Economics of Ethereum 2.0 by Collin Myers (Devcon5)

[Applause] it's either grew up good afternoon Paula Myers and today we're gonna walk through validating each two and getting up to the warrants that you will receive is another day but we're gonna do it in space so we're going to make it fun we're making interactive it's going to be quite cool so look over all those of you please look into the space this is a topic that doesn't have a lot of transparency it's super crucial these are distributed systems with incentive bubbles and there's been a few people of ecosystem publish research on what the incentives for East you are but most American consensus in the yeah we've been working together for an effort to put out or Colombini to calculator which we will release and I have a model that everyone can have a telegram group will launch after this educate everyone the super important topic that's not talking about too much so let's get started so today we have a special guest star her name's Alice she's gonna be a ballad 82 chain space so over the journey we're going to touch on a few topics leading up to what we eat to the calculator is we're gonna start with what is the bacon Chang I'm sure everyone gets crabby Chang definitely needs to conference might cut away become about the Nader what his house responsible for I know she stay a validator and then ultimately what is she in return for doing so when they gonna walk through some economics if they CRO is this is the big thing that we're all hearing that for it's the event that basically bootstraps the BB chain we're gonna walk through the results and we'll talk about these two calculator how everyone can get involved in what the ultimate intentions of it are so let's just start a high-level I'm sure everyone has also probably seeing this chart a million times but we're going to primarily be focusing today on the beacon chain which is the coordination they are the spine that leads to it's the main part where all the action happens this is where Alice and all our friends hang out so the coordination layer itself you can think of it it does a few key components its stores and managed Allison elements it provides a random component to basically select who gets to validate this is where the blocker goes it takes place this is where I get slashed or I get to return for my actions and then committees and cross link processing which is a bit more in place it makes sense once they're starting and but in the future this is also all of that is included it takes places it some of these gist so let's just talk about the paces I'm not gonna talk about thanks to today because it's a bit out there and it's a bit still unknown there's a lot of good work being done will't to make facetube a reality and kind of get people on board and skipping ahead now that 0 and 1 the specs are foreverment people are spending time well phase 2 the big thing is is that between phase zero phase one thing economics do not change but between phase zero thanks to the economics will change and we'll get into that so let's just talk about what phase zero does not there's no media there's no smart contracts and not transfer assets and there's no accounts so it's basically it's the heavy lifting in the system however there's really no activity inside of it it's just basically propagating and applying FFG hanging out of your returns and slashing but we hope that everyone ex all statements time creating that it doesn't happen I also want to address slashing and this today that is kind of a b2 of the model and essentially what we're just going to do is talk about the perspective of a novice validated base one you can think of as bootstrapping for cross-linking this is going to be empty shard blocks but then we all communicating together but there won't be anything inside of them so in phase one shards exist but there's really nothing inside making sure that the machine operates as its supposed to so I'm an analyst I have 32e I want to join how do i do so so the first thing that you're gonna need is a p2 note you can though it can mean a few different things it can be in a laptop desktop computer or it can mean a PS if you are doing this with larger quantities or you're worried about system uptime your own household more right here ain't no meant to be able to do most people in this industry are the F largest asset even we based the model and some analysis on the ESP feed option on these people you need to choose your client of choice this includes Artemis this includes prism there's six or seven different ones everyone I'm sure is seeing the recent Interop news behind all that such as really great progress being made on that side of the equation but that's kind of how you get started you need to have those cheap or things to be the part of this so once that takes place there will be a deposit ceremony I was supposed to have an in-depth thought but it has been recently delayed due to BLS so now we're kind of targeting January 2020 or at some during the beginning of next year there's a few more technical steps here that that we'll go through about generating a PK and then basically having a withdrawal key which could be both with your vitae it also happens to be hot so you can continually have activity to the chain it's not transferable to ET that you get in return so a requirement it's not technical it's something more of like a risk tolerance so if you participate in this level of it you must understand this there's going to be a a time gap which is not work fine that's one of those before but you're eath one gets burned and you get that in return for and you can't do anything with it until a certain point time minutes there it's more than what wasn't asked but it's more of a human risk grammar that you have to think about so you know what do I have to do I've done all the pre steps I have my eat I've lost the process I figured out how to use the command line I've done all this stuff like stuff so now what do I actually have to do so there's two main things that take place as a participant inside of me - you propose new blocks this happens infrequently and if you in the human