CIP: change the reward formula

[pparent76]

I-the proposal

Replace the current reward formula:

with:

The latest formula simply means that we limit the possibility for a pool to receive delegated stake proportionally to their pledge.

II- Rational

The current formula has many critical problems

1-Small pool are disadvantaged over large ones. Proportionally to what they
have we give more to the rich and less to the poors, that is needlessly
unfair. (Matthew effect). ( [1] )

2- We create a very dangerous monopoly, and a cartel of k pools, that when
established will be extremely hard to replace for a newcomer that would need
to invest way more than any of the k pool ever did in the past. And we are
preventing pools to start small and grow progressively. ( [2] , [3] )

3-With this formula the protocol is not properly secured against Sybill attacks:

    a°) we encourage everyone to delegate randomly to pools that they                
         don’t know at all but with higher RoS, and not delegate to a pool                 
         that is operated by someone or an organisation they know directly                     
         or indirectly, which increases chances of Sybill attacks. 

    b°) we can only guess that the chosen value of a0 will steer pool 
         operators to have sufficient pledge to avoid Sybill attacks but      
         we cannot be sure of anything, because that’s only incentives 
         and not enforcement.

    c°) With expected RoS varying from one pool to another, in  the long
         run bots will appear to automatically delegate for people to make    
         as much money as possible, it will completely  void the whole       
         point of having people delegate to secure the network in the first
         place. Also if a particular bot becomes popular and wildly used 
         across the network, it will empower  its developer for an attack,
         since he gets to influence heavily on how to get delegators.

(Reference for delegation bot [4] )

4- The formula makes the system needlessly very complicated to understand for everyone,
and very unpredictable.

The proposed formula does not have any of these problems or any other known problem.

Currently there is no know practical disadvantage of the proposed formula. Some suggested that it would not be technically feasible to use it, but without any convincing evidence from my point of view. I suggest that it is very feasible to do it probably by changing just few lines of code, and we may do a testnet to verify it.

[misteraxyz]

@pparent76

very unpredictable

could you please explain how, from a security stand point (attack surface/attack vectors) - from the perspective of a bad actor/would-be attacker - predictability is superior than unpredictability?

@pparent76

we encourage everyone to delegate randomly to pools that they                
         don’t know at all but with higher RoS

this has already been expressly addressed not to be the case by Duncan Coutts - the technical architect of the system - in this video as has been pointed out to you in your previous post. why have you not acknowledge that here?

@pparent76

bots will appear to automatically delegate for        
         people to make as much money as possible, it will completely           
         void the whole point of having people delegate

this hypothetical has been dabate in you previous post - where among other valid arguments against, the point was made that the around two epochs (5 days each) it’ll take to run before re-delegation can occur, renders any bot advantage hypothetical practically useless - especially atop an environment where the RoS differences are negligible.

@pparent76

but without any convincing evidence from my point of view.

you refer to others having not given you any evidence yet yourself have not given any to support your argument. could you please provide empirical objective evidence of these claims? the way to have productive discourse is to be objective, not through (unproven) hypotheticals led primarily by way of subjective feelings. also keeping in mind that the burden of proof is on you, the person making the claim.

@pparent76

Currently there is no know practical disadvantage of the proposed formula.

further more, there have been legitimate arguments made against, illustrating flaws in the idea(s) behind your proposal in your previous post addressing these concerns - yet you appear to have conveniently opted to disregard them here by omission.

@pparent76

my point of view it is critical that this formula be changed, because If it does not Cardano may become at best a bad project at worse a dead project.

making such claims without empirical evidence is alarmist - akin to shouting fire in a crowded building, crying wolf. it erodes trust. i’d urge you to please think about it yourself thoroughly and critically first - lead with facts not feeling.

---

personal word of advice, despite having tried to reason and empathise with you, the manner in which you have chosen to continue to have this conversation, comes across as you’re trying to deceive people of the community by not being forthright and forthcoming by disclosing valid arguments that have been made against - is not doing you or any current or future stake pool you may run - any favours as far as trust building goes.

[pparent76]

@misteraxyz

making such claims without empirical evidence is alarmist - akin to shouting fire in a crowded building

Ok your right about this, sorry I remove it.

is not doing you or any current or future stake pool you may run - any favours as far as trust building goes.

