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RPLInflationRework.md

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RPL Inflation Rework:

Change RPL Inflation (proposals range from changing distribution eligibility to removing inflation altogether)

Present Day State:

  • Total RPL Inflation is at 5%
  • 1.5% out of 5% (30%) goes to funding the pDAO and oDAO (we'll call this "DAO RPL Inflation")
  • 3.5% out of 5% (70%) goes to NO's (we'll call this "NO RPL Inflation")
    • Distribution is calculated according to RPIP30 as described below:
      • If your staked RPL value in ETH is below 10% borrowed ETH, weight is 0
      • From 10%-15% borrowed ETH, weight is linear with the amount of borrowed ETH
        • 🧮 weight = 100 * staked_rpl_value_in_eth
      • Above 15%, weight follows a logarithmic curve, rising forever, but ever-more-slowly
        • 🧮 weight = (13.6137 + 2 * ln(100 * (staked_rpl_value_in_eth / borrowed_eth) - 13)) * borrowed_eth
      • The NO share of inflation gets split up to each node as weight/total_summed_weight

Proposals:

1. Change RPL Inflation to NO's to distribute by Borrowed ETH

  • Source: Samus' Cohesive Proposal
  • Summary:
    • Change distribution of "NO RPL Inflation" to scale linearly with Node Operator Borrowed Eth. Rewards would be distributed to all NO's as calculated by (your Borrowed ETH)/(total Protocol Borrowed ETH)

2. Scale Down RPL Inflation to NO's over time

  • Sources:
  • Summary:
    • Scale down "NO RPL Inflation" from present value (3.5%) to 0% as rETH market share grows from present day to it's soft-limits goal (soft-limit described in RPIP17: Self-Limiting Rocket Pool).
    • Leave support for RPL rewards (set setting to zero). Eg, if we wanted to run a short term NO onboarding blitz, it might make sense to add RPL rewards.

3. Remove RPL Inflation to NO's

  • Source: Valdorff's Cohesive Proposal
  • Summary:
    • Set "NO RPL Inflation" to 0% ending all RPL rewards to NO's.
    • In this structure, we don't need to use RPL inflation to get more people staking RPL to meet rETH demand. Insofar as folks have unstaked, they're at least doing a service to RPL stakers by giving up their share. If they're doing something like LPing, then they're further serving RP.

4. Remove RPL Inflation to oDAO & pDAO and replace with ETH commission

  • Source: Samus' Cohesive Proposal
  • Summary:
    • Add a commission share for the oDAO (set settings to zero to start).
    • Add a commission share for the pDAO (set settings to zero to start).
    • As rETH TVL grows, the amount of revenue generated from commission becomes large enough that a slice of commission could be used to fund the pDAO and oDAO.
    • During the transition period the pDAO and oDAO could have a blend of funding from both ETH commission and RPL inflation.