Ethereum Staking Economics Endgame by Ansgar Dietrichs

Transcript

yeah hey everyone um it's it's great to be here again actually I I even put in a slide into my talk of just like previously it East Dubai because it's been it's been great to be here for for for the third year in a row and if you if we look back actually it turns out that the the last two years um the talks actually ended up being more relevant than maybe initially one could expect um the first year we talked about EIP 3074 which back then it looked like might might have trouble um reaching reaching ethereum but now it's right back in the mix if you if you go on Twitter you you you you read about account obstruction you you'll see the number a lot so so it's nice to see that that basically foreshadowed that uh two years ago already and then last year we talked

about um another E that I was involved with 4844 and of course I think that was one of the the kind of the um uh Big Ticket items um of of of kind of ethereum road map in the meantime and now we we finally have kind of data scaling on ethereum which which is great um so hopefully can continue this this trend uh this year um and I want to talk a little bit about uh staking economics um and so um I think I'm not sure is this oh yeah this is a slightly outdated doesn't matter it's a minimally outdated version of the of the talk you know that's the the fate of making changes last second but it's fine um so so basically a

colleague colleague of mine and I kaspa and I we we published um a research post uh on on staking a couple months ago in in February um and it it took a while but it blew up a little bit on on on on Twitter like over the last few few weeks and not necessarily in the west way people were a little bit taken taken by surprise and um specifically we kind of had a main main post where we talked about like the long-term vision for where we could stay go but then we also had a proposal for more short-term smaller short-term change and um I think this created the impression that um that basically there was there was some sort of push to rush in some some change to

the to the issuance policy of ethereum so I just wanted to start with a disclaimer and that's the slide that I added last second like a disclaimer slide but basically just so disclaimer is just I mean of course uh St the the staking um mechanism of ethereum the the the the monetary policy all of these are super sensitive parts of the protocol right and so while a lot of the day-to-day governance process of ethereum is relatively technocratic and it's not necessarily every small decision is is the community is very actively involved even though of course all the governance calls are public and in principle everyone can join these more sensitive parts of the protocol those can never be changed without very broad Community buying right so so Our intention when we published this post in February was really just to say hey here's our

thoughts we want feedback on this and we want to try to start convincing the community that a change might be necessary right and so I think it was on us to not communicate that well and it it created this impression that we were trying to rush through a change um that's that's not the point right so so what I'm here today as well is I'm I'm just trying to basically take a step back and and try to build this this intuition of like why do we think at least longterm a change might be necessary and then what might that mean for the short term but again if we can't convince you none of this will be at all relevant right so take that uh in mind okay but with that kind of let's dive in I I basically have three parts of this the first part is the count Trend what

what is the current situation in terms of staking on ethereum and then in the second part we'll look at what potential drawbacks might there be to to through this Cent path that we on and then the third part will be what could we do about it right um so for the for the current Trend uh this is a picture of of a graph of just the um total amount of eth that that is staked on ethereum right and all the way from at the very left the um the uh the launch of the beacon chain all the way up to today or I guess now a month ago or something um and as you can see of course the the speed of of inflow of new new stake varies a little bit over time but overall the trend is quite

clear right it's it's a continued growth in the amount of e staked and so we looked at this um and in general I think on E in the in the ethereum road map we kind of getting to a point and that's also why not everyone loves this this word kind of endgame right but like we kind of getting to a point where more and more in more and more Dimensions the remaining ethereum road map becomes clearer and we're basically starting to try to Define potential end points where not now not two years from now but but potentially some point down the road 5 10 years from now we could we could reach a state where the chain is basically just pished right in in some regards and we looked at this and we were like okay what actually drives this trend where we it is this something that

