Increase the MAX_EFFECTIVE_BALANCE – a modest proposal

[vshvsh]

@mikeneuder

We have talked to a number of large staking providers and most are interested and want to see the full EIP and design and would do their own risk analysis. I think its naive to expect them all to fully consolidate, but I also think its safe to say that the cap of 32 ETH is quite low and there would be no meaningful increase in risk if they bumped their average validator size to say 128 ETH or something similar.

There isn’t any increase in risk probability, but having a 128 ETH validators in a large operation is increasing risk impact slightly less than 4x.

When an operator is slashed on attestations bc of a sloppy setup, software bug (non-malicious) etc, it usually happens to a small percentage of validators, is detected by a monitoring software and operator has time to turn off the offending setup. That has happened with Staked.Us (less than a hundred validators out of thousands slashed even when the detection takem hours), Rocklogic incident recently, etc.

The first equivocation in case of 128 ETH validator will have 4x impact immediately, and this impact now per 32 ETH validator is actually not very small - I think it’s around 1 ETH, combining together penalties, rewards unearned in exit queue and rewards unearned while in a deposit queue.