Picking up from my last reply. Some of what I say here might come off too strong. It’s always hard to convey the correct emotion through text and across cultures. Hopefully the message makes it through.
I think the most reasonable argument for limiting staking is that the network can’t actually handle having that many participants at once:
- Large Validator Set → Network Instability
- First the obvious, we have a couple EIPs that are likely to help address this problem in Pectra:
- EIP-7251: Increase the MAX_EFFECTIVE_BALANCE
- This allows for consolidated validators amongst centralized or large stakers which also allows for a reduced number of validators and helps eliminate immediate threats of network instability.
- EIP-7549: Move committee index outside Attestation
- This allows for much more efficient attestation aggregation and should also reduce network overhead. Allowing for a larger number of validators in the active set than what would currently be possible.
- EIP-7251: Increase the MAX_EFFECTIVE_BALANCE
- We aren’t completely sure when/if this issue will raise its head. But we have a couple improvements coming that should help reduce this risk and I believe networking inefficiencies are receiving more focus of late. Overall, I don’t believe this is likely to be a problem before the next release after Pectra. I’m interested to see how much of an impact the above two EIPs have on the network. After that, I think we will be better positioned to say whether there is a need to include more work in the next release targeting this risk or whether we will be good for a while.
- First the obvious, we have a couple EIPs that are likely to help address this problem in Pectra:
Orbit looks like a reasonable approach to avoiding hitting this issue while maintaining permissionless participation in running a validator.
I somewhat agree with this stance although I wish there were more room for experimentation and believe it will be necessary–though perhaps other chains and other tokens can carry a little of the R&D weight here. Regardless, if the point stands that it should be the last change I’d say there needs to be high confidence and consensus that it is the right path forward. None of what has been discussed seems to bring any MVI changes to that level for me. If we decide to take a less commital approach (which I think would be necessary for any of my ideas on the future of Ethereum to come to fruition) I might be more open to it, but I think it would require a lot of buy in from the entire community regardless and a lot of advance warning.
I touched on marginal additional security not being the only purpose behind more participants in consensus, but I’d add here that the suggested issuance curve adjustments with MVI seem reasonably arbitrary or viewed through a single lens of overpaying for security. I’d want to see analysis on a variety of factors (though I think many would only be capable of being verified through live and active systems) in order to feel more comfortable saying 0.5% inflation should be the highest possible amount. Otherwise, like I said it feels arbitrary and like what is just appealing to your preference for a very non-inflationary or deflationary asset. I.e. your quote said this range represents your personal preferences but I’d argue almost everything you’ve presented here and the concept of MVI itself represents more of your personal preferences than you might realize.
To avoid the feeling I think a number of people get that these are just your preferences and somewhat arbitrary I think the need for introducing MVI itself needs to be very explicit and I don’t think a high-level and clear need has been defined. I think I’ve seen 3 high level needs for why we should pursue this articulated (I’ve addressed them in my replies already but just to make things concise):
- Large Validator Set Network Instability (a tech problem that already has some reasonable approaches to potentially solving)
- Reducing LST Dominance (I still have no idea why an LST can’t dominate even with more limited issuance)
- Avoid paying too much for security (extremely subjective what too much security is)
If you can articulate a higher-level need that is really driving a change like this that has a massive impact on every network participant I’d be open to hearing you out. I don’t think I’ve seen it yet. And getting lost in the minutia of which curve specifically to choose with extremely detailed long posts isn’t going to help move the proposal forward imo. I only skimmed through all of Section 4 in your post because it assumed buy-in from me on making any of these changes at all that are not even close to being there yet. I know this could sound harsh and I hope it doesn’t offend you. I really want to help you if in reality this will be beneficial for the network.
I believe we should be setting as an ideal that anyone with eth is able to run a validator. You’ve indicated clearly that it isn’t profitable for them to do so. I agree it won’t be profitable for them to do so with net new hardware, a dedicated internet connection, etc. but the target isn’t necessarily profitability. As you are aware those that don’t participate in validation are diluted by those who do. So they lose more money if they don’t stake their eth than if they stake their eth (perhaps unprofitably but at almost no greater cost than their existing computer and internet connection). From a tech standpoint I’d prefer a system like bitcoin that no matter how unprofitably they are participating allows them to do so regardless. The beauty of bitcoin is that it can always take on more miners it could be 10 billion separate participants in building the next block and nothing prevents you from joining in. They can always participate if they choose to. It’s a property that I’d like to shoot for.
I don’t think this accurately reflects what occurs. I think you intentionally ignore the incentive people have to spend immediately if they otherwise get diluted. Making the native token delfationary just encourages even more holding by every network participant. Obviously there is an incentive to stake but that might be the difference between us. I want everyone staking. I want everyone participating even if that means there is no real yield. The network itself encourages people to participate in its validity and thus increases its credible neutrality. I agree that ideally issuance and burning cancel each other out and we get no changes in supply but I think slight inflation is more sustainable and better known/understood historically than slight deflation. People that stake right now get a real yield and are more likely to sell that if it is inflationary for real goods (even just to pay off the cost of running the validator) than if it is deflationary (in which case it just encourages more holding and more staking since I get even more of it and it is going to be worth even more – i.e. I think you’ve argued there’s no incentive to use/burn the token if it is inflationary since you just want to stake it but I don’t think you’ve laid out clearly why anyone would be incentivized to use/burn the token when it is delfationary). Inflation can be viewed as an additional cost holders pay for having a secure, maintained, and live network. The burn helps to reduce this cost to regular users to varying degrees. I don’t see why burn should dominate.
I do think there needs to be changes. Locking up your eth is problematic and LSTs outcompete in this regard vs solo-staking because they can use it as collateral and still get the majority of the yield. In order for direct staking to compete with LSTs I think we would need a system that allows for the use of your stake as collateral. I’ve laid some of how this could work out elsewhere but I’ll try to get another ethresearch post up about it semi-soon.
I semi-agree with you on this point. I’ll state though that plenty of currencies have inflation and seem to do alright, fiat and crypto alike. Long term I do think it will be more problematic for them but ETH is no where near that level of inflation and extremely competitive on issuance in my opinion. Look at “issuance” for gold, bitcoin, or fiat and compare it to where eth inflation is at. We are already deflationary and not even in high demand and you are proposing decreasing issuance even more. I can sympathize because just this week I’ve made a couple posts about changing things that would lead to increased burn but I don’t think we should be decreasing issuance right now.
I agree with the first sentence. I’m just a user. In my opinion from what I’ve read from you and others regarding MVI the second sentence is not what I would want.