This is a massive breakthrough for post quantum blockchains. Threshold signatures are a fundamental building block for the secure use of a blockchain and until now, there was no solution for how to make them with a post quantum scheme. Ethereum will be post-quantum secure and it won’t have to give up application and consensus level security to achieve it. Post quantum distributed validators when?

This inaugural CFTC innovation advisory committee meeting is amazing to listen to. Kudos to @MichaelSelig and team for the openness and approachability. Going on two hours of founders and leaders expressing their gratitude to the commission for the newfound approachability and willingness to regulate sensibly contrasted against their lived experience of persecution under previous admins. Super encouraging to hear and I look forward to seeing what comes from it.

Institutions care about risk management. Ensuring that their customers' funds are not at risk to any one single anticipated failure, nor to one software provider is a requirement for adoption. @BitcoinSuisse_ are one of the OG custodians and staking providers. They have over a decade of experience to prove that they understand risks in Ethereum, and what they mean for their customers, auditors, and regulators. They went all-in on Distributed Validators, and before long all other institutional staking offerings will too.

There's a lot of bluster about sockpuppets and deleting comments in the issuance debate. Lets not lose sight of the actual outstanding questions about the proposal and ensure they get researched and addressed such that the community can have an informed debate about Ethereum's security. - None of the issuance analysis includes costs, when you do, this proposal is not good for solo stakers, it makes them worse off both nominally and relatively versus other types of stakers. - None of the issuance analysis accounts for the fact that ~97% of the network makes a real rate of return on the existing curve no matter the equilibrium because they are not staking only their own eth. This happens on both ends of the spectrum, the extremely large professionals, and the extremely small homestakers. Only the ~1% of solo stakers are focused on in the analysis so far (without their costs being accounted for which significantly alters the analysis). - No other large PoS chain has runaway staking. These chains all have far larger dilution, and far less penalties for PoS failures. It tracks that Ethereum's equilibrium on this curve is likely lower than them (so <60% imo). I am not aware of a reason why in Ethereum, delegators will take more risks, for less rewards, while there are also better alternative uses for their capital (including simply protecting it in a cold wallet for the lowest dilution in the ecosystem). - Ethereum does not have $100b in economic security, its likely under a million dollars per day. This proposal could drive it down 5-10x from there. There is no analysis as to whether this is likely enough of a security budget to protect Ethereum from a concerted attack. - We have no agreed upon tracking of the network's Nakamoto (nor gini), these are measures of how easy it is to take over the chain, or how disastrous a failure of a particular multi-sig, smart contract, or custody platform might be. We should first be tracking them, and secondly we should be consensus-seeking on what is a sufficient number for them. I believe a Nakamoto of 10 should be the minimum tolerable floor. (and that gini needs to go down not up as it has been) - Ethereum's security (Nakamoto) has been falling for ~2 years as the chain centralises. This isn't only due to the current curve, the delegation rate has been pushed far lower in this time, and the illiquidity penalty of native staking is forcing delegators to choose the most liquid staked eth offerings. We should be trying to improve the security posture of the chain rather than exacerbating the problems it faces by making the majority of delegation options non-viable. Correlated downtime penalties, a burn2exit feature, and boosted whistleblower rewards on key compromise, could all push the mean preference to solo stake or delegate stake to the long tail of operators, which would improve the chain's security (nakamoto) rather than hurting it. - Stake quality is more important for Ethereum's security than stake quantity. The amount of operators it takes to control the chain is what we should care about, not the viability of a finality reversion event. We should not be damaging the chain's security to push a ratio by likely less than 20%. - Without a cost model of stake, we haven't a good understanding of where equilibrium might be under the proposal (nor the existing curve). Backing into it from costs, I think 60m eth could be staked for as little as $5m per year by the biggest operators (0.002% issuance per year). If you account for MEV, non-ETH perks given to delegators to stake, and the value in controlling Ethereum, I think its very feasible for equilibrium under the new curve to be 45% or higher. An issuance that low would make all but the largest orgs non-viable. - Making Ethereum more centralised is more likely to re-value Ethereum in line with other centralised chains than it is to be rewarded with an increased valuation. Ethereum's value comes from its credible neutrality and its decentralisation. Changing issuance in the proposed manner hurts both. - We are a couple hard forks away from Real Time Proving, and a switch to Post Quantum Ethereum. The cost model for this chain is vastly different than the one we have today. Proposing blocks will take a server rack worth of expensive GPUs, and attesting with a Post Quantum signature scheme is also more costly than the existing scheme. We should be forward looking in this regard, and make sure we're making a change that allows block building to be at least modestly decentralised. Taking issuance to near zero and not making any allocation to the costs of proposing will lead to a world where as few as two entities can afford to eat the costs of producing blocks on Ethereum. We should not be re-doing the issuance model every couple years. Lets plan for the moment validation changes markedly, and lets build consensus for a change that best suits that future architecture. Forcing through a fast tracked change for a risk of dubious downside and dubious probability is not good for the network's reputation. - Cutting the security budget and losing a large amount of the operator set makes Ethereum less CROPS. Ethereum's scaling roadmap depends on having large amounts of independent operators on the network, to ensure its Data Layer remains available, and to ensure fork choice is not compromised. We have to decide should Ethereum's roadmap take decisions that favour its CROPS nature, or one that favours ETH's disinflation. I don't believe we should jeopardise the former for the latter. A maximum of 1.5% dilution is lower than almost every asset in the world, it is not so high as to cause CROPS issues imo, sub 0.3% is a bigger concern. These are not all of the concerns raised about this proposal, and some of these have been more addressed than others by proponents. The impact on DeFi and the Ethereum economy is also notable. I'm just flagging 10+ issues that are getting drowned out by infighting over the legitimacy of how we moderate this contentious debate. Lets focus on facts over feelings, and make a concerted effort to gather first-hand data and develop believable models, so that we can make informed decisions around what we think 'enough security' might look like for the chain on a multi-decade horizon. Thank you.