is already finished can we can we basically just leave this and never touch us again does it require changes let's try to understand this properly and that's kind of what triggered our research um and on a very simple basis right like how how is like why is a certain amount of e stake today right and that it's just a very simple kind of economic um mechanism of course right demand and Supply so how how much is the chain willing to pay for for stake for security and how much do people who might want to stake how much do they have to be paid to come in and actually do the staking right so so basically we just looked at it as like a demand it's Supply and then then the the count equilibrium point is just the intersection of these of these two

curves right the very very simple um um principle um and so first we we looked at the the demand curve right how much is the protocol willing to to pay for security and that's well defined inside the protocol right there's this um this this issuance curve so basically at relatively at very low levels of stake you can see all the way to the left where the beacon chain initially started um the protocol is willing to pay a lot you can see even like say at 5 million or something it's it's it's 8% yearly because you you just need some minimum amount of stake for the for the network to be secure right and so so it starts out very high and then as more and more eth comes in it it kind of gradually drops off and in particular also we we included like there's the solid green

line which is just what the protocol pays but that's not the entire of demand site there's also additional yield that you get access to as a validator um so far that's that's mostly me although of course this year uh everyone loves talking about reaking and so in the future this graph might might uh include not just me we'll see about that um so so that's the demand side and kind of three small takeaways from from that graph so one the the C issuance kind of policy it it is very kind of um intentional about uring a safe minimum participation right but by just keep paying more and more and more until you make sure that some minimum amount of people always participate um it also implies some sort of diminishing

marginal value of an additional Staker right because as you can see like as more people come in the protocol is is less and L willing to to to pay for for security but it's on on the upper side it's it's not very intentional right you could be with that curve you could reasonably see T 10% of e Stak you could see 99% of e Stak there's not really anything that specifically determines where we will end up with right and so so in order to understand what are plausible like long-term outcomes we we also have to look on the other side the supply side right um and so the supply curve while the demand curve was nicely defined in protocol you could you could draw it explicitly the supply curve that just indicates any given eth holder how much would you have to pay them to convert

them into a Staker right like what what do they need to to take the eth and stake and of course you can't observe that you could you could send out questionnaires to eth Holders but that's a bit of a hopeless task maybe so there's one thing you can observe right there's one thing you can observe and that is of course at any moment in time where on the um demand curve are we and then that must be the intersection point with the supply curve right so you so you can't actually see the entire shape of the supply curve but at least you can basically like sketch it and say hey it intersects the green the dashed green line at this point and this point and and as we saw in the beginning more and more e is coming in so what that means for the for the for the supply curve is

that basically the supply curve has been coming down over time so basically people are willing to stake at lower and lower yields empirically um at least in the past and so um and the the the the question was basically um what what actually like what what is the shape um of the supply curve and and and will it keep coming down and and for that uh actually you have to make one kind of like one more uh kind of Step into the analysis and in particular there's there's two types of of two ways for eth holders to take their eth and and start participating in staking that really are quite different and and really have different impacts on this supply curve and that's basically solo staking on the one hand and staking

via professional operators like LSC providers on the other hand and so so so we we looked at this comparison right and there's many different dimensions in which you can kind of compare um compare the two but I just picked picked those those few um right so so on the on the right cost side um you have some initial differences so solo staking comes with relatively High fixed cost and that's not just buying a note that you can run at home right but it also means learning about how to stake right like actually like taking in the time time is valuable for people right so like actually setting this all up that is that is a big kind of one-time initial investment and then you still have some variable cost right you have to pay for your

internet you have to pay for your electricity and whatnot but it basically um it it it it it relative like a lot of your costs come from this piix side um on the on the SSP like taking by ssps this I don't know it's not a very popular term um so so whenever you see ssps you can just think lsts right so that's just professional operators and they of course for a user that wants to stake with them there's no fixed cost whatsoever right um basically you only pay some kind of fee um 10% of of of the revenue they generate for you or something and and they they internally take that 12 offset their kind of fixed cost um the differences become more pronounced as we kind of look at other aspects so another another question that

