# 1kx Tokenomics Proposal **URL:** \ **Category:** Uncategorized\ **Tags:** tokenomics-rework\ **Created:** [13 July 2024 07:20 UTC](https://dao.rocketpool.net/t/1kx-tokenomics-proposal/3119 "2024-07-13T07:20:47Z")\ **Posts on this page:** 1\ **Showing post:** 16
**Author:** ![mike\_1kx](https://dao.rocketpool.net/letter_avatar_proxy/v4/letter/m/eb9ed0/32.png) [@mike\_1kx](https://dao.rocketpool.net/u/mike_1kx)\ **Post date:** [15 July 2024 08:10 UTC](https://dao.rocketpool.net/t/1kx-tokenomics-proposal/3119/16 "2024-07-15T08:10:39Z")
> [@Valdorff](#): > > This means that even _best case_, the most we can do is reward home stakers and large entities the same (which is what the rpl.rehab proposal does). The rework proposal gives them the same rewards. This has a centralising effect because economies of scale exist. When you say “we give them the same rewards”, you are actually saying “we give centralised entities better ROI” - there is an important distinction here. > [@Valdorff](#): > > This is starting to piss me off. It’s fine to disagree with my opinion (that delegation is actively pro-centralization, and that a level playing field results in a mix of centralized and non-centralized entities). It’s not ok to pretend that opinion doesn’t exist or doesn’t deserve to be acknowledged. I have explained why UARS will likely lead to overpaying centralized entities (which you agreed with in DM). I have explained that removing the collateral requirement will open the floodgates to centralized entities taking over the validator set. Can you outline the mechanisms in the rework which will prevent centralised entities from taking as much of the validator set as their ETH permit? What specific mechanisms does the rework have to prevent this? > [@Valdorff](#): > > We have explicitly talked about this. Yes, and in DM, you said: > I agree overpaying the big guys is a slightly sad side effect, but I don’t see a way to avoid it. However, in public you say: > it’s very likely that the hobbyist and high ethos groups have lower averages than centralized entities. These views seem conflicting. Privately, you acknowledge that UARS will result in overpaying the big guys because they have lower average break-even points, but publicly you suggest that small operators will likely have lower average break-even points. Please clarify: Will UARS result in overpaying the big guys or not? > [@Valdorff](#): > > Rather they are both spectrums, and it’s very likely that the hobbyist and high ethos groups have lower averages than centralized entities. It is demonstrably true that large entities have better economies of scale than smaller NOs, and I have explained why: > Larger entities pay less for hardware, bandwidth, and electricity than home stakers. Larger entities can afford to hire dedicated personnel to manage nodes, leading to better uptime and higher rewards. In DM you acknowledge that economies of scale exist and agree that they allow a large centralized provider to accept a lower rate, but in public you claim that hobbyists will likely have a lower average rate. It is difficult to have a productive debate with someone who expresses one belief publicly, and expresses a conflicting belief privately. Please be consistent in your arguments. Feel free to post the full chat if you think I am taking your quote out of context. ![Screenshot 2024-07-15 at 09.44.56](https://dao.rocketpool.net/uploads/default/original/2X/1/17f15a7b0aed53c25acc493531febb7a57c55230.png) > [@Valdorff](#): > > You are, right here, refusing to engage on the issue I bring up. My issue is with delegation. You are focusing on staking. This is the quote you responded to: > Firstly, we already acknowledged that delegated staking… We are talking about delegated staking, and how economies of scale give an advantage to large entities. I am directly engaging on the issue you raised. > [@mike\_1kx](#): > > The inputs sum to the same amount. The outputs - from the perspective of an individual NO and the RPL holders - do not, because of the rent-seeking nature of UARS. You claimed that it is not possible for one proposal to be better or worse than another. I explained why that is the case, but you have ignored the core criticism - UARS is rent-seeking, and that makes the outcome worse under the rework proposal. > [@Valdorff](#): > > You are directly creating an incentive for people to make a secondary out-of-protocol market because this one has a fee, which they can simply avoid. Rocketlend Rocketlend will most likely have a fee. If it does not, then using Rocketlend instead of the delegation system will achieve exactly the same goals as delegation - remove the RPL requirement from the NO, allow multiple small parties to provide the RPL, unlocking protocol growth. rETH still gets the baseline rewards defined by max\_commission\_rate. If Rocketlend does have a fee then your point is moot - people will use whichever mechanism provides them the best ROI. Whether that is Rocketlend or delegation, the protocol wins either way. If people choose delegation over Rocketlend, the protocol wins more because of extra\_reth\_share. > [@Valdorff](#): > > then the attack becomes profitable. You are still referring to it as an “attack”, when I have shown that this scenario simply leads to increased TVL and rETH rewards. > [@Valdorff](#): > > I guess you could see that as a benefit, as that makes RPL less desirable and they’ll then charge less… but in the meantime less RPL than “minimum” is staked in total, which damages RPL value. You are forgetting the recollateralization component. If the amount of RPL is below the minimum defined by the collateralization ratio, pDAO will purchase RPL from the market providing additional buy pressure until the minimum is reached. As you noted in your Discord response to Paladin, the recollateralization\_share is streamed from the ETH rewards, so it guarantees there will always be buy pressure so long as rewards are flowing. But of course this buy pressure is not guaranteed to outweigh sell pressure. > [@Valdorff](#): > > I definitely didn’t realize that, and it certainly is important. The non voter-share variants of the rpl.rehab would have pretty big impacts on Nodeset’s planned constellation product. > [@waqwaqattack](#): > > I did not know this either. Very interesting tidbit of info. Excellent, this is why we do disclosures, to ensure everyone has all of the relevant info. @waqwaqattack, would love to hear your thoughts on the proposal too. We oppose the rework because it exposes the protocol to significant risk of centralized takeover and it fails to solve the “running minipools is primarily speculative” issue, along with the other reasons described [here](https://dao.rocketpool.net/t/1kx-tokenomics-proposal/3119#why-we-oppose-the-rework-1). As NodeSet noted in their review of the rework, RP is only one of the networks they plan to service. You will note that our delegation proposal is also competitive to NodeSet’s product. There is less need for Constellation if delegated staking is built into the protocol (same with Rocketlend). If the result of our proposal passing is that Constellation is not viable, the NodeSet team will be fine. To [quote them directly](https://dao.rocketpool.net/t/nodeset-review-of-rpl-tokenomics/2869/14): > To be clear, NodeSet as a business is in no danger, even if tokenomics were changed tomorrow completely disable Constellation somehow 🙂 We have dozens of other opportunities for us to invest development resources, with more appearing all the time. --- _[View the full topic](https://dao.rocketpool.net/t/1kx-tokenomics-proposal/3119)._