HIP: 28
title: Update submissionBaseDeposit
author: William George
status: Phase-1
created: 2021-08-24
Simple Summary
This proposal would adjust the parameter that determines the part of submission deposits that is used to incentivize challengers.
Abstract
I propose to update the submissionBaseDeposit, which is currently .1 ETH, to .081 ETH.
Motivation
Since the submissionBaseDeposit was set, there have been considerable fluctuations in ETH prices as well as in gas prices. These have had an effect on the incentivization of challengers. Also, as a result of the passage of HIP-17, challengers will only have to lock up enough ETH to cover the arbitration costs of one juror arbitration rather than three jurors reducing the risks that they have to be compensated to take on.
The value of .081 ETH was generated by this calculator, which was also used to generated these proposed updates to the Kleros court parameters that are being considered by the Kleros governance process in parallel. Note that the Kleros court parameter updates would have an effect on the arbitration cost part of PoH submission deposits; if both proposals pass the new total deposit would be .081+.021 = .102 ETH. You will note that the calculator attempts to make the submissionBaseDeposit satisfy two constraints:
There is a notion of the theoretical reward that is sufficient to adequately incentivize challengers in fiat terms. Then challengers should reliably receive this average reward after gas in a “normal” gas environment, which in this case the calculator conservatively takes to be up to 100 gwei. (Normally the theoretical reward would not signficantly change from one update to the next; however as a result of HIP-17 reducing the challenger deposit/ the risk the challenger must take on, I recalculated this. This essentially consisted of updating the value of J i.e. the total arbitration fees in the formulas in this blog post and solving for C i.e. the challenge reward that retains the original level of security.)
A successful challenge should receive a large enough reward to cover the gas of challenging even in fairly severe gas conditions, which in this case the calculator takes to be up to 150 gwei.
In this case, it is actually the second constraint that is sharp. Namely, the requirement that the challenger reward should exceed gas costs even in fairly pessimistic gas assumptions prevents one from taking a lower value.
Specification
This would be done by using the changeSubmissionBaseDeposit function in the Proof of Humanity contract.
It was made with a gas price of 75 gwei and cost 0.041 ETH in transaction fees. So at 150 gwei (which might well be sustained over a 3-day period at some point in the future), this transaction would cost .082 ETH, leaving only .018 ETH (74$ at current prices) in rewards if the challenge succeeds.
I think it’s important to note that what might qualify as an acceptable reward for a Kleros jurors would be unacceptable for a PoH challenger if we consider the following differences between these two functions:
a Kleros juror is passively assigned cases while a PoH challenger must actively seek them out, incurring him extra work with no guaranteed returns.
a Kleros juror gets passive income in the form of a monthly airdrop just for being staked.
a PoH challenger actively takes a risk by committing to a challenge, and while a Kleros juror is also exposed to some financial risk due to the risk of voting incoherently, most cases involve little such risk and this risk is assigned to them randomly.
There are also quite a few cases where a juror will inattentively vote against the general consensus on the first round. In this case, the challenger must fund their side of the appeal knowing that there is little chance that the submitter side will be funded. This is an issue since funding an appeal incurs extra transaction fees and is not rewarded if the appellant wins by default.
Taking all this into account, I feel like the current potential reward of 74$ in high gas conditions might already not be considered large enough. But once again, I didn’t go through all of William’s math, so if these high-level considerations are addressed there and I missed it, please let me know and I’ll try to trudge through it.
EDIT: I’m an idiot. Messed up the price at 150 gwei. Gotta rethink this lol
EDIT 2: Okay, so the net reward at 150 gwei is 74$ and not 32$. I think it’s still debatable whether this is really enough though. Personally, I am not in favor of reducing the challenger reward until we have proven that we are truly resistant to attacks. And I think it’s worth reminding everyone that there is currently a person in control of at least 120 puppet profiles. I see this proposal as a micro-optimisation and not that beneficial to anyone. If you can’t afford a .1 ETH deposit, you’re unlikely to be able to afford .08. And that’s what crowd funding is for.
Yeah, gas prices have increased somewhat since I originally proposed this. This proposal was calibrated for an environment where challengers can get gas prices of 100 gwei generally and 150 gwei for periods of relatively high gas. If instead one conservatively calibrates for gas prices that are 150 gwei in normal conditions and 200 gwei in periods of high activity, which at this point may be more realistic for conservative estimations, you get a value that is essentially the current deposit. So it is likely not worthwhile changing this value at this time. Note that one can plug in different values of gas prices into the calculator to see how that changes the values that it proposes - it is indeed based on a logic of how large challenger rewards should be on average after accounting for gas.
Thanks for the confirmation. To clarify my position further, that’s what I was concerned about because, as a juror, I don’t mind cases not being profitable (or even making a very slight loss) for a small period of high fees since I know when fees go down, I’ll be profitable overall. I could temporarily unstake but that would end up costing me more than just waiting out the congestion. A challenger, on the other hand, gets to pick each case they challenge. So as fees go up and the risk-adjusted reward goes down, challenges will only target the most cut-and-dried cases, and eventually, as we approach a 0$ net reward, even the most outrageous profiles will pass.
With invaluable help from @william, a new proposed value for the submissionBaseDeposit has been generated with the calculator.
Given current gas conditions of low, average, high [10, 30, 80] respectively, in gwei, it was found to be feasible to use 0.055 ETH as a new value for submissionBaseDeposit.
This would make the total deposit 0.055 + 0.025 = 0.08 ETH, down from the current 0.125 ETH.
Given original support for this forgotten HIP, and even lower amounts, I’ll request creating a Phase 2 as soon as possible.