RPL Staking Rework Proposal

Hi All!

Today I’d like to share:

At a very high level, the primary point of the proposal is to go from
(by changing how we calculate RPL rewards) to incentivize NOs to supply more rETH (yay growth!).

Want moar? See the bottom of the intro document, which has links to the #research discord thread, an earlier research-facing document, etc.

Note: there is definitely room for change here. For example, there have been alternative equations for rewards, alternative methods of withdrawal friction, etc. Consider this a “release candidate”, rather than “the thing we will definitely vote on”.


Where do I vote, if in favour of these changes?

In the future – the forum likely has folk different than #research on discord, so we’ll see what comes in from new perspectives.


I’m in favour of Valdorff’s proposed revision of staking rewards in spite of being 150% staked RPL and therefore potentially worse off. To me the big issue is that Fire Eye’s original tokenomics were relevant when the RP protocol was launched and needed support from RPL ICO holders to get off the ground. That was long ago and more recent events where a number of those holders have departed the scene show that revised tokenomics are necessary.

Valdorff’s thoughtful analysis and recasting of where reward allocation can provide the greatest benefit to the protocol going forward resonates with me. What also is stimulating is that this proposal is effectively home grown in the sense that the greater RP community is responsible for it as opposed to some outside consultant.

While some may be critical of the slowness of this revision to take shape, I for one am pleased that the talent within the community is being tapped to preside over RP’s development. Collectively it comes at a lower cost and far greater effectiveness than an office tower full of highly paid permanent staff as found at other protocols.


What’s the reasoning behind using 10% rpl per borrowed eth as base of the model other than “we once chose so”?

Most valuation models have minimum RPL per borrowed ETH as a term. The idea here is to improve the alignment of our current NO spend; changing that minimum would be more like changing the value split between RPL and the other parties.

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So I think this proposal is great! Compared to the current system, I would vote for it in a heartbeat.

Here are my criticisms (using ‘somewhat’ since this is all conjecture and I’m not sure where the proper cutoffs are):

  1. Somewhat too narrow an optimal linear window for current state given our frequent (lol edited) 30% drops (may cause more opposition/short term volatility than necessary)

  2. Somewhat too wide a distribution of rewards for mature state (likely will require another tokenomics change later- ie as people cluster around minimum collateral would be simpler to switch to a straight RPL per rETH created or RPL per minipool formula)

  3. Somewhat too complicated an equation to explain to newcomers (maybe I just find it hard to think in log terms, but I wonder if there are simplifications that would keep a similar curve)

  4. The thrust is to get people to bond reduce and to form new minipools. Right now we don’t have a great way to pair the marked increased demand to spin up minipools with increased demand for rETH (something like universal variable commission), which means potential for long minipool queues which means decreased RPL to the overcollateralized and poor UI for new NOs. I think this proposal would be greatly improved by strengthening the link between rETH and NO demand.

Response (4):

I think this proposal heavily encourages minipool creation and leaves rETH demand unchanged; i worry that this imbalance will cause a queue that will interfere with its intended benefit: to grow the protocol. I would hope that ways to mitigate this could be discussed concurrently, because they may make the deal sweeter for the high collateralized stakeholders (those who care less about ETH and more about RPL rewards) who will otherwise lose RPL rewards (either by bond-reducing to a queue or not bond-reducing).

  1. I agree 50% can absolutely happen. But it’s happened once since launch, so I’m gonna push back on “frequent”. 37% for the next biggest. Here’s a log view

  2. Could you expand? At maturity, I think there’s built-in incentive to be near the minimum anyhow, so I think width matters less.

  3. Agreed, but I think it can be mitigated with drawings and calculators. I tried a piecewise thing and it was too many pieces to be a clear win. Might give it a go again later with something like sqrt?

  4. This proposal is fairly narrow in scope - just changing how we spend an existing amount of spend on NOs. It sounds like you’re talking about something more powerful that can, eg, trade off between rETH and staked RPL. It’s interesting, but out of scope for what I’m aiming for on this proposal.

