As I mentioned in my post, my main goal was to hew as closely as possible to how the current design works.
I believe going with 150% protocol ETH scaling for LEB8s is a larger change than my proposal.
I’m looking to have the exact same amount of “privileged speculation” as we currently have. I believe increasing or decreasing it should be done on purpose, not by accident or based on nomenclature.
After giving it some thought, I’ve decided that I’m against this proposal for essentially the same reason that I was against the previous one: Rocket Pool should not change the RPL withdrawal level until there is a useful alternative for that RPL within the RP ecosystem. Otherwise, we are inviting instability into the system.
This could take the form of UEBs or SaaS deposit pools for example, since both of those would use RPL to improve the productivity of the protocol – i.e. the RPL is used for the essential function of the protocol: making validators. RP growth is not NO-bound, it’s validator-bound, and if we can use the “extra” RPL for this purpose, we should do so.
I’m not blind to the arguments in favor of reducing withdrawal limits, but I encourage everyone to remain conservative with tokenomics changes. In a FOSS project which thrives on community participation, I believe it’s better to do nothing than make a change which carries significant dissent, since preserving the community is akin to preserving the project itself.
But this proposal doesn’t change the withdrawal level in absolute terms, only in relative terms, and only for LEB8’s. A node operator that has 24 eth worth of RPL locked up against a 16-eth minipool, would still have 24 eth worth of RPL locked up against 2 LEB8’s. The operator still earns the same amount of RPL rewards and can’t withdraw any more then they were able to before. All this proposal does, is for LEB8’s, cap the amount of RPL in absolute terms to the same absolute level as for 16 eth minipools.
RPL is still not used as collateral and as of now it won’t be in Atlas either, yet nobody seems to care.
Ok gave some more thought to this from my all seeing armchair.
Let’s consider a future state where these realistic assumptions hold:
RPL yield <= ETH yield (incl. mev etc)
We have majority in LEBs trending towards zero/low node operator ETH
RPL is mostly staked with inflation at 5%, with 70% going to NOs
The main type of node operator is one who is a yield seeker
i.e. intends to stake capital and sell enough yield to cover lifestyle e.g. tetranode’s ski trips
RPL supply/demand is in steady state equilibrium
i.e. no price trend at initialisation of this thought experiment
We are in a sensible market phase
i.e. ignore bull market speculation demand/supply in this, which mostly is proptional to marketing attention anyway
Early whales have adjusted their RPL position to be long term hold
i.e. lets assume even distribution so not required to account for massive dumps
Existing minipools are in equilbrium
i.e. no unbalanced exit or entry of existing minipools (e.g. unlike the events expected to happen when withdrawls are enabled)
In this scenario:
The primary demand is new minipools from node operators entering the network
The primary supply is existing NOs selling their yield
If you look at the demand component, can divide new minipool operators into two:
Those who are not bullish RPL:
Those who are bullish RPL:
Scenario discussion
Lowering the upper limit, lowers the value on RPL held above collateralisation, i.e. lowers demand in the proposed equilibrium scenario.
Reducing the higher limit on collateralisation primarily affects the node operators who are bullish RPL, as the NOs who prefer lower risk seek yield are the lower collaterlised types.
In such a future the majority hodlers of RPL will be the node operators. If RPL/ETH price from that equilibrium state goes up, then all node operators win. If RPL/ETH price goes down, all node operators lose
From this, I think:
A reduction of upper collateral limit (whatever number it is) reduces RPL demand from NOs bullish on RPL, which reduces RPL value based on a hypothetical scenario above.
Such an equilibrium does not yet exist, so lowering upper collateral limit I see as designing that equilibrium to come into existence at a lower RPL value.
Conclusion, based on that:
(analysis is unproven, unquantified - only arrived at this conclusion based on logic above, open to changing mind if premises change)
If minipools are in equilibrium and people are sensible, both of which you assume, then there should be no RPL bulls (as RPL should have a relatively stable price, for good fundamental reasons). I don’t think there’s anyone in the set of rational folks choosing High Collateralization on your flow chart.
If we add voting being very highly valued then maybe someone goes that route? But RPL won’t permanently grow vs ETH in a mature state of RP.
If minipools are in equilibrium and people are sensible, both of which you assume, then there should be no RPL bulls (as RPL should have a relatively stable price, for good fundamental reasons).
The kind of way I phrased the scenario was we start with an assumed equilibrium, and then disrupt it by making a reduction in the upper collateral limit from 150% down to 20%-50%. Which I think would devalue RPL.
Then I acknowledge such an equilibrium doesnt exist, then indicate that what a lower upper collateral limit will mean is we are making design choices that reduce RPL demand, and result in an equilibrium that is lower RPL/ETH value.