that that determines whether you're willing to St or or not to stake is of course the risks specifically with slashing slashing is supposed to have inherent risks um from the slashing site then there's also like additional risks of just accidents um if you're a solo Staker all you have to trust is in your own skills which easier said than done though though of course because some of us are of course very technical I may be very um um comfortable with running running a node at home uh other people not so much I personally know people who learned how to use the command line specifically to to be able to to to home stake which which is great of course right but like it means that of course maybe they are less confident that if anything goes wrong they can immediately react and and and fix that on the other

hand with ssps you have different types of risk you you have to trust that the operator will not do anything wrong with your e e right you have with these onchain versions you have to have you have Smart contract risk you have governance risk right it's it's a very different kind of type of calculus of like whether you want to stake or not um con convenience I already talked about it like solo staking you need the technical skills ssps usually it's it's one click right you you go on coinbase you you you click earn you you go on Unis swap you you swap from eth to Ste or i e or something very convenient right and and lastly uh liquidity right I mean after all liquid staking uh tokens and not all ssps issue lsts but but most of them do um again Ste I CBE

right all of these examples for for for for liquidity you get if you stake with them um so solar saking you don't get any liquidity um ssps you do and um how how useful those kind of tokens are like how useful is steth um that's of course a question but but at least there's there's a potential for for it to to to to meaningfully kind of give you back liquidity over your stake de um so looking at this kind of there are few observations one is that the left side right that how attractive it is for someone to solo stake that varies a lot between between St eth holders right so so you you you you have the the the people that the enthusiasts the very technical people for whom that

is very easy to do and then you have people for for whom you you'd have to pay them a lot a lot a lot for them to even consider running their own Road right and so what what that means in terms of the supply curve is that the supply curve for for solo stakers is relatively steep right and so that that would naturally kind of limit how much how much stake you would see in the in the network at any given time whereas and and I also like have a summary slide here for that um whereas in contrast for ssps it's a much more homogeneous kind of risk and and and and kind of cost Spectrum across different eth holders right so if if you look at like the most enthusiastic SSP kind of participant how much do they need to be paid per year in

order to come in versus say the the median the median e uh eth holder right now the median eth holder does not yet stake or participate but what kind of apy would they need to see on for lsts to to consider it right it's it's at least significantly lower than what they would have to see to to consider running their own node at home right and so basically ssps lead to a like a flattening of of the supply curve right now it's basically for for for bigger portion of the E holder said it is at least feasible at least a potential option to come in and participate in staking one extra aspect here as well is if you look at like how do these Trends develop over time right and and again we we saw this graph of over time more and more

people coming in and staking uh the cost structure for solar stakers remains relatively unchanged of course as we've we've had the the beacon chain around for longer people are trusting more that the software works correctly and that it's it's something they might feasibly be able to do but in principle most of the costs stay the same on the SSP side there's a lot of kind of trends that make them more attractive over time so there's um of course the the smart contract risk there's the governance risk all of these kind of become become more robust become more trusted over time you have operators that start building out a track record right um You have the lsts that that gain adoption over time it's it's it's it's more attractive to hold an LST versus Raw eth

as you can use the LST in more places right um ssps in principle have um economies of scale right so where basically like or can can at least have them where as they gain adoption they can basically turn around and and in in in turn lower their fees or at least in a competitive environment over time they they might they might do this which which would would draw in even more users um and and the last one of course is is already like that that's hinting at like some of the con kind of concerns we we might see with with kind of this this development um there's also this this aspect where as an an SSP kind of has more and more assets under management at some point that becomes a question of like if they if ever anything went would go wrong right and

they would get slashed is it even feasible that that they wouldn't just be bailed out right like if if they become too big at some point is it is it actually credible that the network would would be able to stand up to them and basically be like sorry no bailouts right and that's that's that's a question at least over time that that tail risk might basically just be perceived as as not even existing at all um so anyway all of these kind of um factors right if if if you now take that together and and talk about like where where are we headed with with with kind of staking so so we have the the demand side where we have the kind of the the curve that's unopinionated towards the the the higher side we have the supply side um where basically over time the