I’m not into this topic for personal profits really, so I don’t care. I know it may sound hard to believe.

For all other arguments I have already answered them in details. I only wanted to be convinced by them, and forget about all that, and move on. but anyways I cannot make as though I am convinced if I am not.

Now I just want to make sure I did everything I could, and I think I did, and I will probably move on to something else in the following days, and leave you alone, if my proposal is ignored. (And not run a pool on the mainet, anyways)

[misteraxyz]

@pparent76

Now I just want to make sure I did everything I could, and I think I did, and I will probably move on to something else in the following days, and leave you alone, if my proposal is ignored. (And not run a pool on the mainet, anyways)

if you feel you have communicated what you needed to, then i guess that would make sense as a conclusion. perhaps, in the future once you observe from outside that your concerns did not materialise - you’d then hopefully rejoin the community with a pool of your own.

[pparent76]

@misteraxyz

if you feel you have communicated what you needed to, then i guess that would make sense as a conclusion. perhaps, in the future once you observe from outside that your concerns did not materialise - you’d then hopefully rejoin the community with a pool of your own.

I feel I do have communicated what I needed to, and I feel it can be a conclusion. Even though if people want to ask me few questions or interact with me I don’t see any reason not to answer them, at this point.

Thank’s for your time.

[IPIB_Pool]

If with your formula the rewards basically depend on pledge only, can you explain how a small pool could ever be allowed to grow? How can a pool with 50k compete with a pool with 1M?

[pparent76]

I’m not sure to fully understand your question. The formula does not depend only on pledge, but on pledge and delegated stake, like the current one, and the one you proposed.

But to answer your question how could a small pool grow, like any small business in this world:

1- Reinvests profits into the pool to grow progressively.
2- Borrow some money.
3- Find investors.

It is to be noted that in the current formula small pools are left with virtualy 0 chances to one day outgrow big pools, because of a problem that I called cartel problem:

I loved Itn and Cardano, but I may not love mainet because of a0!

I’d like to nail things down about the very dangerous monopoly Suppose that we have k saturated pools with 10% pledge. How a new pool could compete with them? Well at the very beginning a new pool will start only with pledge and no delegators so its reward formula will be f(s, σ) = R / (1+a0) * ( s’ + a0 * s’^3/z0^2 ) Now to attract delegators he will need to compete in the first place with the RoS of the k saturated pools. The reward formula for those pools is f(s, σ) = R / (1+a0) * ( zo + …

I loved Itn and Cardano, but I may not love mainet because of a0!

Also a very important thing that needs to be noted You might say small pools are not important let’s just ignore them. Actually they are. Many business that are huge today started small. Many youtuber that have millions of followers today, started very small. Bitcoin and cryptocurrencies started very very small. If we kill the possibility to start small, and grow progressively that’s terrible!. We are killing future big pools that would have emerged. We are giving very dangerous monopoly to al…

[IPIB_Pool]

Did you run some numbers on your formula? Because a simple linear formula like the proposed one might have a steep gradient, of course it depends on the b0 parameter.

[pparent76]

@IPIB_Pool

I did many things to study including make a demonstration than this formula led to a Nash equilibrium with k equal-size pool, as I was asked by IOHK devs.

I did not draw curves, because it sounds to me very straight-forward how it behaves. And very easy to imagine, and because none asked yet. So I could if you really need to. Even why not 3D curves with s, and σ variables.

I don’t think there would be a “steep gradient” problem. But it is possible That I missed something. Adding an exponential factor as you propose may be advantageous,I don’t know, I need to think about it.

Take the time to read this long thread, I’m sure there are many things that was written by me and others, that should interest you a lot, given your reflections:

I loved Itn and Cardano, but I may not love mainet because of a0!

I loved the Incentivized testnet. It was great because anyone could run a pool and validate some blocks, with chances proportional to their stakes,even with as few as 100kAda you’d get a block per month. I ran a pool, and I loved that, honestly it did not get me that much of earnings so far, but I was very happy with the idea to participate directly to the security of the network. I was looking forward to mainet and a PoS crypto that we truly control. But this may be coming to an end because I…

We may discuss that again in a few days, if you wish.