First of all: what the actual fuck. Private discussions are private.
The disparity between public and private comments put me in a very awkward position, and I decided transparency was the best option. Let’s be clear: acknowledging a flaw in private and arguing against it in public is the poor form here.
If I am kindly spending my personal time giving you feedback on an early draft (which is what this comes from), I don’t expect to have it thrown in my face
It’s a minor detail, but again is misleading. The conversation was in fact in relation to the flaw in UARS, not something in our draft. Here is the quotation in context:
Again, if you think that quotation is taken out of context, please do post the entire chat, I am happy to be 100% transparent here. You did provide some feedback on the early draft in an earlier conversation, but this was from a later conversation about the rework.
I would rather be focussing on the pros and cons of our proposals than correcting these things but it needs to be addressed. You are in a trusted position in the community. People are relying on you to provide an accurate representation of each proposal:
Here you say that “It will be centralizing of everything. NOs and vote power”. That it would be centralising of NOs is your opinion - I believe the same about your proposal. That it would centralise vote power is false. We have discussed that delegation for rewards is not the same as delegation for voting. You are misleading people who are relying on you for an accurate representation of each proposal.
What you describe as “complex game theory bits” was in fact an obvious scenario that had already been considered. Running through the game theory here shows that the outcome is suboptimal for the NO and results in them sacrificing some profit which goes to pDAO, as I described here.
Here you see we’re “overpaying” everyone in the green and blue groups, most people in the orange group, and half the people in the red group.
The issue is not a misunderstanding on my part; rather, it is that the illustration entirely misses the point. This thinking is based on economically unsound ideas and is both simplistic and risky. Assuming that ideals alone can drive economic viability ignores the fundamental principles of market dynamics and cost structures.
The lines are drawn according to your subjective beliefs about the no_share values that would be acceptable to various staking cohorts. I am talking about the break-even point, below which it is unprofitable to operate.
One’s philosophy does not change economic reality. I care more about decentralisation than my neighbour, but we both pay the same for electricity. If the SSD in a NO’s NUC fails, Amazon does not give them a discount on the replacement based on how much they believe in decentralised L1s. On the other hand, the large entity who bulk-buys SSDs B2B certainly pays less per GB than the home staker buying on Amazon.
The green and blue groups in your chart might have the exact same financial break-even points, despite accepting different no_share values due to philosophy.
My concern here is that UARS ends up in a range that is unprofitable for home stakers, but profitable for large entities, leading to the centralisation of the validator set. I believe you are an intelligent person who understands there is a distinction between “no_share below the NOs break-even point” and “no_share that Val thinks NOs will accept due to their philosophical alignment”.
Without making this distinction it is impossible for you to perform a fact-based risk analysis.
Fwiw, this is not the first time the proposal authors have been informed of this risk (from NodeSet’s review):
An unstable economic contract will drive out smaller operators with higher operating costs than large, centralized providers.
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You have presented your opinion on this multiple times. This opinion is based on your subjective belief of what no_share various groups will accept, when it should be based on their break-even points. Repeatedly stating your subjective beliefs on this matter is a distraction that prevents discussion of the actual issue.
Lacking a functional method of price discrimination (the economics term), there’s not a good way to pay everyone the “correct” amount. Where by correct here, we mean to squeeze every penny out of them so that they are barely choosing to be NOs.
This is not about price discrimination. It is about ensuring that our most-desired NOs are able to operate profitably. Please address the actual issue: the profitability of each group. The relevant economics terms here are “break-even” and “operating loss”.
I am no longer treating this as a good faith discussion.
In my opinion you have not been treating this as a good faith discussion for quite some time. Almost three weeks ago you insinuated that my suggestion that we try to capture subjective entry ticket value was motivated by a desire to take advantage of people:
Surely you’re not arguing that the form of value capture we should aim for in year 2 is that people in year 1 paid too much and got burned?