the the curve gets flattened and and keeps coming down and so we looked at this and and and what what we saw was that like it's not clear where where this ends up but one observation is at least it is very plausible that this will keep going quite away right like it's if you look at this it is very plausible that St taking in the long term if we if we make no changes we could get to 70 80 90 90% of of of each stake that is at least a plausible outcome right and so we would at least have to make sure we would be comfortable with that will this definitely happen no right but it could happen and so at least we should make sure that we would be comfortable with with such an outcome if it were to happen otherwise we we need to to do

something about it um and so here yeah we we just just to illustrate right we sketched like out and you can see even relatively small changes to what the supply curve would look like would end up making a big difference in in where we would end up in um I'm also way too slow as what I'm what I'm realizing but I'll speed up a little so so what are the concerns we have um we we we looked at this again and we we again I didn't end up including the disclaimer slide but we here really is just this Kasper and I two colleagues we don't represent the EF we don't represent the CFS we don't this is two people's opinion right so so take it with with that context so so what concerns did we have looking at this um a few right and so so I wanted to

just go through them I numbered them so as we go through them you can you can kind of keep keep track of them um uh yeah like something about yield solar staking viability protocol security uh the Mone of of eth and then also even though not everyone loves this point minimum viable issurance right so so let's go through them one by one um and then see how much time we have left um first off yield let's talk about yield um that's actually a nonobvious point so so so basically often times people look at this as like the issuance curve for ethereum right and and and and and and then they are like okay so basically what what this graph tells me is that basically at you know 20 million e stake I make 5% of profit a year or at least Revenue a year for staking and at 100

million Stak I I still make 2% right so basically it it kind of flattens up but it it always kind of stays significantly above zero so I I still make money all the way to the right right what this does not take into account though is issuance is not just free money coming out of nowhere right issuance is really just a transfer from raw eth holders to e stakers and what that means is that as more and more people stake you yourself start to pay more and more for your own rewards right so so there's this kind of this aspect of how basically printing extra e just dilutes existing holders and as more and more of the holders at Stakes basically more and more this of this is just a pure accounting change right you can you can imagine I don't know if you have if you have a country

um and the country has uh has government employees right and so um and uh basically the government pays with taxes for for the employees salaries as as more and more of the people in the country work for the government at some point they pay 100% in taxes right because they have to pay for their entire own salaries right so basically you might still earn 100,000 nominally but you have to pay 90,000 in taxes because 90% of the people work for the government right and so your net income is only 10 10,000 right and so so basic we looked at this we're like wait this is this is just nominal yield this doesn't actually tell you how much how much um actual Revenue you have in a year and so we we adjusted this right and so now you can see the the zero line um here and basically we we just instead

of having it add it we just basically put it below the zero line so so you can so it's easier to understand now same same graph but you can see the the the solid green line goes all the way down to zero so basically the actual real yield you make if everyone St is of course Zero from issuance because it's really just a reshuffling everyone's balances goes up by 2% a year if that would was a way to actually generate money we should just make everyone's balance go up by 10% every year you know that that's not real real yield um you you still have the incentive to stake though right it's not like you would leave the staking set because if you if you're one of the few remaining raw e holders your your balance actually effectively goes down by 2% right um of

course the number would stay the same but your share of the overall market cap would would go down by 2% so so the incentive still stays but it basically now mostly comes from from this kind of this dilution protection side instead of the actual real yield um and yeah I just Tred to summarize this so um staking rewards mostly real yield if we have relatively low participation and so in that point in in in that world staking is actually like a profitable service by Specialists um at high staking participation it's the the rewards you get from the protocol are mostly just offset by the by the inflation they cause um where in a way you can think about it as at that point staking is more of a Duty everyone who wants to be

