Thread by @TimBeiko

.@EthCatHerders EIP-1559 community call happening in ~10 minutes 🔥⛏

Stream:
Announcement/agenda: medium.com/ethereum-cat-h…

We'll be discussing 1559 with miners, researchers and implementers. I'll live-tweet as much as possible 😁 Panelists include 👇🏻

.@poojaranjan19 & @hudsonjameson to moderate the whole thing, @barnabemonnot, @gakonst @hasufl on the research side, @tkstanczak @AFDudley0 as implementers, @f2pool_official, @BitsBeTrippin & @Inno_Miner on the mining side, @iamDCinvestor representing "ETH is Money", ...

and finally @JHancock @trent_vanepps and myself who have helped with various bits of coordination along the way!

Tune in 👀

Going live in ~30 seconds!

One bit I won't be able to livetweet is I'll be giving a quick overview of 1559 and its benefits. Written version can be found here: hackmd.io/@timbeiko/why-…

One important note by Hudson at the start of the call: we won't be making a decision about if 1559 or alternatives are included or not on this call. The goal here is just to expose the different viewpoints, proposals, concerns, etc.

The decision about 1559 (and any potential alternative) will be made on AllCoreDevs.

Next up, we'll give miners two minutes each on the call to explain their position/PoV.

First up is @f2pool_official: first Chinese Ethereum mining pool, mined their first block in 2016. They opposed the DAO when it happened, but now with distance feel that this was the wrong mistake, as we see with ETC's adoption relative to ETH.

They feel that a miner-driven fork of 1559 would not be successful. They think Ethereum has value not because of miners on it, but because of the users and applications of the network. They think miners should support the network in exchange for the block reward.

FYI, they've written a bit more at length about their position here: f2pool.medium.com/staying-on-the…

Also worth noting: my tweets are just a summary, and I suspect there will be a _lot_ that I miss, so strongly recommend watching the livestream if you want all the nuance 👀

Next up, @BitsBeTrippin! Says he represents a lot of the "at home" miners, and that he came out early against the fee burning part of 1559. He says that this impacts not only the future growth of miners, but also at a steep change right at the transition.

He says that a continued reduction of price could cause a very big unbalance, where if you have an exponential amount of hashpower joining at that time, a lot of hashpower could become available to rent, increasing the odds of 51% attacks on Ethereum.

He thinks there are several ways to address this risk, which he'll present later on the call today.

Then is Chris from @flexpool_io: they've seen a lot of opposition to 1559 by their users. They like several aspects of the EIP, but think that the fee burn doesn't reflect the current reality: when it was put forward, fees were a negligible % of the total rewards, now it's ~50%

They put up a pool on r/ethermining asking miners what they'd like w.r.t. 1559, you can see it here: reddit.com/r/EtherMining/…

Results:

Last up Roger from InnoSillicon, who have been working on ASICs for BTC since 2013 and Ethereum ASICs for the past few years. He says that the reduction in txns fees would upset some of their customers, but that they would keep supporting Ethereum.

He says they are nervous about having an anti-ASIC EIP (ex: EIP-969) being attached to 1559, as it would stop their users from being able to mining. He thinks that ASICs only represent a small % (~10%) of mining hashrate on the network.

Ok, first up from the non-miner side is @hasufl. He wants to address some of @BitsBeTrippin's claim re: dormant hashrate. He says that Ethereum (and others) have survived long-term bear markets, with drops ~90%, and has never had issues with this.

He also points out that ASIC mining actually helps here, as GPU miners have been much more vulnerable to this types of attacks.

@tkstanczak now is giving the PoV from Core Devs, says that they try and look at EIPs independently from each other, but still need to consider other EIPs as a way to react to different scenarios, and not use them as bargaining tools.

He also says that the drawn out process around EIP inclusion helps provide some visibility to the community, so that the introduction of 1559 wouldn't come as a "shock".

@BitsBeTrippin responding to @hasufl: the previous drawdowns were "natural events", and somewhat gradual, compared to 1559 which is more abrupt, especially in cases where transaction fees grow past the block reward in value.

He adds that as GPU miners, they are long the entire mining ecosystem. While Ethereum doesn't need to do anything for GPU miners, but miners owe anything to Ethereum and can move to other networks as well.

@hasufl again: it's good to have a frame a reference about revenue being burned. He says miner revenue consists of 3 things: block (and uncle rewards), transaction fees, and MEV (arbitrage bots bidding up gas prices in the mempool to be included earlier in blocks)

He and @gakonst just published (another!!) analysis on deribit which looks at the lower bound of MEV revenue, and the impact of 1559 on total miner reward. They find that miner reward would drop at most ~20-30%: insights.deribit.com/market-researc…

Again, my summary here is very coarse, livestream is much better 😁 @MicahZoltu and @gakonst both +1 the MEV point.

Chris from @flexpool_io: he says a lot of discussions about security focus on the "minimum they should pay for security", and disagrees that this is the path that Ethereum should take: he says that Ethereum should look at what is the maximum it could pay for security instead.

Now @iamDCinvestor: he wants to take the side of Ethereum users and ETH holders. The community views 1559 as a massive UX improvement. Aftab says that being able to get a txn in with high reliability is huge for new users! Micah wrote about this too: medium.com/@MicahZoltu/a-…

Re: miners, he says that they have provided a valuable service to the community. He says that since the beginning of the Ethereum roadmap, Ethereum has wanted to move to PoS. ETH is also a very important asset (ex: for DeFi), and that hardening it helps secure the PoS transition.

One quick point too about how a lot of the "worst case scenarios" that miners brought up re: ProgPow didn't end up happening, and miners have an incentive to highlight the worst-case scenarios here again.

But boy! Another super high quality comment. Livestream, livestream, livestream.

