What we are proposing is to use a percentage of pDAO funds
Leaving aside the merits of the suggestion itself, which is absolutely worth discussing, I think we can’t legitimately use pDAO funds for anything right now because there are no pDAO governance mechanisms. We need to establish legitimacy for governance actions (I’ve suggested we start with RPIPs), especially before we start spending money.
Why are we trying to prop up rETH APR by stealing from NO’s? If there was a problem with rETH’s APR, current rETH holders have a 2k deposit pool to withdraw from. Nobody is doing so, clearly this is a manufactured crisis that has no basis for such nuclear option solutions being suggested.
Obviously, we seem to have much more attraction to rETH than we do new NO’s considering the deposit pool has been pinned at 2k for 1+ month. rETH being a good value will always be important, but at this stage in RPL’s lifecycle the team should be focused on fixing the limiting factor to growth, which is recruiting new NO’s or allowing current NO’s to more efficiently allocate capital to pull more from the pool. Don’t forget that NO’s will eventually have the ability to exit the RPL protocol and allocate their capital elsewhere should we keep going down this path. Then you’ll not only have low recruitment, but you’ll also have current NO’s trying to get out which will be a disaster for rETH. Don’t take the fact that we’re locked in, but rETH holders are not, for granted as it will not last forever.
We should be putting more effort into recruiting new NO’s instead of disincentivizing them by lowering commission rates and by putting downward pressure on RPL (Which NO’s are forced to hold).
I am against this for a number of reasons. First everything points towards us having a shortage of node operators so I don’t see the reasoning behind why we should be incentivizing reth holders who we have too many of (relatively not actually) .While simultaneously we are taking actions to reduce node operators (Pdao funds being used for this are indirectly taxing node operators and we are already reducing commission to 15%). I’m in support of locking commission to 15% but we should be very wary of doing anything to make node operation less appealing.
Second this seems very unnecessarily complex why not just lock the commission to 10% if we want to compete. Using rpl to dump for eth to make up the shortfall is unneccessary and makes it seem like we are trying to make node operation look more appealing than it actually is( instead of reducing the commission which is an obvious form of making nodes less profitable it would appear like we are trying to hide it in the rpl token) .
Reth is simply going to trade at a premium to steth or centralized tokens we should determine what the fair premium is based on what the market tells us. Right now it is saying that relative to node operation reth is much more appealing and we should take that into account.
Nature of the market is telling that 20% is not enough to keep the offer of awaiting ETH to be matched with 16ETH, so bringing it to 15% is going to worsen the situation, and the pool will only get bigger.
Setting up a NO doesn’t come cheap. Claiming RPL rewards is expensive and we are putting our capital at risk.
The market will find the balance of the commission, for this I think we should increase the commission and let the market decide. Alternatively you can change the curve used to calculate the commission, making the 20% less available.
One additional thought; could we instead use the pDAO’s treasury to implement improvements on the RPL rewards claim process to make it less expensive to claim and (potentially) re-stake those rewards? Layer2 solution or otherwise. This would be an incentive for NOs.
It’s not a terrible idea. I have mixed feelings and would need more information to decide one way or another. Using this approach essentially allows you to continue incentivizing NOs at current levels while also incentivizing rETH deposits. I’ve seen a lot of talk so far about this proposal hurting NOs, but it seems to me that since commission rates will remain constant for now under this proposal, that’s not necessarily the case. There is of course, the downward pressure on price that the pDAO selling of RPL will cause. That’s not a huge concern for me at this time, because I restake all of my RPL rewards, but may concern other people more. It depends on the magnitude of the price effect, of course. Depending on how significant, this could be really frustrating for people at or near minimum collateral. Still, that might be better in the short term than lowering commission, if that must indeed happen. Long term, that probably does need to happen, as while the advantages of the protocol do justify a lower APR, that may not be adequate incentive for deposits long term. It may be the case that there is some pent up demand for rETH and that we have yet to see what happens when rETH competes with the wider market among people who don’t necessarily care a lot about decentralization. It does seem like the worst thing to do at this point would be to disincentivize NOs, but this proposal doesn’t necessarily seem to do that in a significant way. I do wonder why it’s necessary to take these actions now, given the fullness of the deposit pool. Strictly for marketing purposes? Attract more deposits before the interest in depositing slows? I’d like to hear more about the reasoning behind doing this now. I also think making a decision on this would require hard numbers about RPL amounts to be sold off and maybe some real estimates of the price action that would cause… A lot of care is required here, as I feel this kind of move might honestly be the most consequential decision since the protocol has been on mainnet, and I wouldn’t dismiss concerns about the reputational effects.
I believe having a competitive rETH APR is important, however this proposal seems like an ineffective use of limited funds.
Tokenomics:
This creates additional sell pressure on the RPL token which is detrimental for existing NO’s that have staked RPL as collateral. This also devalues the rewards which are being used to attract new NO’s. Whilst the direct price impact may be somewhat negligible, the dynamic itself may also be offputting for newcomers/potential NO’s.
