Automatically merged updates to draft EIP(s) 908

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EIPS/eip-908.md

@@ -14,14 +14,18 @@ created: 2018-03-01
 When each transaction is validated, give a reward to clients for developing the client and provide a reward to full nodes for validating the transaction.
 
 ## Abstract
-This EIP proposes to make a change to the protocol to provide a reward to full nodes for validating transactions and thus providing extra security for the Ethereum network, and a reward to clients for providing the software that enables Ethereum to function, where the reward can include a proportion of transaction fees (reducing the full proportion that the miner currently receives) and some newly minted ETH. To summarize the mechanism in the proposal, a user agent is attached to a transaction containing a vector with the index of a client address in an access list and the address of the verifying full node. The client address could be inserted by the client and verified that it is the same as a read-only constant in the client's storage, and the full node address could also be read in a more user-friendly way (e.g. via Metamask, a GUI or command line prompt). Reward mechanisms that are external to being built in to the protocol are beyond the scope of this EIP. Such extra-protocol reward methods include state channel payments for extra services such as light client servers providing faster information such as receipts; state channel payments for buying state reads from full nodes; archival services (which is only applicable to future proposed versions of Ethereum with stateless clients); and tokens for the client and running full nodes. With a supply cap the issuance can be prevented from increasing indefinitely.
+The tragedy of the commons is a phenomenon that is well known in many sectors, most notably in regard to sustainability. It involves the over-utilization of shared finite resources, which detriments all participants and stakeholders involved (which in the case of a global public good can be everyone, including future generations). Without proper management of public resources, a tragedy of the commons can occur. Internalizing externalities (where externalities can be broadly defined as effects that are not accounted for in the intrinsic price of a good, service or resource) is one way of incentivizing the proper management of resources, although other methods that actually properly manage them are necessary. This EIP proposes to make a change to the protocol to provide a reward to full nodes for validating transactions, and thus providing extra security for the Ethereum network, and a reward to clients for providing the software that enables Ethereum to function, where the reward can include a proportion of transaction fees (reducing the full proportion that the miner currently receives), and some newly minted ETH. Thus, verifying full nodes and clients are incentivized to maintain and improve the security and health of the Ethereum protocol and ecosystem. To summarize the mechanism in the proposal, a user agent is attached to a transaction, where this user agent contains a vector with the index of a client address in an access list, and the address of the verifying full node. The client address could be inserted by the client and verified that it is the same as a read-only constant in the client's storage, and the full node address could also be read in a more user-friendly way (e.g. via Metamask, a GUI or command line prompt). 
+
+Reward mechanisms that are external to being built in to the protocol are beyond the scope of this EIP. Such extra-protocol reward methods include state channel payments for extra services such as light client servers providing faster information such as receipts; state channel payments for buying state reads from full nodes; archival services (which is only applicable to future proposed versions of Ethereum with stateless clients); and tokens for the client and running full nodes. 
+
+With a supply cap (as in [EIP 960](https://github.com/ethereum/EIPs/issues/960), the issuance can be prevented from increasing indefinitely. Alternatively, it could at least be reduced (still potentially but not necessarily to zero, or to the same rate at which Ether is burnt when slashing participants, such as validators under a Casper PoS scheme or notaries under a sharding scheme), e.g. by hard forks, or as per [EIP 1015](http://eips.ethereum.org/EIPS/eip-1015), an on-chain contract governed by a decision assembly that gets signalling from other contracts that represent some set of stakeholders.
 
 ## Motivation
-Currently there is a lack of incentives for anyone to run a full node, while joining a mining pool is not really economical if one has to purchase a mining rig (several GPUs) now, since there is unlikely to be a return on investment by the time that Ethereum transitions to hybrid Proof-of-Work/Proof-of-Stake, then full PoS. Additionally, providing a reward for clients gives a revenue stream that is independent of state channels, which are less secure, although this insecurity can be offset by mechanisms such as insurance, bonded payments and time locks. Rationalising that investors may invest in a client because it is an enabler for the Ethereum ecosystem (and thus opening up investment opportunities) may not scale very well, and it seems that it is more sustainable to monetize the client as part of the service(s) it provides. 
+Currently there is a lack of incentives for anyone to run a full node, while joining a mining pool is not really economical if one has to purchase a mining rig (several GPUs) now, since there is unlikely to be a return on investment by the time that Ethereum transitions to hybrid Proof-of-Work/Proof-of-Stake with [Casper FFG](http://eips.ethereum.org/EIPS/eip-1011), then full PoS with [CBC Casper](https://github.com/ethereum/research/blob/master/papers/CasperTFG/CasperTFG.pdf). Additionally, providing a reward for clients gives a revenue stream that is independent of state channels or other layer 2 mechanisms, which are less secure, although this insecurity can be offset by mechanisms such as insurance, bonded payments and time locks. Rationalising that investors may invest in a client because it is an enabler for the Ethereum ecosystem (and thus opening up investment opportunities) may not scale very well, and it seems that it is more sustainable to monetize the client as part of the service(s) that it provides. 
 