When we look back, securing your customer’s stake on multi-sigs instead of single hot private keys will look obvious in retrospect. Take your staking security seriously before you wish you did. Adopt distributed validators.

It was a very obviously human written comment. It was a very intelligent comment. In fact, I would say one of the best comments on the entire proposal and it is hardly surprising that people are going to spin up accounts specifically to comment on this proposal for the first time because it is a highly highly contentious proposal, so people are very shocked by it and of course, they're creating accounts to comment on this forum because they've been told this is the only place where feedback will be considered, and they've simply never had occasion to comment on something before, because nothing else has been this contentious before.

Solo staker's taxes are a supposed reason for capping issuance. Proponents argue that solo stakers would be better off under the cap than a high staking ratio where their rewards come with higher dilution. I think this argument falls apart when you model how much it costs to solo stake, which is unfortunately a lot. Electricity, hardware, internet, downtime, and the headaches of DIY are not free. At a 70% staking ratio on today's curve (higher than I believe we can reach for the sake of argument). A 32 eth solo staker makes ~1.9% APR, ~$1167 gross. Operating costs are $537 (calculator here: taxes @30% are $350. You make $280 per year net. (0.46% APR). At a 40% ratio under a cap (lower than I believe we will reach for the sake of argument). You make ~0.8% APR, ~$491.50 gross. Operating costs are still $537, taxes are $147.50. You net to a $-193 loss. (-0.31% APR) This effect applies even if you pump your eth stake way up to minimise the fixed operating costs. You have to argue about eth dilution and what that might do to the eth price because of stock to flow models, or make generous assumptions about why delegators making 0.72% APR for no effort will unstake, to try and make the math make sense. What am I missing? P.S. You make $1050 (1.71% APR) and $442 (0.72% APR) under these options if you delegate instead of solo staking. We definitely need to solve the disparity in taxation, and to make solo staking more economical, but this EIP does not seem to be beneficial for solo stakers as it claims to be.