Not really a criticism of Valdorff’s proposal but I’m thinking that it should include encouragement of the potential upside of what is looking like a fruitful relationship with Coinbase. I’m impressed with their efforts to remove the SEC from arbitrary crypto enforcement which among other things greatly reduces the risk of RP being banned for offering securities without a license. I saw a recent rETH paper which mentions that Rocketpool Pty Ltd has no certification from Australian authorities to do such so we are very vulnerable to such pressure with no funds to fight it. Given Coinbase’s legal expertise in this area we would be well advised to “hide under their skirt” so to speak.

Strategically given that Coinbase has launched Base we have the chance to think of their 100 million users as an RP prospecting tool. Armstrong has clearly articulated plans to enable crypto for the next billion users. Given our close relationship it makes sense for our RPL reward plans to consider tailoring offers whereby a Coinbase user can become an NO and/or an rETH holder with either having an RPL holding as a part of the package.

Millions of smaller RPL holders creates intrinsic demand for the token. Perhaps they could be collectivised via an “RPL Fund” which aggregates many small RPL contributions and pays out regularly to the holders much the same as the smoothing pool. The RPL Fund then provides RPL to NO’s perhaps through the NodeSet system. Coinbase in turn could allow its users to invest ETH again managed via NodeSet approved NO’s.

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Any thoughts on whether we would want to fund education around how this change would work, risks, benefits, etc.?

Thus far the new less-researchy higher level document has gotten a number of positive responses… I think we’ll be able to get a feel for our needs better if we see questions on this forum thread.

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To expand on Dondochaka’s comment, I think it would be educational to have a simplified calculator for projected RPL rewards under the proposal.

Although helpful, the Desmos calculator isn’t very user friendly. Two people told me they didn’t understand how to use it.

I imagine a simple calculator would be beneficial for developing consensus. I appreciate all the work you and others have put into this.


I agree with this proposal.
the sooner we can have this as RPIP and vote on it the better.

Only comment, can this:

If staked RPL value in ETH is > 15% borrowed ETH

  • node_weight = (13.6137 + 2 * ln(100 * (staked_rpl_value_in_eth / borrowed_eth) - 13)) * borrowed_eth

Be modified to be more easily intelligible?

something like:

node_weight = 100 * (0.15 * borrowed_eth) + ln( some_factor * (staked_rpl_value_in_eth - 0.15 * borrowed_eth) 

the goal is to show that any RPL staked above 15% of borrowed eth gets logarithmically diminishing returns.

The formula as it stands is very hard to interpret.

Thank you very much for this work Valdorff

PS: I’m @mfilipe on discord fyi.


May be useful for some people to see to get a general idea of the curve

Val sent me this on discord, and I am re-inserting it here for visibility:


I haven’t dug into the details other than looking at the general change in the incentivisation and curve, so my opinion is based on that knowledge alone.

Overall I’m currently in favour, because I think the incentive changes are more appropriate for long term steady protocol growth.

I think increasing the proportion of RPL paid to low collateralised nodes stimulates more people to spin up minipoools, and hence increase rETH capacity. I think it’s still important to have an incentive towards 2-3x of the lower 10% collateral limit, because RPL is so volatile, and node operators seek to remain collateralised through volatility to receive “RPL salary”.

The downside which I’m averse to, is that I think this change will introduce incentive for higher collateralised nodes to reduce their RPL position over time, compared with current state. This may increase sell side in the balance of the market in the future relative to the do-nothing scenario.

However, sometimes you just gotta eat your veges to become stronger in future.

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Right now the proposal is to phase in the rules over a six-month period. Can we talk about whether six months is the right duration? E.g., why not three, 12, or 24 months?

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To me, it should be “minimum viable”. I don’t really see much reason to spend in less-aligned ways for longer. That said – I also don’t think jerky changes are good, so I like some amount of ramp. 3 months sounds fast but doable to me. 12 months makes me sad, 24 months makes me say “why bother” (since we believe that as we mature and more RPL gets staked folks will trend towards minimum anyways).

