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RPIP-42.md

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rpip title description author discussions-to status type category created requires tags
42
Bond Curves
Introduce smaller ETH bonds to improve capital efficiency for Node Operators while maintaining the security of the Rocket Pool protocol.
Valdorff (@Valdorff)
TBD
Draft
Protocol
Core
2024-03-08
43, 44
tokenomics-2024, tokenomics-content

Abstract

This proposal dramatically increases the LTV used in the protocol (loan to value; the amount of ETH that can be borrowed per unit of bonded ETH). It does this safely by:

  • Enabling node-level penalties to mitigate/discourage MEV theft
  • Using forced exits as needed
  • Starting with lower LTV at lower total bonded ETH to mitigate/discourage MEV theft
  • Retaining sufficient bond per validator regardless of total stake to mitigate against slashing and abandonment
  • Providing increased capital efficiency with greater bond to encourage an NO to stake as large nodes instead of many small nodes

This proposal also explicitly tries to benefit the smallest NOs in a few ways, in line with the pDAO charter values of decentralization and prioritizing Ethereum health (see RPIP-23):

  • We willingly take on somewhat more MEV-theft risk for the smallest NOs (see Rationale)
  • We give precedence to small nodes staking some number of initial validators in the Node Operator queue
  • There is a small but tangible financial benefit for large stakers that stake as few large nodes instead of many small nodes -- this (alongside our vote power, which scales with the square root of vote-eligible RPL) helps preserve the strong governance voice of small NOs

This work is based on prior work; a copy can be found here.

Specification

  • The oDAO SHALL be able to penalize stake at the node level when a Penalizable offense is committed
  • When Node Operators create validators, with i validators in the megapool prior to adding:
    • If i < base_bond_array.length: the required user_deposit is the amount of additional ETH to bring the user's total bond up to base_bond_array[i].
    • If i ≥ base_bond_array.length:, the required user_deposit is reduced_bond per validator.
  • When Node Operators remove validators, with i validators in the megapool prior to removing:
    • If i > base_bond_array.length: the Node Operator share before penalties is reduced_bond.
    • If i ≤ base_bond_array.length and i > 1: the Node Operator share before penalties is the amount of ETH that would bring the user's total bond down to base_bond_array[i-1].
    • If i==1: the Node Operator share before penalties is the amount of ETH that would bring the user's total bond down to 0 ETH.
  • Bulk validator creation/removal functions SHALL behave the same as multiple individual transactions.
  • If an NO has more total bonded ETH in their megapool than would be necessary based on the current settings (eg, reduced_bond is reduced), it SHALL be possible to reduce their bonded ETH and receive ETH credit for it
  • credit MUST be usable to create validators in a megapool
  • credit MUST be usable to mint rETH to the NO's primary withdrawal address
  • The initial settings SHALL be:
    • base_bond_array: [4, 8]
    • reduced_bond: 4 ETH

Deposit queue specification

ETH from the deposit pool SHALL be matched with validator deposits from queues as follows:

  • There SHALL be a standard_queue
    • When adding a validator, users MAY place their deposit on the standard_queue
  • There SHALL be an express_queue
    • When adding a validator, users MAY place their deposit on the express_queue by spending one express_queue_ticket
  • When matching ETH from the deposit pool to queued deposits:
    • First, ETH SHALL be matched to the oldest deposit in the express_queue; this is repeated express_queue_rate times
    • Next, ETH SHALL be matched to the oldest deposit in the standard_queue
    • This sequence SHALL be repeated indefinitely until both queues are empty
      • If one queue is empty, those matches SHALL be skipped
  • Each node SHALL be provided express_queue_tickets equal to express_queue_tickets_base_provision (this includes newly created nodes)
  • Each node SHALL be provided additional express_queue_tickets equal to (bonded ETH in legacy minipools)/4 (this will always be zero for newly created nodes)
  • The initial settings SHALL be:
    • express_queue_rate: 2
    • express_queue_tickets_base_provision: 2

Deposit mechanics specification

  • A node operator MUST take 3 actions to start a validator: deposit, prestake, and stake
  • Deposit SHALL place all the ETH in the deposit pool (where it can be used in validators as needed) and enters a queue as described above
  • Until prestake, it SHALL be possible to exit the node operator queue and receive ETH credit for it
  • Prestake SHALL be possible when
    • The deposit pool contains 31*number of currently prestaked validators ETH
    • The deposit pool contains an additional 1 ETH per match using the process described above
  • Prestake SHALL take 1 ETH from the deposit pool and stake it to the beacon chain
  • If there is enough ETH in the deposit pool to execute deposit and prestake in the same transaction, they MUST be done in the same transaction
  • There SHALL be a period of time to check for deposit validity
  • Stake SHALL take 31 ETH from the deposit pool and stake it to the beacon chain alongside the previous 1 ETH to make a complete validator

Specification taking effect with Saturn 2

  • Update reduced_bond to 1.5 ETH

Penalizable offenses

This portion of the RPIP SHALL be considered Living. It may be updated by a DAO vote.

Offense Penalty Added Updated
MEV theft theft size + 0.2 ETH 2024-03-29 2024-03-29

Implementation thoughts

  • When showing legacy node status, there is not a trivial way to get the node index for a given address. That said, the other direction is trivial using RocketNodeManager.getNodeAt, so the work can get moved off-chain. Eg, one can iterate across all possible node indices and then pass in the node index that matches the node's address; the smart contract can confirm the match to demonstrate legacy node status.

Rationale

  • Bond sizes were originally ideated per prior work.
    • base_bond_array is chosen to "sufficiently" dissuade MEV theft as a strategy
    • reduced_bond is chosen to "sufficiently" guard against slashing or abandonment risks
  • Follow-on work was done in discord
  • The express queue is meant to favor (a) existing NOs and (b) small NOs. The end goal in both cases is to support multiple values enshrined in RPIP-23 (the pDAO charter): decentralization, protocol safety, and the health of the Ethereum network.
    • The express_queue_tickets_base_provision is enough to get started, and currently matches the length of base_bond_array
    • The tickets from (bonded ETH in legacy minipools)/4 are enough to fully migrate to 4-ETH deposits during Saturn 1 using the express queue OR to partly migrate to 1.5-ETH deposits after Saturn 2
    • It's worth emphasizing that the tickets stick around -- ie, a node operator joining during a time when we don't have an NO queue (ie, when RP has an immediate need for NO supply) gets to keep their express queue benefit for a later time if they wish
2.5% commission 4% commission
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  • Note that the bond curve has been chosen to ensure that minimum-size sock puppets are not the most efficient for theft. They get the most advantage from theft, but not the highest overall yield from a dishonest strategy.
  • Validators with base_bond deposits are prioritized to promote decentralization; new or smaller Node Operators can get up to base_bond_array.length validators launched ahead of larger Node Operators adding reduced_bond validators.

Copyright

Copyright and related rights waived via CC0.