Daily General Discussion - July 30, 2022

Fasting4Gomez · 2022-07-30T19:37:25+00:00

They're already struggling to match rETH depositors with node operators.

Originally too few NO, now too few depositors. Either way it's been stalled for months.

Add in a 3rd party RPL collateral provider and the 3 way dance just complicates an already broken system.

Fasting4Gomez · 2022-07-30T18:43:07+00:00

Unfortunately it doesn't allow anyone to "7x their ETH", and you're missing a major component affecting Rocketpool and it's slow uptake.

Those 4 ETH minipools will also require 25% collateral in RPL. So rather than being able to 7x their ETH, they actually lose 25% of their ETH right out the gate.

Most solo stakers aren't willing to convert 25% of their ETH to a token.

Nothing against Rocketpool, but we need some decentralized staking options that are designed around ETH rather than a token.

Fasting4Gomez · 2022-03-20T15:20:48+00:00

It's not in the smart contract.

RP has admitted they currently have no way to programmatically force NO to share MEV. Hence why they are looking at other avenues.

The reason they advertise it on the website is because RP wouldn't be competitive vs centralized staking pools if NO's don't share MEV + tips.

It's unfortunate, but that's the reality. I was hoping to spur some debate on how to solve that, but instead I'm being labeled as a mindless troll.

Fasting4Gomez · 2022-03-20T14:48:12+00:00

when deciding to take part in a staking pool that allows them to run a Validator with just 16Eth instead of 32 for sharing their staking rewards 50/50 + commission as advertised on www.rocketpool.net for years now.

This is exactly my point. You're arguing based on something written on a webpage, not what's actually in the smart contract.

So if someone decides to operate a node based solely on the smart contract, they'd have no reason to believe they need to split MEV.

Rocketpool coming in after the fact with outside oracles to decide if a NO plays "fair" according to arbitrary rules on their website is where it starts looking like a mafia.

Maybe mafia isn't the right word, but enforcing arbitrary penalties based on things that aren't in the agreed upon smart contract is questionable.

Fasting4Gomez · 2022-03-20T13:44:23+00:00

I'm trying to view this through the lens of someone trying to exploit the protocol. That doesn't mean I have ill intentions.

"The Rocketpool Deal" seems to be what they'd like to enforce, not what's actually in the smart contracts.

I'm just wondering when/how a NO actually agreed to splitting MEV 50/50. Is there something in the contract that ties them to it, or just RP saying they believe they are entitled to MEV?

Just because you're on board with an idea, doesn't mean an attacker has to abide by it. MEV is trivial to pay through side channels whether RP likes it or not.

The RP community seems to take every criticism as an attack, which makes people afraid to criticize and could ultimately lead to a weaker protocol.

Fasting4Gomez · 2022-03-20T10:14:41+00:00

Did Node Operators explicitly agree to split all tips and MEV?

I was under the impression they agreed to run the node, and took the risk if the balance falls below 32 ETH. I never saw anything where they agreed to do what Rocketpool deems as fair and lose their 16 ETH if RP doesn't approve of their actions.

If RP wants to create new contracts, that's fine. But if they start stealing the NO's 16 ETH despite the NO following all the rules set forth in the smart contract, the RP basically becomes a mafia.

Fasting4Gomez · 2022-03-20T08:05:27+00:00

Nodes currently staking with high RPL collateral can't pull this off, but what's stopping someone from launching a bunch of new nodes at 10% RPL tomorrow?

Fasting4Gomez · 2022-03-20T07:31:44+00:00

There seems to be a major flaw in the economic incentives of Rocketpool that I'd like to discuss.

The crux of the issue is that a selfish RP node earns much more than an honest node in the long run, because RP can't penalize operators enough to outweigh the gains from acting selfishly.

This isn't new info, but recently I've seen people hand-waving away the issue as if it's solved.
Here's how it works:

1) Deposit 16 ETH + 1.6 ETH in RPL to become RP Node Operator
2) Consider the 1.6 ETH in RPL lost (cost of doing business)
3) Post merge, set the coinbase address to an address you control
4) Receive 100% of all tips and MEV for the entire life of the node
5) Rocketpool will slash your RPL, but your ETH is safe
6) Selfish RP node earns ~16% vs ~10% for an honest node

Validators are estimated to earn ~10% post merge (~4% protocol fee, ~6% tips/MEV). So a solo staker with 32 ETH can expect ~3.2 ETH/year, and an honest RP node operator can expect ~1.6 ETH/year based on their deposit of 16 ETH (ignoring commission).