-Incentivizing client development and running full nodes would more directly incentivize resource provision in the protocol, preventing a tragedy of the commons where there is an extreme lack of supply and excess demand leading to the protocol being unusable. 
+Incentivizing client development and running full nodes would more directly incentivize resource provision in the protocol, preventing a tragedy of the commons, where there is an extreme lack of supply and excess demand, leading to the protocol being unusable. 
 
-See [here](https://eprint.iacr.org/2014/452.pdf#subsection.2.1) for an analysis in the context of Bitcoin, PoW, and a hybrid PoW/PoS protocol. While Ethereum has a gas limit, the section points out that this is not enough as the market cap increases and the incentive to attack the network increases, while the ratio of security costs to transaction fees does not, while PoS will further alleviate the problem. However, the section points out that PoS is not enough, since the costs of propagating, verifying and storing transactions are not incentivised). Note that the "Proof of Activity: Extending Bitcoin’s Proof of Work via Proof of Stake" paper also contains a scheme for incentivizing a target participation level.
+See [here](https://eprint.iacr.org/2014/452.pdf#subsection.2.1) for an analysis in the context of Bitcoin, PoW, and a hybrid PoW/PoS protocol. While Ethereum has a gas limit, the section points out that this is not enough as the market cap increases and the incentive to attack the network increases, while the ratio of security costs to transaction fees does not, while PoS will further alleviate the problem. However, the section points out that PoS is not enough, since the costs of propagating, verifying and storing transactions are not incentivised. Note that the "Proof of Activity: Extending Bitcoin’s Proof of Work via Proof of Stake" paper also contains a scheme for incentivizing a target participation level.
 
 > The word “activity” in the phrase Proof of  Activity emphasizes the point that only active stakeholders who maintain a full online node get rewarded, in exchange for the vital services that they provide for the network.  This stands in contrast to earlier Proof  of  Stake schemes in which offline stake can accumulate weight over time, and may ultimately be utilized in double-spending attacks.
 
@@ -29,10 +33,12 @@ We can also incentivize full nodes to propagate transactions and to store transa
 
 Implementing this as a layer 2 solution may not ensure the sustainability of the protocol, since not everyone would use it; if the protocol doesn't have any cost for full nodes to validate transactions, then people will take advantage of that and not use the layer 2 solution. It seems that you should at least have the part where the reward is provided in protocol, but then that and the user agent signature doesn't really add anything else to the protocol, so doing some part in-protocol and some part e.g. the verification or a verification-game off-protocol could be done, but it's already done in protocol. Note also that some computationally expensive tasks are too challenging to feasibly do in protocol, e.g. due to not fitting in the gas limit, could be done with Truebit, where verifiers have an incentive. 
 
-Not providing incentives for clients is an issue now as there is less incentive to build a client that aligns with the needs of users, funds need to be raised externally to the protocol to fund client development, which is not as decentralized. Not providing incentives for full nodes validating transactions may not seem like as much of an issue now, but not doing so could hinder the growth of the protocol. Of course, incentives aren't enough, it also needs to be technically decentralized so that it is ideally possible for a mainstream computer to be a verifying full node, or at least a mainstream high-end desktop computer with GPUs in the case of PoW.
+Not providing incentives for clients is an issue now as there is less incentive to build a client that aligns with the needs of users, funds need to be raised externally to the protocol to fund client development, which is not as decentralized. If only a smaller subset is able to fund client development, such as VCs, angel investors and institutional investors, that may not align well with the interests of all current and potential stakeholders of Ethereum (which includes future stakeholders). Ostensibly, one of the goals of Ethereum is to decentralize everything, including wealth, or in other words, to improve wealth equality. Not providing incentives for full nodes validating transactions may not seem like as much of an issue now, but not doing so could hinder the growth of the protocol. Of course, incentives aren't enough, it also needs to be technically decentralized so that it is ideally possible for a low-end mainstream computer or perhaps even a mobile or embedded IoT device to be a verifying full node, or at least to be able to help with securing the network if it is deemed impractical for them to be a full node.
 