The proposed issuance cap is designed to price out the lowest revenue, highest marginal cost stakers. Not only does it lower the revenue from staking to near 0, it especially penalises the weakest stakers most because it burns eth equivalent to perfect participation, not what you actually achieve. The 98% uptime solo validator gets even less rewards than the 99.5% professional, on top of their higher relative costs. It is a bottom up filter for stakers, and will lower Ethereum's security budget until it fails and Ethereum gets compromised. Ethereum should be focusing on becoming CROPS not ultrasound money.

@sheffieldreport > Positive nominal yields, managed but positive inflation (we are sub 1% already, basically on par with BTC) and positive real yields are how you create sound money. This is the “Eth is money” argument I can get behind. I agree with the whole post and subthread!

This is the most measured and fair explanation of the failings of the issuance debate to date. If you want to see what's yet to be addressed, see how this thread evolves (and ask the cap authors to address them asap). These concerns have been raised consistently for 2+ years, and they are still yet to be addressed, we are not ready to move forward with a proposal to change issuance without a proper data driven deep dive into these challenges. Forcing a change through without measuring the problem and discerning whether its real or theoretic, and without ensuring the cure isn't worse than the disease is a recipe for disaster. Minimum viable security that doesn't mean 'anti-fragile as fuck' won't cut it. Social slashing is not a realistic threat right now and won't protect us from a centralised validator set. Ethereum is valuable because its a permissionless, decentralised, world computer, not because of its issuance rate. Sacrificing the former for the latter, will dramatically devalue its value proposition in my eyes. I also don't believe the current curve is sacrosanct, but I think a constrictive curve is more dangerous and worse than the status quo. I think the burden of proof to say otherwise is high, and I don't believe that work is yet done, nor will it get done in time for a decision on H-star. I'm happy to share what I know about costs and staking economics, to help us pathfind to a future with a long term resilient and secure Ethereum, and right now I think that means choosing CROPS over hard money for the network.

Ethereum's security is not how much eth is staked, its how hard it is to control fork choice. A curve that goes to 0 at a reachable level will allow the biggest and most price insensitive orgs in the space to price out the vast majority of rational actors, such that they can control who gets to use Ethereum going forward. The original curve deliberately prevents this, by increasing issuance as staking ratio goes up, making it impossible to price people out. Cappers will tell you this was a bug and mistake, it was not. Ethereum should focus on CROPS, not wanting to have a security budget crisis faster than bitcoin does. I'll share more about this in the coming days and weeks, but tl;dr: decentralisation > hard money.

Three locations, 5 different client types, no-downtime upgrades; this is what a professional staking setup looks like. With correlated downtime penalties coming in 2027 (🤞), high availability setups with client diversity and chain split protection will be a must for institutional stakers going forward.

Correlated downtime penalties got their first update in ~2 years as they're considered for inclusion in Hegota! Tl;dr: - This EIP increases downtime penalties temporarily if a large amount of the network goes offline together. The goal is to penalise all stake piling onto the same few operators and datacenters, which has become a significant issue over the last 5 years. - The original design was a tiny blip of penalties, not enough to change behaviour, nor enough to justify the dev effort. Now the penalties can scale up to 128x from the baseline penalty. - This is still pretty small in terms of your principal, but can set you back weeks or more of rewards if you stake in a centralised manner that has an extended outage. (Worst case is ~0.38% of principal per day if you and a third of the network are offline, which is more than a month of lost rewards) - Focusing on the source + target vote ensures short term failures in block production won't trigger this penalty. - This penalty caps at 33% of stake offline, after that, its the existing inactivity leak that punishes you further, (which has a lot more teeth!). Check out some example payback times, and a new vs old graph to show why the update is needed. Hopefully the Core Devs will include EIP-7716 in Hegota, and Ethereum can start to value its decentralisation rather than taking it for granted before its all gone. Ask your local core dev to SFI EIP-7716!