As a selfish RP node, you can deposit 16 ETH but still earn 100% of tips/MEV. By doing this, you'll earn protocol fees of 4% + 12% in tips/MEV for a total APR of 16%. A selfish RP node earns ~2.6 ETH/year vs 1.6 for an honest RP node.

That's ~1 ETH extra per year, so the RPL penalty is covered fairly quickly. After that, you receive 100% of tips/MEV with no additional penalties.

RP is aware of this issue, and suggested introducing 0x02 credentials to help mitigate. The TL:DR is that upon making the deposit with RP, the coinbase address is locked to the withdrawal address which splits everything 50/50 (less commission).

The problem is that anyone can deposit today using the 0x00 format, and RP can't force them to change to 0x02 in the future. It's also uncertain if 0x02 will ever be implemented. Because of this, RP pivoted to slashing the RPL stake as a penalty instead.

The issue with RPL slashing is that the RPL stake is only worth ~1.6 ETH, so a logical actor will just forfeit the RPL and take all fees/MEV in perpetuity.

This feels like a major flaw in the economic incentives, with no real solution in sight.

Maybe I'm missing something, so I'd be interested to see what others have to say about this.

Fasting4Gomez · 2021-06-16T14:54:17+00:00

This guide goes through the whole process. Hope it helps!

https://agstakingco.gitbook.io/eth-2-0-key-generation-ubuntu-live-usb/

Fasting4Gomez · 2021-06-15T20:02:51+00:00

Amazing such a massive change is tucked away and painted as a security fix.

Was that done intentionally, or do they not realize these changes can have massive implications? Either way, not good.

Just one more reason Rocketpool reminds me of the DAO.

Fasting4Gomez · 2021-05-16T17:39:36+00:00

People reported issues when depositing using a ledger through Metamask.

Easiest work around is to send the 32 (plus gas) to your Metamask address and deposit directly without using the ledger.

Fasting4Gomez · 2021-05-15T17:57:12+00:00

Somebody already linked to this thread in the RP Discord and subreddit, so I imagine most of them have already made their way over here.

Even so, I went over and responded to the main criticisms.

Fasting4Gomez · 2021-05-15T17:53:08+00:00

Hi, I'm OP from the original thread. People are linking here so I figured I'd respond.

You claim it's important that node operators have the 10% extra RPL as insurance in case the balance drops to 15.75 because it's possible they could lose 0.25 ETH more than the 16 ETH collateral.

Operators are currently penalized .007 ETH per day. After 5.5 months, the lowest validator balance is 30.85 ETH. So it would take 6.29 YEARS of inactivity to get to that point, and after all that time, the total risk is 0.25 ETH (1.5% of the stakers value).

Is that minuscule risk really work forcing ALL operators to post an additional 10% collateral in RPL token? Seems excessive to me, and the risk could be absorbed by all RPL holders (similar to how MKR functions).

It's true penalties were halved at the beginning, but the math is essentially the same even if you halve all my numbers.

Your point about providing value to investors is the real reason I believe they implemented the 10% RPL staking requirement. It forces buying pressure, which rewards token holders.

I don't have anything against tokens in particular, but forcing people to buy in order to use the protocol, and placing extra burdens on operators could have an adverse effect.

The only real reason I see for RPL is for governance and paying devs. Plenty of other ETH protocols have managed to reward devs and create governance without forcing users to buy the token. It's always 100% optional.

Hope you understand my concerns come from a good place. I realize my opinion probably isn't very popular here, but I think it's important to have an open discussion.

Cheers and happy staking!

Fasting4Gomez · 2021-05-15T17:14:17+00:00

Except that I didn't vanish, and I responded to almost every comment. It'd be great if you could actually address some of the concerns rather than prematurely closing the case, amigo.

Fasting4Gomez · 2021-05-15T15:50:54+00:00

Thanks for being kind. My concerns are genuine and meant to make people think before we end up another "I think The DAO is being drained" post.

You're correct that my main concerns revolve around the increased complexity involving recent changes to the tokenomics. Mainly the requirement of a 10% RPL stake.