I don’t think there’s anyone in the set of rational folks choosing High Collateralization on your flow chart.
It seems implicit in this statement that lower collateralisation is the preferred node operator state and higher collateral limit doesn’t matter then because no one actually will choose it. I.e. unlimited upper limit is equivalent to a low upper limit.
If we add voting being very highly valued then maybe someone goes that route? But RPL won’t permanently grow vs ETH in a mature state of RP.
If voting was high value, and someone who was RPL-success aligned - then that would be ideal to allow higher collateralisation isn’t it? I.e. the node operator, who is most bullish (cares the most about successful outcomes), given voting power to incentivise preference of the highest perceived value outcome in RPL assuming well designed tokenomics => RPL go up = rocketpool success? (Counter argumnet is if RPL go down = rocketpool success, this is bad tokenomics)
P.S. Not married to an outcome, just putting thoughts out there in case it leads to a wider perspective discussion. AI’s only get as good as the number of times they play against themselves, so hopefully more discussion leads to better outcomes whatever they are.
No, because the statement is about an equilibrium state. We are not at equilibrium, so it does not apply. Higher limit does matter from here until equilibrium.
I’m not saying we are in equilibrium. I’m saying lower limit will lead to equilibrium with less RPL demand, hence a lower RPL/ETH valuation.
Just to be clear my point is - how does lowering upper collateral limit increase demand and add more value to RPL/ETH?
It neither damages nor harms it much I don’t think.
If someone wants to have a roughly 1.5RPL:1ETH portfolio, they’ll exit to rebalance well before 36:8=4.5:1 (when they’d first be able to withdraw for LEB8s if we use 150% of protocol ETH as the max).
If someone wants to have a 4.5:1 portfolio, they’re not gonna swap to 1.5:1 just because they can’t get a little yield on the rest. This is an intense speculator betting hard on RPL.
So while it may change where RPL is kept, and who gets yield, I don’t expect much change at all to RPL value.
And in maturity, even less. In maturity, almost everyone will want to be near the lowest setting as RPL is no longer expected to outpace ETH (not even by omegabulls like me).
We pay less rewards for speculation. That means marginal rewards for the next minipool are higher, which leads to more minipools. That would mean higher RPL ratio in the equilibrium, if you believe that it is linked to number of minipools.
That’s not true. RPL is used as a collateral of last resort. There’s flaws in the auction and this scenario is very unlikely to occur, but the functionality exists.
RPL has two intended purposes: to serve as collateral and voting in protocol governance. Other mentioned purposes like ‘unlocking commission’ or ‘privileged speculation’, are IMO after-the-fact rationalizations that are besides the point. (It does not make sense to reward staked RPL above the minimum if you only consider those two.)
I fully agree that RPL should be more immediately useful as collateral and would rather see RPIPs put forward to that end. (e.g. use RPL for penalizing MEV theft.)
I always appreciate descriptions of things as they are rather than as how we wish they would be and I believe you’ve managed to describe things very succinctly here.
I favour this proposal much more than the previous one because it maintains the status quo of effective RPL for existing Node operators which as others have pointed out is only fair taking into consideration peoples choice to buy in at varying amounts.
The only purpose of LEBs is to improve our scaling by extending our rETH generating capacity in a safe manner, increasing effective RPL amounts for existing Node operators over the 150% maximum is not a goal.
To reiterate, this proposal would maintain the current amount of effective RPL, rewards and voting power for Node Operators, it is the option with the least changes.
On the other hand, a maximum of 150% collateral based on protocol ETH for LEB8s would:
Reducing RPL APR for lower collateralised nodes has the potential to hamper node operator growth and hurt RPL value. Increasing the lockup of RPL may dissuade lower collateralised Node Operators from migrating and reduce our scaling benefit from LEBs.
If there is a desire to make changes that increase the maximum amount of RPL that you can earn rewards on, then that should be proposed separately rather than be bundled in with LEBs.
I’d like to come at this discussion from another angle entirely. This mental model has been helpful for me, and hopefully it will be for others, too.
As long as RPL rewards are higher than ETH rewards, there will be a set of NOs who prefer to maximize RPL rewards.
If RPL value is changed by adjusting the reward distributions, this cohort will adjust:
In the current rewards system, the valuation of RPL and rETH capacity is at odds, leading to conflict.
In my view, the best thing Rocket Pool can do for both RPL value and rETH capacity is to realign these two metrics. The most common suggestion for this is introducing UEBs, since that allows RPL value to be directly productive for rETH capacity. This isn’t the only option, however, and I encourage more research and discussion in this direction. In my view, the best reform possibilities for the reward structure exists in other design spaces, and we should focus on exploring those.
