Name of Project
RocketPool Tokenomics Simulator
by Nethermind Research
What is the work being proposed?
The proposed work consists of two related parts:
- The design of a multi-agent simulation engine to analyze tokenomics proposals.
- The analysis and coding in the engine of a few selected tokenomics proposals.
Design and Development of a Multi-Agent Simulation Engine
The first part involves designing and developing a multi-agent simulation engine to analyze tokenomics proposals. This engine will model the behavior of Node Operators in terms of collateralization and provide insights into how different proposals may impact the network, taking into account factors such as the number of pools and collateral amounts.
Analysis of Selected Proposals
The second part of the work focuses on analyzing and coding selected tokenomics proposals within the multi-agent simulation framework. In collaboration with the Rocket Pool community, a set of proposals will be carefully examined, prioritizing those with significant potential to affect the protocol, feasibility of implementation, and alignment with the community’s vision. The deliverables will include comprehensive analysis reports and recommendations for each proposal. Throughout the process, close monitoring of the RPL price and its impact on protocol growth will be conducted, along with the identification of any potential risks. Parameter tuning will also be performed to optimize the proposed solutions when applicable. We have shared in detail our approach in building these simulations with the community on the governance forum. This can be found here.
Is there any related work this builds off of?
This proposed work is based on:
- Our previously published research on the governance forum.
- Community discussions and proposals, both existing and forthcoming, aimed at increasing the collateral posted by node operators.
- The community’s existing knowledge about Node Operator behaviors and the Rocket Pool protocol.
Will the results of this project be entirely open source (MIT, GPL, Apache, CC BY license, or similar)? If not, which parts will not be, why, and under what license will they be published?
100% free software.
The project will use Python and the Mesa library to build the multi-agent simulation engine.
Mesa is an Apache 2 licensed software.
Benefits
This project aims to offer significant benefits to the community:
- Our vision is to create a collaborative tool that empowers community members to contribute their modeling ideas and assumptions. This tool will be accessible to anyone in the community and will facilitate the generation and testing of new tokenomics concepts. Users will have the ability to explore ideas such as creating new types of minipools, adjusting collateral requirements, and modifying commissions. One of our core principles is modularity, which means that the tool will be designed in a way that allows for easy updates to reflect changes in tokenomics. This flexibility ensures that the tool remains relevant and adaptable as the ecosystem evolves.
- The simulation engine will foster a highly responsive and engaged community where stakeholders can actively shape and refine the tokenomics framework. We believe that it will speed up the decision-making process and allow any member of the community to experiment and test ideas. This will also serve the protocol in modeling and deploying future upgrades.
For Node Operators benefits will include:
- Make the RPL demand better aligned with protocol growth. This should lead to lower RPL volatility and better price appreciation for RPL.
rETH holders should also benefit from the fact that NOs are better incentivized to have high collateral levels which in turn will make the protocol safer.
Overall, better tokenomics will accentuate Rocket Pool’s competitive advantage and benefit all stakeholders.
What other non-RPL protocols, DAOs, projects, or individuals, would stand to benefit from this grant?
N/A
Team
Who is doing the work?
Nethermind Research team.
What is the background of the person(s) doing the work? What experience do they have with such projects in the past?
Our team background and experience in the DeFi space is extensive and diverse. We have a group of highly skilled individuals with backgrounds in finance, risk management, quant modeling, and financial trading. Many of our team members are CFA charter holders and have worked in prestigious financial institutions such as Santander and Nomura, as well as established hedge funds like Janus Henderson.
Our head of DeFi research will be personally managing the project. He has experience building simulations in TradFi and building complex quantitative tools for DeFi protocols. Nethermind can also rely on a large team of engineers and developers who have developed tools for financial institutions and protocols.
What is the breakdown of the proposed work in terms of milestones and/or deadlines?
- Design and Development of a Multi-Agent Simulation Engine
We propose building a multi-agent simulation engine to enhance the decision-making process within the governance forum.
- The first step will involve detailing how to model the behavior of all the agents, including Node Operators, Traders, and others. This important step will be agreed upon and debated with members of Rocket Pool and the community to ensure consensus. We estimate that this process will take approximately 2 weeks, with 1 week dedicated to documenting the agreed-upon model. This documentation will serve as a valuable resource for future upgrades and tool documentation.
- Further data analysis may be required to validate assumptions or improve the modeling of certain agents. However, this will only be pursued if necessary or if there is disagreement within the community.
- Subsequently, we will begin developing the multi-agent tool based on the model described in the previous step. The simulation engine will incorporate the collateralization behavior of Node Operators, providing valuable insights into the impact of various proposals on the network. Key factors such as the number of pools and the amount of collateral will be measured.