You did this again in the message I am replying to, where it looks to me as though you are trying to imply that the attempts to get you to acknowledge that different break-even points exist is an attempt to “squeeze every penny out of them so that they are barely choosing to be NOs”.
These are just two instances where your behavior has failed to meet my standards for good faith, and this doesn’t even cover the numerous times I’ve had to remind you to stay factual. I’m not the first person who has found it necessary to ask you to maintain professionalism in tokenomics discussions.
Here you say that I am treating this as an academic exercise and not treating the protocol seriously Discord
When I say it is like an academic exercise I do not mean this in an offensive way. I tried to make this clear with the train example. In this type of exercise you can typically change the answer by modifying one variable (in this case, train speed), and the scenario ignores things that exist in the real world: delays caused by bad weather or drivers showing up late, signal failures, and so on. In an academic exercise we can ignore these things. In the real world it is more complicated.
Consider a physics problem where you calculate the trajectory of a projectile, ignoring air resistance and wind. In reality, these factors significantly affect the outcome. Or think about a financial model that assumes perfect order execution without accounting for slippage.
Your view that subjective entry ticket value can be captured by changing a global parameter ignores real-world complexities such as scarcity value and expectations of future growth. While I believe you want to treat the protocol seriously, you are approaching the problem with overly simplistic models, exposing Rocket Pool to significant risk.
This is unacceptable behavior, and I will not engage further with you.
Fair enough. From my side, I think I have consistently been professional, polite, and engaging in good faith. The discussions have taken place in public and everybody can draw their own conclusions. People can also look back at your previous interactions with those providing feedback on your proposals, and decide for themselves if there is a recurring pattern here.
Fwiw, I genuinely am not attacking you personally and have no intention of hurting your feelings. My goal is to have a productive and constructive debate about tokenomics. In debates, it’s easy to feel personally attacked when, in reality, it is the ideas being challenged. I also understand and appreciate the significant time you’ve invested in the rework, and I know that criticism of it can feel personal.
This is the second time our conversation ended abruptly when I asked probing questions about the flaws with UARS. I know that we’re all human and our emotions can sometimes get in the way. Still, these critical questions seem to lead to an emotional response, which distracts from addressing the core issues. I appreciate we’ve been going head to head for a while, and hope we can reset and continue with a productive discussion.
And now you have posted private communications of ours publicly, perhaps in some kind of attempt to embarrass me?
My intention was not to embarrass you. My intention was increased transparency.
it’s very likely that the hobbyist and high ethos groups have lower averages than centralized entities.
I agree overpaying the big guys is a slightly sad side effect, but I don’t see a way to avoid it.
If I was publicly arguing “it’s very likely that hobbyists and high ethos groups will receive more delegation than centralised entities”, and then in DM wrote “I agree the big guys getting more delegation is a slightly sad side effect, but don’t see a way to avoid it”, I have no doubt you would feel the community deserves to know.
There is a lot in my response. If you feel like engaging further I have a few questions:
- Do you recognise that there is a difference between “break-even” and “no_share that someone thinks each group will accept”?
- If so, when you say “it’s very likely that the hobbyist and high ethos groups have lower averages”, are you referring to their average break-even point or the average lowest no_share you think they will accept?
- Do you feel that you have adequately assessed the risk that UARS stabilises in the zone where no_share is profitable for centralised entities but nonprofitable for home stakers?
- If UARS were to stabilise in the zone where no_share is profitable for centralised entities but nonprofitable for home stakers, and an increasing portion of the new validators were from centralised entities, what mechanisms in the rework would you use to attempt to reverse this trend?
- Apart from the “reduce the no_share” self-defence mechanism, does the rework include any other provisions to help reduce the likelihood of centralised takeover?
- What percentage of NOs do you estimate would leave the protocol if no_share were reduced to zero? (Ideally broken down by cohort, but single blended value is fine)
- What percentage of NOs do you estimate would remain with RP if no_share were below their break-even point? (Ideally broken down by cohort, but single blended value is fine)