test which is the signing of new bucks this happens much more often and it's much more important to the overall system without corners so those are two main things are some other small he wants things that exist but it's a lot to get through twenty minutes so we're just going to keep behind that list of two main things that you do those are your two actions so now let's talk about you know where do these come from what are they we've been talking to return your certain actions I have to have certain things to give them so now let's talk about what they are and where they come from so the FFG award is what you receive a zero that has actually grown up into five components of it too technical for what we're going to talk about today but essentially that is chopped up into five different things and that's the basic reward is what you will receive a zero things one for bootstrapping the system there will be no network fees until it base two and then later on phase two as well you can essentially you know call people out there you can receive something they return it as well in the model that we built it includes all of it and it can be toggled that the primary announces today we pay zero so let's talk about the system right how's this thing designed where the main rewards coming from ulta to link what are the key drivers all academic modest existing key drivers that can be sent playing with E - has in my opinion severely different and actually mature group mistake design methodologies behind it even though POS introduced so let's talk about two of those so number one totally fits take number two thanks for work number three what is the average network percent online of all the participants inside of the system Chloe that state you can think of this as you can see on the chart here the more that at stake in the network with less than I get these two red dots are two key points of bootstrapping this system two million eight states is the first red dot and four point two is the second red thought we've given a bit more into what those mean and why they're important but ultimately I guess a comment that I'd like to make about how the system is designed is that you know people have different ways of saying what the return is or what the resort level is a heuristic protocol most people are watching POS with dead star of like zero Tony distribution this model that leads to is based on is actually more of a shared POS where unless we have a proper token distribution and everything is already in the ecosystem you aren't able to do this also a big proponent of not having a cap so people who run POS network sometimes with essentially mining schedules would like a fixed period it's a big debate should there be a cap supply enough I personally that you can't run this economic model if there is a cap but we're going to have a debate about people of intercuts the second part of it base reward factor right now the spec is at 64 and this is basically showing you from to attend maybe what you would receive with a bunch of the fix variables which will all be inside of the model but the primary point of this is to show that as a base reward increases what I get in return also increases and as the amount of value in network states it decreases over time so it's staying true to its design principles and it matches what we just looked at the third factor is your average number percent online this one I think is quite cool and not really spoke about too much so it's basically like a collective reward mindsets where if everyone work is providing uptime and being consistent their behavior than everyone else is something in return for it so what it does is it sets of us is collectively better behavior for everyone to stay online than to stay alive it's a primary driver of what's the of what you get out in return and I haven't seen it collectively implemented about the Oseberg also I find this person to be one of the more genius things that these two interested see how it plays out but again two million a mistake 4.2 million just remember those - those are very crucial levels and for a relative comparison right now that side of all the minor protocols there's 2.8 an ether lot but again as you can see from 70% to 100% year when you receive them the protocol increases over time as we provide more uptime our fourth component which is not included in the last year that is sent that's something I think we should talk about is a lot of POS protocols not gonna name names but they what you get in return is based on how many times you have which is twice they centralized element of all of this so like this is like a whale scale we have different amounts of clients that you could run in the bottom of it stretches from 1 to 50 which basically means at a protocol level X cost if I'm validating with 32 E or I'm validating was 1600 I receive the same thing so achieving economies of scale at the protocol level inside of youth - it's not something that is possible it's more about how many plans is happening on each node so ultimately end of the day the premise of this being designed to be the most a centralized actually in Austria so I think it's a really cool thing to have to write the numbers and seeing this come out is something important to remember this yes to the mission so positively unless it's going to happen this is kind of how everything starts January 2020 are kind of some of the data people have been throwing around I was supposed to be very calm that kind of gives us a bit more time to educate on economics advice that they need to kind of gather more of a collective the exclusion of people to be a part of this the two million needs to let's talk about that but that's important so to get the change started that's equivalent to 65,536 validators so looking at what combined Awards would be the economics at two million East Inc is something quite interesting to look at the next number that's the island on the charts is for one single inning so you can think of this as once we enter phase 2 it starts with lie what is the minimum amount of eat it needs to be state for a fully started system to be secure so I personally think