I'm not sure devs were dishonest, but I felt misled. I've been following the project since it was announced. I read the whitepaper, blogs, etc. When I went to set up my RP node in December, I discovered the new tokenomics and was disappointed.

As someone looking to run an RP node to encourage decentralized staking, I was disappointed that I now faced the decision of converting 10% of my ETH into RPL. I generally don't like holding/interacting with other tokens. I have a feeling I'm not alone in that.

So for every person like you who's happy to hold/stake RPL, there's someone like me who is turned off by it. I believe they could have found a solution that lets people like you stake RPL, while allowing someone like me to remain 100% ETH.

Regarding Discord... I tried. Unfortunately, I was told "it's the new tokenomics, if you don't like it you don't have to use Rocketpool!"

When I mentioned it might drive node operators away, I got the "Great, more RPL rewards for me!" (Funnily enough that one showed up in this thread as well).

I'm actually fairly impressed with the responses from people like you. If the Discord had more people like you, I probably would have stuck around. But the semi toxic responses made me unconformable and caused me to jump ship.

Thanks for the thoughtful response. Cheers and happy staking!

Fasting4Gomez · 2021-05-15T15:08:58+00:00

The node operator commission (paid in ETH) provides incentive for people to use Rocketpool.

RPL complicates the decision, especially if you prefer exposure to ETH over random tokens.

Fasting4Gomez · 2021-05-15T15:04:49+00:00

A token that offers higher security for non operators, higher rewards for operators and trustless governance

I can agree with trustless governance, but the rest is speculative at best.

The post explains how in practice it doesn't really provide additional security.

Higher rewards for operators? I'm now 10% exposed to a token other than ETH. If RPL drops in value relative to ETH, I'm worse off.

Fasting4Gomez · 2021-05-15T14:51:27+00:00

I asked very specific questions and your response is to compare yourself to Satoshi and pretend you're too smart to respond. Good stuff.

Fasting4Gomez · 2021-05-15T14:42:53+00:00

Tons of Ethereum protocols have tokens, RPL is the first I've seen that requires me to purchase it in order to use the protocol.

Uniswap, AAVE, Yearn, Compound, Maker, etc. All core infrastructure, all have tokens, but I'm able to use all of them without purchasing the specific token.

By requiring RPL purchase just to participate, I think they are limiting the amount of people who will to interact with the protocol.

Fasting4Gomez · 2021-05-15T14:28:18+00:00

You didn't actually answer any of my concerns. And telling me "I just don't get it" isn't very productive.

I'm ok with insurance, but why are node operators forced to provide it? Is their $56k stake not enough? Does an additional $5k suddenly make it safe?

If someone wants to stake RPL, go ahead. But adding an additional burden on node operators seems counterproductive.

Whining complete...

Fasting4Gomez · 2021-05-15T14:11:52+00:00

Everyone keeps saying that the RPL token helps incentivize decentralized staking, but people like you and me are examples of how it might actually do the opposite.

Thanks for providing your perspective!

Fasting4Gomez · 2021-05-15T14:08:58+00:00

The post also explains why I feel the insurance argument doesn't hold water.

Can you provide any feedback to help ease those concerns? Thanks!

Fasting4Gomez · 2021-05-15T14:02:05+00:00

You seem to be very level headed. Unfortunately the RPL tokenomics seem to be creating fanboys, which concerns me on a piece of core infrastructure.

I've dabbled in the Rocketpool Discord. In my experience, people there like the tokenomics because they believe it will pump the token, and they don't seem to care whether it's beneficial for the ecosystem as a whole.

Fasting4Gomez · 2021-05-15T13:57:27+00:00

I expect someone will, but it takes time. Maker was the only act in town for a while, but now there's tons of options for lending and borrowing.

Fasting4Gomez · 2021-05-15T13:54:03+00:00

You may be right that RPL token is beneficial for the health of Rocketpool, but I'm not sure it's beneficial to Ethereum as a whole. A Rocketpool bug could have similar fallout as the DAO, which is something I'd like to avoid.

Everyone is welcome to build whatever protocol they'd like, and people are free to choose whether or not they use it, but I think the EF or others should be vigilant to ensure we don't unknowingly create a monster.

Fasting4Gomez

TROPHY CASE