Based on this zoomed-out view, I’m still against this proposal for the simple reason that it leads to lower RPL value compared to the existing language in RPIP-8. I hold a lot of RPL, and I also know that RPL value is important for the protocol mission in the long run, even if that means we are trading off some growth in the short term.
With SaaS contracts and further collateral reductions on the horizon, there are greater scaling opportunities to come, so we don’t need to pay for marginal rETH capacity directly from RPL value today. In fact, the opposite might be a wiser choice right now.
As I’ve said every time you’ve brought up this mental model, it’s correct for RPL rewards including price appreciation/depreciation (ie, speculation). Until some day when our ratio is extremely stable, the depreciation/appreciation term will absolutely dominate RPL yield.
Why is this relevant? Because it means that (until maturity) the folks likely to hold staked RPL are also likely to hold RPL on their wallet. If someone wants 5:1 RPL:ETH, because they expect RPL to 3x, they’ll do it regardless of 9% yield. I see no protocol benefit (including your claim re RPL price b/c I don’t think it’ll change portfolio balance much at all). I also think the current draft of rpip-8 is a larger change from current minipool16s (that’s what my proposal attempts to minimize).
At maturity, ETH yield should be significantly better than RPL yield (with any more than 70% of RPL staked, yield is negative, eg). That means we can ignore maturity for this analysis.
We can and should also ignore UEBs for this analysis. If we make such a thing, we can make changes to go with it (eg, allow some extra amount of staked RPL for UEBs).
I’m for this proposal for the same reason I was for allowing withdrawals below 150%. As I stated in that post - I was for it specifically in the context of LEBs. I’m on board with the idea of not changing tokenomics for 16ETH minipools though, so I’m actually more for this proposal than the general < 150% RPL withdrawals.
I understand the point of the collateral system being somewhat complex, but I think it can be explained simply, and the increase in complexity isn’t dramatic. In marketing material the actual number of ETH equivalent RPL can be stated first as a numeric range, the formula is less important at first introduction. Depending on the background of the individual reading about rocketpool, even the idea of mixing your ETH with others is novel, this isn’t a huge additional leap.
I’m assuming here the incremental effort to add this change along with LEBs is relatively small, maybe not a 1 in story points, but not a 16 
Tbh, I’m a bit surprised at the level of opposition to this proposal, and in some of the replies it looks like a bit of defending ones book, and I say that as someone whose RPL investment is 1.5x my ETH.
One of the points of opposition is not changing tokenomics with LEBs, but I see that as really a false choice. Tokenomics are already changing with LEBs, compared to 16ETH minipools. As has been stated a couple of times, I believe this proposal is actually a path of least relative change, with the introductions of LEBs. I couldn’t understand why this wasn’t included, but now it seems it just was the least of the issues at the time.
I believe that there are some, especially those running their nodes as a business and recognizing all income when it’s received, that desire to be at the level where RPL can be withdrawn when necessary for taxes, to create new minipools when you’re over the RPL threshhold, or any other liquidity reasons.
In the end, for me this isn’t the end of the world. I would likely wait the few months (hopefully) between LEBs and withdrawals before converting if a change like this isn’t made. After that I can always exit for liquidity, even though that seems like an unnecessary hoop just to start using LEBs and having the same RPL liquidity as my investment today.
I believe the discussion and participants above have ALL acted in good faith and have made/led an educated open convo. I’m for the proposal.
Ive thought about how people vote
1 - follow people who they believe are smart and read into the subject
2 - vote for what they believe is in their personal best interest
3 - vote for what they believe is in the protocol’s best interest
I understand this is a contentious vote and am happy to vote with 3/3 of the above checked - tho being able to check 1/3 is of course valid as well.
Thanks to all those who have made efforts in promoting their side of the argument. Thanks to those who also can admit they have been convinced and switched sides.
The more I think about this and read the arguments; the more I’m convinced that this proposal actually imparts the least amount of tokenomics disruption with the implementation of LEB8s relative to maximum collateralization under the current regime. As such, I’m supportive of this proposal.
Hey all - I think this should head to snapshot vote to get authoritatively resolved.
I put up a discord thread to talk about logistics for that snapshot vote: https://discord.com/channels/405159462932971535/1033959349715996702
Help me understand the main change from the planned max RPL collateral from LEB8s. My understanding is that currently, it will be that a NO can stake 150% of the NO ETH value in RPL. For example, a NO with 1 LEB8 would be able to stake 8*150% = 12 ETH_worth_of_RPL on their node.
If so, I’m not following what this proposal adds for LEB8s as 20% of the borrowed ETH (24*20% = 4.8) is lower than 12 ETH, so it never provides the NO with a pathway to stake more RPL on their node.
What am I miss understanding?