It doesn’t seem sustainable, and may create a reliance on selling RPL rewards to boost rETH APR.
It seems like an ineffective use of RPL inflation. I would guess that bribing the curve pool would be cheaper, more effective in increasing rETH demand (it appears to have been working in this way effectively already), and also have other benefits such as increasing liquidity and facilitating further defi integrations (which can create further ongoing and more sustainable sources of rETH demand).
For NO incentivisation, RPL could be used in ways that create less sell pressure, as it would have a logical use case - it could be staked on the node to earn further rewards, whilst also serving to protect the network by increasing RP’s overall insurance collateral.
Opportunity cost:
There are many other ways in which this RPL could be spent. In addition to bribing the curve pool (which I think would be a better and more effective use of RPL inflation for the purposes of incentivising rETH demand), there is also things like marketing efforts, which are lacking.
Suggestions:
It would be useful to assess the NO demand once the protocol has transitioned to the fixed 15% commission rate (eg over at least one reward period). This would give further insight into the importance of the commission rate to attracting new NO’s vs other variables.
Continue to monitor rETH demand in relation to the curve pool incentives, and strongly consider adding additional incentives once the current incentives are reduced.
Consider improving rETH competitiveness by gradually reducing the fixed commission rate towards 10% over a stated schedule, if it is concluded that this is best for the protocol.
Consider reducing the commission rate to a fixed 10% commission in the short term, and incentivise new NO’s in another way, such as using the RPL to subsidise new node creation (or something similar), or by attracting a larger pool of NO’s via marketing campaigns.
This proposal has generated a lot of discussion, and hopefully one of the benefits it may lead to is a more concrete system and process for how the community can allocate pDAO funds.
Nothin more to add than what other “nay” voters have already mentioned. I’m just here to iterate and add my vote - it doesn’t seem worth the efforts to go beyond the already planned 15% fixed commission.
The recent (and continued?) demand for staking using RP seems to indicate rETH users are happy with the current prospects, and IMO, this stop-gap solution is unneeded, or else, would have minimal impact as to raise the question: is the juice really worth the squeeze in this case?
Ok, so pretty much universal opposition from both the forum and Discord.
This is what we have heard:
Competitiveness - we assumed that our target commission to remain competitive was close to 10%. As many have highlighted, rETH is unique and should compete on quality rather than just return. Once we have fixed the commission to 15%, the average commission will tend to 15% and returns will improve.
NO growth - the proposal was not intended to hurt NO growth, at all, quite the opposite. A commission of 15% is a good balance between incentivising node operators and enabling a competitive rETH, with the above adjusted expectations. There are short, medium, and long term activities to promote NO growth.
Opportunity cost - pDAO funds could be better spent elsewhere, fair enough
Governance - I will provide some responses to the other posts in this forum. Thank you for raising the posts.
Marketing - I have already provided responses elsewhere in this forum about this
At this stage, we will continue with the 15% fix and reassess over time. Thank you everyone for your feedback.
Is there currently demand destruction of rETH? Every time I look at the pool, it looks pretty full of people wanting in on rETH. Looks like people are pretty happy paying 20% commission to gain access to an appreciating, hands-off asset. Wait for the demand that integration into defi will provide.
Are we creating a problem that doesn’t actually exist?
I know this isn’t the place, but I don’t think there is a problem with demand. I think the problem is on the supply side (Not enough Node Operators to keep up with the pool).
Just my 2 cents, but dumping coin to falsely prop a market up sounds bad from my perspective. NO’s get hit from lower commission and sell pressure of pDAO RPL and to what end? There is no rETH demand issues.
If anything, the cost of being a NO is going to increase to the point that this protocol will become centralized as a result of the an oligarchy within the NO community. And the constraints on the rETH pool (and lack of NOs) are going to dissuade people from entering.
I am but a small fish compared to top tier NOs. Maybe lowering the 150% max RPL reward for NOs who agree to a 5% commission, so that the incentives of RPL balance out the lower commission rate. That way, smaller operators are still incentivized to start up pools for less bonding, lower commissions, higher RPL rewards. This helps the new operators will lower capital and also dramatically reduces average commission rates.
A much better use of pDAO RPL would be to use it as bribes on Convex/Curve to increase demand for rETH regardless of native ROI. Let’s work to make this a valuable Lego in the DeFi ecosystem as it will be the best lego that wins out at the end of the day; not the version of staked ETH that earns the most natively. rETH holders should be able to earn governance rights as much as NOs IMHO.
Markets are efficient and driving demand with high commission to NOs can be offset by distributing gov tokens (RPL) to the other side of the market (rETH holders) for holding liquidity positions.
Opposed . Again we need more Validators, and to do so is to allow ultracollaterized Node Operator staked RPL i.e > 100% to start a validator without the 16Eth deposit