is being particularly easily fine and we'll get there but ultimately I think we really do is in this first sprint of all this proof to 4.2 billion so that when today's toothpicks in the call to action won't have to be too severe and distracting and ultimately much learning takes place everything will be in there again Thanks network thiis not included and your bad side transfer will hold until Facebook so let's talk about some of the assumptions in the model some from the charts that were about to go through so on the network side of it we take a look at between two and ten million East States and I personally think that that's achievable at the 10 million plus and maybe not in this first phase zero push but ultimately I think that's kind of where the equilibrium will be picked between 10 and 20 ninety percent average online kind of just the base running the model based on that but sensitize into different charts thanks forward 64 and again no peace let me take a look at our validator Alice is acting she's a single individual validator she only has 32 e she's providing 98% 98 percent uptime she has a 250 dollar computer with the two-and-a-half-year light button so that basically our Kostas schedule over two and a half years we don't include Robert and I speak as cost in this equation it's kind of a sub cost we assume that most of your average humans that will be participating in this earlier stage will have this but the model that you can toggle it and you can decide whether or not you think this is needed or unneeded these prices that 182 it was a bit lower but you know it's I changed everything the evening yesterday women so it's talking about phase zero now here's what you're going to get a pure protocol network level this includes no cost this includes nothing like that so you will receive in Ivanova into an inflation 10.5% at that two million level which it's the Beagle chain picked off call it secure is charting which is our 4.

2 million level you'll receive seven point two or seven any of us now let's take a look at what you would receive when applying that cost so when these perfect when these numbers first came out and you run a bunch of models on it at the beginning of the year they weren't net positive it was in the red which led me to believe that I don't believe it's a protocol or foundation responsibility to to base the design of a protocol on Hospital when thinking about making this a reality since it's such a human based technology so at our phase zero two million to get the beacon chain started you'll receive a six point nine percent which i think is quite competitive considering the risk profile of built out a theory of this and other fruit mistake so at four point two million as well go get three point six percent so that's that's the ideal setting of when we think that the system will be secure and I'm pretty comfortable with that to be honest with you I do think that at the lower end it's a ten minute bite low but then again it's kind of a call to action of what we're doing there while they're putting this together is getting insight from people who already comments people who've actually looked at and understand human behavior like vultures because right now it's a bunch of technologists and ex bankers trying to figure this stuff out which has got us pretty far but ultimately this means for their insight from other people as well so this is kind of interesting one being at DEFCON this is kind of the way the scale I do believe that form a face your perspective like we're going to need not an element of centralization but we're sir we going to need some larger eat folders to come in here and bootstrap this thing so this model this chart within the model is based on use of a VPS to visual ocean at $20 a month its assumes that you can fit 16 clients on each machine which is quite conservative but that can all be flex inside the model and ultimately this is what your return stitch what would be again just to comment on the decentralize design the protocol as you can see economies of scale can only be achieved to a certain degree as a large person on the network which i think is quite cool but anyway else in the room this is what you can expect with a zero if your vendors to help me out so you know what we this has been four or five months to put this together where's the point of all of it what we want to do with it essentially we're launching two calculator and the purpose of this is to educate the person thanks to inform this is for people who want to validate this is for people who do research this is this is for anyone who wants to add feedback to it so it'll be an advanced calculator that has a series of validator assumptions and network assumptions basic and advanced there's going to be a feedback form as well which we think is probably going to be the most important thing where we want all the feedback and comments about this fact about the economics to take place in one setting because ultimately at this point if people aren't stoked on the be a heart force that's going to entail affirmation and a lot at this point so we were like where are we now with all this we have enjoyment we have all the business logic involved built into it today we're going to launch this group here where I will drop the bottle into it and anyone that has questions as comments I'm not going to do that during the talk today but ultimately we'll do all of that and cause it one of the kind of single source of truth so that we can continually get feedback on this cos it's super crucial to do so so to kind of close it out there was a lot of people who helped with this effort both inside a consensus at the EF outside this is kind of the maintenance of people here that helped out with all this so it was a coordinated effort for everyone so everyone involved because it was above it to get this done and that's it if you want to hit me up here's my sonogram and that my Twitter I can't believe both of which were not taken but they weren't so please feel free to reach out if you guys have any questions and I'll drop the model into the telegram group because start jamming thanks [Applause] you