part of ethereum basically just has to stake or like stake indirectly via ssps or something um but you don't actually earn money with it anymore um and so again in either of these uh situations you still have an incentive to stake but um but basically uh it's it's it's worse for stakers if if most of your of your incentive um comes comes from this kind of instead of the real yield um so that's kind of one thing that basically just gets worse over time um by the way none of this yet talks about any solution to these problems right so maybe some of these might be inevitable I'm not for now I'm not claiming that necessarily this there's there's an easy solution for any of this it's it's just

about pointing things out that get worse over time as more people stay right um and maybe I'll I'll yeah yeah anyway so uh second point is solar staking viability um that's actually that's a a a big one and and and a very controversial one of course um for for a lot of kind of for ethereum security for for for censorship resistance it's it's it's very very valuable for us to not just have a few kind of big parties R running validators but to also have like this longtail of of people running notes at home um and a lot of kind of the the the the relative competitiveness of solo staking becomes worse as more people stake and then that's for several reasons right so one you have kind of

the economies of scale for for for for large centralized operators of course this varies within the the the type of of of of operators say someone like coinbase has a lot of economies of scale because basically the amount of of actual nodes they run doesn't M vary much with with the amount of people taking with them whereas someone like Lio they try to actually spin up new operators I think per 1% of of e under management or something something like rocket pool of course they they have a much more kind of uh linear cost profile as well so so the economies of scale some ssps benefit from the mo less and but solo stickers don't benefit from them at all right because you run your your set of nodes you don't get any benefits um a a really problematic one as well is that basically we we have

different types of year right like I showed you me I showed you Internal Revenue as the internal revenue basically goes closer and closer to zero um as as more people stake more and more of your actual income in in the year comes from external SES right now that's me that could be reaking and those also basically for for small operators like you only occasionally win the M lottery so there's a lot of variability in your rewards um whereas big big operators can smooth that out and with reaking we don't know yet where that exactly goes but at least it's very plausible that that there might be some some like we already see some Trends where not all types of of freting activities might be available for for small node operators um uh a few other points the the kind of

the the lsts become more and more useful as they gain adoptions so basically as as as there's more more money on a management by lsts um basically not not having access to that as a solo sta becomes more painful um and then that's a weird point I wasn't even sure whether to include that but actually um because we were talking about nominal and real yield there's actually this unfortunate aspect where basically in many jurisdictions you get taxed on your like nominal income in a way right like it's the same thing with with say capital gains right the capital gains are not inflation adjusted you actually have to pay for whatever your balance went up even though inflation also maybe AE away of some of that and same thing like if your eth balance went up by 2% you still have to pay taxes on those two that 2%

even though everyone's e balance went up to 2% and so effectively in dollar terms you didn't make any profit right so basically as we slide further to the right uh for solo stakers that that that's an additional kind of Burden meaningful burden whereas ssps generally lsts can be structured in a way where where this is kind of shielded away and and you don't have to have to pay that um of course you know not not tax advice but you know this is this again it it is something that we' we've heard multiple times raised as a concern by by solo stakers and I think it's valid um next Point protocol security that's one of course I'm you know I'm on the CF research side I'm personally really worried about this um we already talked a little bit about this kind of this too big to fail

can we actually slash very large staking entities as they say have 30 40 50 60 70% of all eth in existence under management if if something goes wrong more and more unclear I would say and and and of course the whole point why do we why does staking secure the network slashing is a crucial part of that so so it's it really is very unfortunate for the network to to lose this um in general by the way like not just for for large centralized parties if like if a lot of the net of of of the Ethan existence is staked and there's a mass slashing even across multiple staking providers that that that might become a concern um also and that's maybe again a bit more of a niche concern but I'm

personally really worried about this it's just like as you unbo more and more of the longtail of eth holders that means you unbo those people with additional layers of intermediation right so so you you you have these intermediaries you have ETFs that maybe stake under the hood you have L2 bridges that maybe stake implicitly just under the hood when you when you deposit your ether into the layer two and everything so you you you have more and more of like where of course the people that stake today that's home stakers that made that choice very explicitly or that's maybe people that stake with lsts but they also specifically made a choice as as like a tradeoff of the risk profile and everything right so so they are like informed give informed consent to to the kind of the the risk side right so um um so so the problem here is that