I tried playing around with simplifications, and it’s all ugly tbh :stuck_out_tongue:

It’s easy enough to have the factor you mention up front, but the other part is still gross:

node_weight = (100*0.15*borrowed_eth) + 2*borrowed_eth*ln(100*(staked_rpl_value_in_eth / borrowed_eth) - 13) - 1.3863*borrowed_eth)

We could conceivably separate it out into terms?

  • node_weight = weight_at_15pETH + diminishing_reward_term + offset_to_align_functions
  • weight_at_15pETH = 100*0.15*borrowed_eth
  • diminishing_reward_term = 2*borrowed_eth*ln(100*(staked_rpl_value_in_eth / borrowed_eth) - 13)
  • offset_to_align_functions = 1.3863*borrowed_eth

Or I could simply state that and then be like:
The total can thus be calculated as node_weight = (13.6137 + 2 * ln(100 * (staked_rpl_value_in_eth / borrowed_eth) - 13)) * borrowed_eth

Tried some of the fun log rules, but no joy. Could move the 2 into the log by squaring everything, but then I’d be sad. Could pull the 100 out as a constant term, but now I just have an extra constant term. Could get the alignment term inside the log, but I think I’d have to have an e-th root of something? Etc.

If someone else has something nice (either formula, or way to present), very happy to include it.

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I agree that the RPL 10% collateral is still helpful and not hurtful to the new tokenomics. Over collateralization is the only guaranteed way to ensure safety in DeFi. Lowering the collateralization over 5-10 years could help onboard more Node Operators, but for now 10% is a logical and sound collateralization ratio that Tradfi can adopt in my view.

Outside of this, I support the updates @Valdorff, thanks for leading this effort for the community.

In defense of simplicity:

I’m going to make the argument that the logarithmic structure will not affect behavior in any predictable way because the incentives will not be in any way predictable to a human. A linear system will be superior.

This bracketed linear system roughly matches the marginal effectiveness/curve of the proposed rules


This curve is
if pETHratio<0.1, total effective RPL = 0. Otherwise, for all RPL <0.15 pETH, effectiveness is 100%, for 0.15-0.17, effectiveness is 75%, for 0.17-0.20, effectiveness is 50%, for 0.2-0.3, effectiveness is 25%; beyond 0.3, effectiveness is 0%.

It’s fairly obvious from the linear graph and the equation what your marginal effectiveness or APR is for any level of RPL. At some levels of collateral logarithmic provides better rewards, at others linear does.

Concerns with the logarithmic curve

We can match the logarithmic more accurately; for the 75% rule, this would mean RPL holders from 0.15-0.155 would do better on than linear, and 0.155-0.16 would do worse than linear. In comparing the two, that maximum decreased rewards for the linear discontinuity would be approximately 0.005[amount from .15-.155]/.015[amount of core 100% RPL]*.5[triangular area under the curve, decreases as you approach 0.155]*25%[decreased marginal effectiveness between curves]`, or about 0.417% of their RPL rewards for the month.

  1. I think it is extremely unlikely that anyone except a bot will make an adjustment to their holdings based on improving rewards, at maximum, by less than one half of 1% of RPL rewards, or 0.2% of total rewards. So like 8.35% blended APR becomes 8.33%.

  2. For every individual in the proposed rule who sells RPL/bond reduce because they are above the linear, there will be about as many people below the curve who would not sell RPL/bond reduce because they get more rewards (pETH ratio 0.155-.016). So whether one is more concerned about increasing the amount of rETH created or decreasing negative RPL action, it mostly won’t matter.

  3. You have to have huge scale to even consider this proposition- because we are talking about selling chunks of 8 ETH of RPL to make a new minipool. If you are in the sweet spot (pETH ratio 0.1525) and have 100 8E minipools, then selling RPL to get another minipool would sink you to about .1477, well below the maximum efficiency of 0.15. So you’d have to have well north of 100 minipools to even bother making this calculation, so we are talking about maybe 1% of NOs maximum.

