakers on reasonably efficient setups.
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Anders Elowsson pfp
Anders Elowsson
@anderselowsson
At a fundamental level, the conjecture is that the relative distribution of reservation yields may differ between different classes of stakers. This then leads to different proportions of solo stakers at different quantities staked. But whether one policy is better than the other cannot be ascertained.
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Anders Elowsson pfp
Anders Elowsson
@anderselowsson
We must also remember that self-custody is an important paradigm for many users and that LSTs come with risks; this will affect the supply side of the analysis. A problem of a high issuance level is that it forces a principal—agent problem on more unsophisticated users that do not wish to see their savings eroded.
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