How do we fund miner rewards? With rules baked into the protocol.
How do we fund validator rewards? With rules baked into the protocol.
With EIP 1011, these rules were going to exist in a smart contract in the current EVM chain. At the EIP 1011 fork, a bunch of ETH was going to be placed into the casper contract in an irregular state change to fund validator payouts. Validators would then send deposits to this contract to be inducted into a protocol level set of validators that had special privileges around consensus. After participation and either making or losing ETH, a validator could then issue a logout, and leave the validator set with their balance to head back to the existing EVM chain.
With the beacon chain, these rules are going to exist in a special side chain called the beacon chain. At some fork block, validators will be able to send ETH to a contract on the existing EVM chain to then be inducted into a protocol level set of validators that have special privileges around consensus. They will be responsible for FFG finalization (similar to what would have been the function of the casper contract) as well as building and finalizing the shard chains (what would have been the job of the sharding manager contract in previous roadmaps). After participation and either making or losing ETH, a validator could then issue a logout, and leave the validator set with their balance to head back to the shard chains (not the existing EVM chain).
At first this is a directional relationship out of the EVM chain and into the sharding side of the protocol. Eventually, when we are happy with the new sharding side of things, we can loop the existing EVM chain back into the new PoS structure. There are two main methods being discussed. (1) bring the EVM chain in as a shard to be managed, built, and finalized by the validators, or (2) port the full EVM chain into a shard as a contract. I currently prefer (2).
You start with two primarily independent mechanisms as the new sharding mechanism gets built up. This loose coupling of the current stable part of the protocol with the new likely rapidly changing/growing sharding part of the protocol will allow for rapid development of the sharding side of things without having to meddle too much with the stable EVM. Only when sharding gets to a stable place, will we work on more tightly coupling the old and new universe.
In terms of the new sharding side of things, the protocol will be rolled out in phases. The 1st phase might not have an initial option for validators to withdraw (because the shard chains themselves might not yet exist to withdraw to!). In this initial phase, I would expect a smaller set of ETH to participate. Because the validator payout per eth deposited scales inversely with the total size of the validator set, these early adopters will be paid a premium for early participation. When the protocol matures, risk has been more certainly established, and validator withdraws are active, I expect a larger set of ETH to participate and for the per-ETH reward to be much lower. There’s a risk, time horizon, and payout profile on early participation. Validators will personally have to assess and make a judgement call on participation.