like we have less and less of a connection between the people providing the capital and The Operators that might end up basically making the decisions not just by the way about making mistakes that get them slashed or even colluding for an attack but also just in terms of censorship resistance like do they censor do they not censor all these kind of questions right where basically you have less and less people actually making decisions with their own capital and more and more these levels of indirections it also means there's this this intermediary governance layer that basically just implicitly now gets a lot of power delegated by users that don't necessarily actively make that choice um and it could mean that whereas today I think a lot of people even people say that stake with with with lsts right they specifically make a choice of like hey this LST looks like it's actually

having the best interest of ethereum met hard right like you know like I think there's been a lot of talk in the past like you know rocket pool Li all these people like of course they are all very very like people who who really have the best interest of ethereum at heart and try to structure their their kind of lsts in a way to to to make sure that they never become problem for network but as you have more and more people like the average person who maybe retirement fund invests in eth by an e ETF and then the ETF delegates to some to some uh staking protocol they don't make a choice about which which staking which LST is the most ethereum aligned right they just want the most yield and so it becomes more of just a raise to the bottom of whoever can just have the

most raw profit um and by the way I'll I'll I'll just stop the talk after we went through the concerns and then give just give you a little bit of an intuition of of where we would go otherwise I think I'll I'll run run over time uh too much but anyway so there's two more concerns we had um the the Mone the Mone of eth right um it's a bit of a complicated term like M like what even does that mean not everyone like likes that if you find Martin kelman on Twitter he'll try to fight you about e being money um but of course there is such a thing as like the the convenience of of of a token right like e itself it can be used for many different things it can be

used of course to to pay for gas and that will forever remain true right um but it also like it is used in defi it is it is used um as collateral it it's used in many different places it's the main um unit of account for um how how nfts are priced all these kind of things right and um whereas in LST today like Ste I CB or something is is less useful less directly useful right um but of course as there's more and more of of of of these lsts in existence and and the the amount of raw e goes down right at some point you kind of you reach a point where where basically it almost kind of starts to flip right where you can imagine if there's twice as much of of a specific LST in existence then then

there is a ra e now all of a sudden all the default Unis swap pools are priced in that LST instead of in raw e right and so over time slowly you would start to to replace the money of the network right and you instead of having having raw e at the base now you have like one LST which further in like creates some Network effects now you'd really predict that there's a a single LST that really wins out the race and and out competes all the other competitor ones which is not great um and it also means that we B have this this permanent additional kind of trust layer on ethereum um you have this kind of these um this pressure of users even if user maybe does actually would prefer to hold raw e now if they actually want to use anything on

ethereum they kind of need the LST um and I would say again personal take you know I'm one of those ultrasound money people with my with the little emojis in the handle which many people find um unbearable but um I personally am worried that ethereum is is as is at severe risk of just basically completely losing its monetary preum right where like eth I think is a is a like a maximally trustless asset if over time eth is no longer a thing and instead instead the the monetary product of ethereum is just hey buy this LST that that has this exal additional governance IND Direction lay and everything I think basically it just won't be won't be attractive as a money right like I'd personally probably rather hold Bitcoin

than than an LST in terms of just the you know the the digital money kind of aspect so that's that's another um concern and then the last one just to briefly mention it again it gets a lot of kind of bad rep these days but minimum viance the idea that in principle it's kind of it's better for for monetary properties of the network if you don't overpay for security because that just um leads to to unnecessary delusion for for for E holders but maybe my spin spin to this is um if you think about it right like there's some some amount of of staking activity that that is beneficial for the protocol and necessary for security for censorship resistance all of that if you keep paying for more staking than that