- Deliverable: We will ensure that the code repository for the simulation engine, along with its documentation, is made available to the Rocket Pool community, enabling future development and refinement.
- Time to deliver: The estimated time to deliver the completed project is 2.5 - 3 months. However, it is important to note that the timeline could extend depending on the modeling complexity required by the community.
- Cost: The project is estimated to cost $35k.
- Analysis of Short-Listed Proposals:
- As a collaborative effort, we will work closely with the Rocket Pool community to identify and incorporate a few selected proposals we would like to examine.
- These proposals will be chosen based on their potential impact on the network, feasibility, and alignment with the community’s vision.
- Deliverable: We plan to model each proposal in the multi-agent simulation framework and produce an in-depth analysis report with recommendations. We will track the RPL price, and its impact on protocol growth and identify potential risks. When relevant, we will run parameter tuning to optimize the proposal.
- Time to deliver: 2 - 4 weeks per proposal, depending on the level of complexity. That will be 2 weeks of work for a mid-senior analyst per proposal.
- Cost: We estimate an indicative price of $15k for the implementation of two proposals.
How is the work being tested? Is testing included in the schedule?
The testing process for the work will involve several steps to ensure the accuracy and coherence of the simulations. Each module will be tested individually to verify its functionality and performance. Additionally, a comprehensive sample simulation will be executed as a sanity check to detect any anomalies or unexpected behavior.
During the testing phase, various aspects will be closely monitored. This includes validating the stability of user balances to ensure there are no instances of negative balances. Additionally, the simulation will be monitored for any sudden and unexplained drops in prices or irregularities in the number of minipools. These checks will help assess the coherence and reliability of the results generated by the simulations.
How will the work be maintained after delivery?
Comprehensive documentation will be provided to ensure ease of use and enable community members to take ownership of the tool and make changes as needed. The documentation will be designed in a user-friendly manner, offering clear instructions and explanations to guide users through the tool’s functionalities and customization options.
In addition to providing documentation, we are committed to fostering knowledge transfer within the community. We are open to organizing workshops and creating informative videos that will empower community members to understand and utilize the tool effectively. These resources will serve as valuable learning materials, enabling users to leverage the full potential of the simulation engine and explore new tokenomics ideas. Please note that workshops and educational content are not included in the project timeline and costing.
Payment and Verification
What is the acceptance criteria?
- Delivery of the tool as specified by the community with documentation
- Running of the base example with appropriate metrics
- For the assessment of tokenomics proposal, the delivery of the evaluation report will be key.
What is the proposed payment schedule for the grant? How much USD $ and over what period of time is the applicant requesting?
Project 1: Simulation Engine
The first payment will be made once we have delivered the specifications as agreed with the community. This constitutes 20% of the total cost for the engine, which is $7k.
The remaining payment, amounting to 80% or $28k, will be made once the tool has been delivered.
Project 2: Tokenomics Proposal Analysis
Payment will be made after the associated report has been delivered.
How will the GMC verify that the work delivered matches the proposed cadence?
Set up bi-weekly calls with members of the GMC (or Rocket Pool if more appropriate) to discuss progress and give access to the GitHub repo.
What alternatives or options have been considered in order to save costs for the proposed project?
When building an economic model, it’s important to consider the trade-off between a complex model and a simpler one that is faster and easier to update. A complex model can incorporate a wide range of factors and interactions, allowing for a more detailed representation of the agents’ behavior. However, complex models come with certain drawbacks. They typically require more computational resources (and more cost) and time to develop, implement, and update. They also have more parameters that need to be calibrated.
Our objective is to create a streamlined model that can effectively represent the key factors driving tokenomics. This approach brings several benefits in terms of speed and ease of maintenance. By focusing on fundamental features and interactions, we enable faster simulations and more efficient updates to the model. Simpler models also tend to be more transparent and easier to interpret, facilitating clear communication of the model’s behavior and findings to the community.
It is also important to stress that no model is perfect. All models involve simplifications and assumptions that may introduce some level of error or uncertainty. It is crucial to acknowledge the limitations and potential sources of error in the model and to communicate these uncertainties transparently to the community.
Conflict of Interest
Does the person or persons proposing the grant have any conflicts ofinterest to disclose? (Please disclose here if you are a member of theGMC or if any member of the GMC would benefit directly financially from the grant)
Nethermind has recently done work for Lido. We researched mechanisms to make Lido’s network Sybil and white-labeling resistant. More details on this can be found at A proposal for partnering with Nethermind to design a mechanism for a good validator set maintenance - Proposals - Lido Governance
Will the recipient of the grant, or any protocol or project in which the recipient has a vested interest (other than Rocket Pool) benefit financially if the grant is successful?
No.