The Ethereum Staking Debate

The ethereum community is debating the power and responsibilities of the Ethereum Foundation, with some arguing that the foundation acted like a central bank when it proposed changes to ethereum’s token issuance formula.

When a discussion about the Ethereum staking reward issuance curve is not really about the Ethereum staking reward issuance curve, it is actually a discussion about Ethereum governance and Ethereum monetary policy.

A quick summary of Curve issuance (and why everyone seems to be upset about it) is as follows: On the current trajectory, it is conceivable that eventually all ETH will be staked, either directly or through re-staking. Currently, almost 27% of all ETH is staked.

Starting with a post on the Ethereum Research forum in February, Ethereum protocol developers and researchers have begun discussing how to best address the issue, with key changes centered on a new issuance reward formula that makes staking less attractive after a certain point.

Exciting stuff! However, reactions on social media tended to focus more on the idea that the proposal involved a change to ethereum’s monetary policy than on the technical details. In other words, the crux of the matter was not so much the launch as the perception that “core developers” (a vague term in ethereum), particularly those associated with the Ethereum Foundation, had not achieved the appropriate level of “rough consensus” from the wider stakeholders.

Critics tend to be members of the Ethereum community associated with the “sound money” subculture, who want to establish ETH as sound money (just as people view Bitcoin as sound money). For them, changing the issuance curve is a red line because it is reminiscent of central bankers’ practice of constantly adjusting monetary policy.

In my opinion, the Ethereum ecosystem encompasses a variety of roles and groups, including regular users, node operators, validators/stakers, Ethereum media and podcasters, and dApp developers. In at least two recent media articles, these stakeholders were referred to as the community, and the community was "strongly opposing" or raising objections to the proposal.

Core developers are certainly part of the community, but they obviously have more influence on the protocol than other stakeholders. Furthermore, we are really talking about the various researchers who are paid by the Ethereum Foundation. Because,

The Ethereum Foundation is one of the few organizations dedicated to researching the protocol and paying researchers salaries.

Now there are subtleties to consider here, especially since we live in an age of real conspiracy theories about the Ethereum Foundation, such as the ridiculous world of “ETHGate”. As an Ethereum governance researcher, my view is that the Ethereum Foundation does not “control” Ethereum. It is worth noting that the Ethereum Foundation is engaged in a process called “subtraction” where it will gradually fade away. In fact, there are a large number of core developers that are completely independent of the Ethereum Foundation, especially when we consider autonomous software client teams.

Perhaps it's time to consider a community feedback mechanism.

However, it is clear to me that while the Foundation’s influence is overstated by its critics, it is also underestimated by its defenders. We know that just 10 people are responsible for 68% of all implemented Ethereum Improvement Proposals (EIPs), and if you’ve been following the development of the Ethereum protocol, you can probably guess who those 10 people are. Hard forks are announced via the Ethereum Foundation blog, and the logistics of all core developer meetings are mostly handled by people associated with the Ethereum Foundation. Therefore, it’s not hard to understand why some people would think that the Ethereum Foundation is the one that’s driving this.

I think it’s really a communication problem. As Ethereum developer Tim Beiko pointed out, most core developers view the Ethereum Magicians’ League forum and Ethereum Research forum as places to discuss and debate ongoing research work, but many in the wider community misunderstand it as a place where final research results are shared and everyone must accept them.

But as Beiko points out, Casper and Ansgar, two of the Ethereum Foundation’s authors, have tried to spread their message in some ways, including an appearance on the Uncommon Core podcast, proposing to slow down the issuance of ETH. Unfortunately, people tend to see X as a medium for discussions on Ethereum governance.

Interestingly, in a response to a post by Hasu (an industry OG), Ansgar noted that they could probably do better, but he also saw the rally as a sign of Ethereum’s strong decentralization. It’s true! The community does have a voice and the ability to dispute research it doesn’t like (at least in its current form).

One way to dispel the idea that Ethereum governance is the exclusive domain of the Ethereum Foundation is to see second-layer networks start to participate more closely in governance, such as second-layer RollCall trying to create common standards or dApp developers lobbying for support for EIPs (Ethereum Improvement Proposals).

What these stakeholders realize is that Ethereum governance is, in principle, open to anyone. There is nothing stopping you from writing your own research on the Ethereum Magicians League forum and the Ethereum Research forum. There is nothing stopping you from supporting your own EIP, or attending all the core developer meetings.

Another overlooked angle is the importance of independent observers through professional podcasts. Sassal’s The Daily Gwei and Christine Kim’s The Infinite Jungle both closely follow protocol governance and play an important role as independent advocates in my opinion. A perfect recent example was Christine Kim asking the Prysm developers at EthDenver why they weren’t focusing more on user and developer experience.

Thinking about the larger issue, maybe it’s time to consider some community feedback mechanisms. One idea I’ve floated before is to have an annual Ethereum conference (like at EthCC) where different stakeholders from the wider Ethereum ecosystem can voice concerns about any EIPs. But there’s a general feeling that this could become a centralizing force, so maybe that idea won’t work.

As an alternative, it might be interesting to explore an online feedback mechanism. Perhaps a one-month window per year where everyone else could post their concerns or questions about new research directions, hard forks, roadmaps, etc., and the core developers could review them as a sanity check. I think this would solve some problems that wouldn't go away otherwise.

Ultimately, without such a feedback mechanism, Ethereum’s “social layer” will be limited to an adversarial platform that tends to encourage our worst behaviors.