all you do is now basically you take money and you literally just you just you basically you just destroy value by basically just it becoming a public works project right you basically you pay for more people to to run nodes most of those again we talked about the supply curve most of those won't even be like solo stakers coming in because we already kind of mostly depleted that pool so you just basically you pay you pay for additional effort in the real world that ultimately creates no addition use anymore right so it's it's literally like a dead weight loss for everyone involved um yeah so so these kind of were where the the DS we saw um I kind of already talked about those I don't have time to actually really dive into what the the proposal we made for like how to changes I just want to give

you give you an intuition right so so basically we just want we we we looked at this and we like hey we are just not convinced that the count path we on with the count issuance curve we already in the end game right like we're not convinced that this is an issuance policy that you could just leave as is go away and 20 years from our ethereum would still be healthy and so if there is a change that we might need to make what would it be and so I'll just skip to um just this because this is the only slide you need out of that section to to to get an intuition that's basically what we looked at as a potential alternative right so if you wanted to say make sure that only say I don't know a third of e the stake at most or

something what you could do is you could take the issuance curve and just as it's very opinionated on the left right the green curve ignore the red curve that's just a little fun but like the the green curve right on the on the left it's very Steep and instead of then completely leveling off now we just basically also make it steep on the right Beyond a certain point right um and uh what what that of course means is that in principle it would have to go negative that's where this entire meme of like oh negative issuance comes from of course by definition that the total revenue of staking would never go negative because then people would not just purely not stake um it comes with its own set set of drawbacks I'm not going to go into them too much it mitigates most of the

the kind of drawbacks we saw solar stacking is actually um more nuanced it it mitigates some of the kind of competitive concerns it does worsen the effect effects of external yield so we would really need um um solutions for M burn all these kind of things to to to to to mitigate this it does reduce the net incentive to stake so so it's um we we have to we'd have to see um what the kind of the the net outcome for this would be so basically takeaway here was just and again sorry that I'm running out of time but you can you can you can go read our post um the point was that we were looking at this and we like hey we just need to have this conversation this is not

something where we want to this is not in any way close to like a spec or something that we we are confident we would want to move to this is basically like an an initial post on the path to figuring out where do we want do we want to go is this is is this here a a good direction is it does it does the do the drawbacks outweigh kind of the benefits that we would get from this um we basically we're just like hey research Community let's let's start have have this conversation and so I think it's going to be a conversation hopefully we can have over the next few years and then in a few years if I give another talk at East Dubai we can look back at this talk again and we like oh yeah interesting that also pointed pointed the direction we were going and just

because it had so much controversy I just want to um mention um we did have this proposal for like a more short-term change to the issuance policy and that again drew a lot of of drawback and so I just wanted to say basically where did we come from for that right so so that looked lot very confusing to people again we looked at this the long-term way to go if we ever wanted to basically go to a targeting mechanism where we try to keep the staking rate at like 30% or something right like 20 30 40 whatever we would pick 50% um it's much easier much more seamless to transition to that world from today where we are at like a low level so you just ramp it up to whatever you want and then you just leave it at

that if we wait until we are at like 80 90% of e Stak it's going to be much more painful because you have to actively kick people back out how do you kick people out by making it so uneconomical to stake that they voluntarily leave that's really unfortunate you don't want this to happen especially because the first people to leave might be solo sters that already have a harder time being competitive right so we looked at this and we like hey maybe if we just slow down the issuance a little bit in the meantime we we buy us more time to figure out this end game so so that's where this proposal came from again it's a very sensitive part of the protocol we this would never be changed without broad Community buyin I think that was not communicated well so here's the communication like only if we can

convince you all to make changes there whatever changes happen um but we see we see some um some motivation there and most importantly though we just think this is a conversation we really need to start having and hopefully this can be a good starting point for that and sorry again for running out of time uh yeah but you can it's basically it was just a onetoone summary of the post so go read the post and thank you all right give it up for onar