 ## Specification
-When a transaction is validated by a client, the client attaches a user agent to another transaction. The user agent is a vector with the txhash of the transaction that is validated, the index of a client address in an access list and the address of the verifying full node. To ensure that the verification of the transaction is valid, the vector could contain an optional field for a zk-SNARK, or you could have Truebit interactive verification of the verification. The client address could be inserted by the client and verified that it is the same as a read-only constant in the client's storage, and the full node address could also be read in a more user-friendly way (e.g. a GUI or command line prompt). The access list prevents anyone inserting any address to the first element of the vector, where there should be a way to prevent censorship and centralization of authority of who decides to register new addresses in the list, e.g. a layer 2 proof of authority network where new addresses can be added via a smart contract, as well as being only able to read the client's address from the client, and the whole transaction could revert if the address is not in the access list. You could provide the index of the address in the access list, and then you could assert that the address found at that index matches that which can be read by the client (where the latter would be a read-only address). To prevent the miner getting a double-dose of transaction fees, assert that the full node validator address is not the same as the miner's address. Some amounts of ETH (these amounts are not specified and would need further analysis as discussed qualitatively below) could be sent to the address in each vector, when the transaction is processed (similar to mining rewards). The amounts could include a proportion of transaction fees (while the miner would then receive less) as well as newly minted ETH.
+When a transaction is validated by a client, the client attaches a user agent to another transaction. The user agent is a vector with the txhash of the transaction that is validated, the index of a client address in an access list and the address of the verifying full node. To ensure that the verification of the transaction is valid, the vector could contain an optional field for a zk-SNARK, or you could have Truebit interactive verification of the verification. The client address could be inserted by the client and verified that it is the same as a read-only constant in the client's storage, and the full node address could also be read in a more user-friendly way (e.g. a GUI or command line prompt). 
+
+The access list prevents anyone inserting any address to the first element of the vector, where there should be a way to prevent censorship and centralization of authority of who decides to register new addresses in the list, e.g. on-chain governance with signalling (possibly similar to [EIP 1015](http://eips.ethereum.org/EIPS/eip-1015), which also specifies an alternative way of sending funds) or a layer 2 proof of authority network where new addresses can be added via a smart contract, as well as being only able to read the client's address from the client, and the whole transaction could revert if the address is not in the access list. You could provide the index of the address in the access list, and then you could `assert` that the address found at that index matches that which can be read by the client (where the latter would be a read-only address). To prevent the miner getting a double-dose of transaction fees, `assert` that the full node validator address is not the same as the miner's address. Some amounts of ETH (these amounts are not specified and would need further analysis as discussed qualitatively below) could be sent or added to the balance of the address in each vector, when the transaction is processed (similar to mining rewards). The amounts could include a proportion of transaction fees (while the miner would then receive less) as well as newly minted ETH.
 
 ## Rationale
 
@@ -56,6 +62,8 @@ There is a tradeoff. Higher fees means you may cut out poor people and people wh
 
 Regarding rewards for full nodes, in the [draft phase 1 sharding spec](https://ethresear.ch/t/sharding-phase-1-spec/1407) proposers acting as full nodes have rewards for proposing blobs (without execution) or later in phase 3 transactions (with execution) to be included into collations/blocks. So that would help. However, full nodes that do not act as proposers and just verify transactions, or [full state nodes](https://ethresear.ch/t/incentivizing-full-state-nodes/1640), are still not incentivized.
 
+Note that while further quantitative analysis to specify fees should be done, some level of experimentation after implementing this method on-chain may be necessary.
+
 ### Security
 All of the below struck out information should be prevented via using an access list and verifying that the read-only address provided by the client matches with an address in the access list, as well as using a layer 2 solution such as a PoA network for censhorship resistance and minimization of centralization in the access list.