  4. To me most compelling, is that it absolutely won’t matter what someone chooses to do this month, because the volatility of RPL is far greater than 1.5% per month. So if you have someone who would buy at 0.1525, but not at 0.155, they are 50% likely to sell the next month when ratio >.155; and if they would sell at 0.1525 but not at 0.150, they are 50% likely to buy the next month when ratio <0.15. In other words, the pETH ratio volatility greatly outstrips any possible decisions one might make within the critical 0.15-0.16 range. All we may possibly be doing with a granular reward system is encouraging node operators to buy and sell every month to hit some specific target (ie, increase churn).

A simile scenario (this is mostly fluff, you can skip it):

Comparisons are often strawman arguments- hopefully this is not, but i’d welcome critiques to make it less strawman-ish.

You make 40$/hr. You need childcare and want to hire a babysitter who costs 20$/hr. Great, you hire them!

But wait, you also decide your time with your flesh and blood is worth 10$ an hour. But 20+10 is still less than 40$ an hour. So hooray, you hire them.

But wait, you have to pay taxes. You have to pay 20% in taxes. Hooray, 20+10 is less than 40*0.8; you hire them!

But wait, this is a progressive tax. You estimate how much you will work this year- you fall into the 22% marginal tax bracket. You hire them! But you can tell by eyeballing that if you get any big bonuses at the end of the year, you’ll be pushed into the 30% marginal tax bracket. Which means you should stop working and stay home with the kids.

But wait, this is a logarithmic tax structure. You pull out your scientific calculator. After solving for ‘X’, you find that if you work up to 2100 hours this year, it will have been worth it to hire the babysitter; unless you get that bonus, then you can pull out your calculator and figure if it is worth it to stay home.

But wait, this logarithmic tax structure is also multiplied by the difference in year over year inflation. It was 4% last year. You pull out your scientific calculator and estimate that if it is more than 4% next year and you work under 2100 hrs, it’s worthwhile to get a babysitter. If it’s 3.5%, you can work 2400 hrs and still make it worthwhile to get a babysitter. But if it’s 4.5%, you should have only worked 1700 hrs before staying home with the kids. And if it hits 5%, then really after 1000 hrs you should stop working and just stay home with the kids. So you study some TA and get a copy of the economist and try to figure out what the current guess for next year’s inflation is before deciding on your child care options. And it’s very possible that if inflation is 6% next year you should just have stayed home the whole time.

This final scenario is my concern for how the tokenomics will work in practice. A finely granular structure of rewards requiring calculation with any small change, but where the calculation won’t generally help people make real world decisions because those decisions will be completely outstripped by a highly volatile metric (RPL/ETH ratio) that is outside their control.

Risks/benefits of a bracketed linear system


  1. Rather than a smooth curve, there are discontinuities in linear systems with edge effects that will change people’s decisions.
    notably, these are discontinuities in slope but not rewards. I believe that these are unlikely to affect human behavior based on my arguments above.
  2. There is no benefit for staking RPL beyond 0.3, suggesting people will be more prone to sell RPL which could affect RPL price.
    While this is conceivable, at this point we would be talking about <1% RPL APR under Val’s proposal. i don’t think anyone would stake at that level because of the rewards given the volitility of RPL/ETH ratio.
  3. There is increased complexity with 5 different linear curves (0, 100%, 75%, 25%, 0%)
    i think humans are well equipped to deal with tax brackets when they come in nice round numbers


  1. A human can tell the effect on their bottom line when bond reducing, staking, or withdrawing RPL with minimal mental math
  2. It is easy to explain in real terms to people on discord or documents
  3. there is no rewards going to highly overcollateralized NOs, these are directed back into the sweet spots. This is a minimal benefit.

My opinion is that I just don’t think humans are capable of using something so granular as a logarithmic system to make real decisions. And I’m sure humans are not capable of successfully estimating future RPL/ETH ratio movements within 3% bands in a timeframe longer than a few days, at least not until we are much more mature as a protocol. If the incentives will not affect human behavior, then they are complexity without benefit. So consider a linear tiered reward system like the above. Or consider just a flat system, where we reward people to be in the sweet spot we want them to be in (let’s say just reward pETH ratio 0.10-0.20), and nothing else.