@AFDudley0 says that after working on 1559 for years, and hearing miners today, he doesn't think that all miners understand the impact of MEV in depth. He asks how they are viewing MEV? How are they modelling? etc.

@gakonst says miners don't need to understand MEV: the existence of private gas auctions in the mempool increases miner revenue, without them needing to do anything.

@gakonst addressing the point re: maximum/minimum security: "The network exists for the benefit of ETH holders and transaction senders". The security spend should hence scale with the network size. We currently overpay for security, and 1559 brings this "back to normal".

@BitsBeTrippin: re: ProgPow, the main concern was that every other coin which introduced ASICs saw centralization of mining.

re: economic hardening: @BitsBeTrippin says that 1559's deflationary pressure would reduce supply, and then "move the price up for holders". He says "with an uncapped limit", you are only artificially increasing the price.

He says that both times the ETH reward was reduced, it did not have the effect that people were expecting.

Next up is @MicahZoltu with a quick comment on MEV: he says it's a terrible name: miners generally aren't the ones extracting the value (traders/arbitrageurs/bots are)!

He says the reason it is called that is because miners are _in the best position_ to extract the value. You cannot beat a miner at MEV, because they basically control block ordering. He encourages miners to get into MEV extraction, because that represents M$/day in revenue.

@hasufl says that miners _do_ capture a substantial amount of MEV today, because the frontrunning bots bid for priority in the mempool, and this represents 80-90% of the MEV revenue , and miners capture that.

Again, the back and forth here is very good. Watch the livestream 📺

@f2pool_official again: +1 to @gakonst re: miners being overpaid for security. Including fees, today, there are ~20k ETH in mining rewards per day (~8M ETH/year). He says that compared to PoS, all PoW chains seriously overpay.

He adds that compared to BTC, Ethereum's mining rewards are very high. They are also doing research about how to redistribute MEV rewards to their pool miners.

@flexpool_io: Pools exist to defend their miners (which are their customer). They don't feel that miners are overpaid. As you pay more, more miners join, and the extra gets paid across all miners.

He says that miners are not opposed to 1559 per say, but they think that a revenue cut to the extent that 1559 brings is too much. He says that ~90% of the network hashrate opposes this proposal.

.@iamDCinvestor adds that when we move to PoS, all of mining rewards will be lost, so this is trending to 0. Re: the deflationary pressure, he says that one big concern about ETH is that it has more supply uncertainty than, say, BTC, and 1559 helps partially alleviate this.

.@JHancock addressing the point re: lead time to 1559, the EIP has been in the works for 2 years. @vulcanizeio did the first implementation then.

Roughly 1 year ago, 1559 also raised the largest @gitcoin grant and said we could see 1559 live on mainnet within 1 year, which is basically now, so there was plenty of advance warning.

I made two comments:
1. Re: ASIC dominance, Ethereum has a lot of tools to deal with it if it happens (ProgPow, EIP-969), so it's not really a risk today

2. Re: mining as a small business: this is a _very risky_ time to start mining: ETHUSD is near ATH, hashrate hasn't caught up, transaction fees are at ATH. It's fine to start a business on this, but the risk must be recongnized.

There was one last comment before the Q&A by InnoSillicon:
1. They are in favor of 1559, but it does feel like a large drop in revenue;
2. Ethereum ASICs will never be as efficient as BTC ASICs because of Ethereum's PoW algorithm
...

3. They are starting to look at GPU/ASIC hybrid miners.

Q&A:

1. Wen 1559? At the earliest, London, which should happen around July this summer. We'll likely know after next week's AllCoreDevs.

2. Why such a big reduction in miner income for a modest supply reduction?

@tkstanczak: hard to predict price impact (better answer on the livestream!) but the burn compounds, but the UX benefits are significant.

@BitsBeTrippin: had a long comment, highlighting the very high fees we're seeing now. I missed part of it because I was looking at the replies 😣 @hasufl mentions the recent 100-ETH fee block, where >90% would have gone to miners.

Q: why not stop MEV?
A, by @AFDudley0: it's exceptionally difficult because of how Ethereum is designed. @gakonst: the problem comes from the fact that ordering + execution is in the hands of the miner. Nobody knows how to fix this well yet.

Q: have fees been modelled based on how full the block is?
A, by @tkstanczak: Yes, 1559 is modelled to adapt based on how full blocks are. OTOH, 1559 does *not* decrease fees, which are the result of supply and demand. See: willeip1559lowergasprices.org

@barnabemonnot: scalability & eth2 will help address fees significantly by increasing supply. OTOH, the fee variance we see right now on the network is very high, and people end up overpaying because of that. 1559 helps by having better estimations.

Q about 51% attacks: what happens if >50% moves to a rental service (ex: nicehash).
A, by @MicahZoltu: this is dangerous b/c the people renting hahsrate have no long term commitment to the network (vs. a mining farm, who would be negatively affected by the attack).

That being said, it is very speculative whether we can hit 50% of mining hardware on nicehash. If it did, we need to consider whether it would show up all at once or incrementally. If it was incremental, it is easier for core devs to address.

@BitsBeTrippin says that this could happen if we saw a very large drop in hashrate on the network post-1559.

@tkstanczak: the amount of research, testing, tooling, etc. shows that we do understand the importance of these risks and we are monitoring them.

Final statement from each participants!

@iamDCinvestor: users are strongly in favor of 1559, it's a great UX improvement and economically hardens ETH.

@barnabemonnot: amazing discussion, 1559 is also useful for rollups!

@gakonst: main takeaway for miners should be that MEV drastically changes the landscape, and that the fee loss from 1559 is lower than what is being calculated now. Miners are long the Ethereum economy, as that grows, so does their revenue.

@AFDudley0: hopes the miner community takes their opportunity to accumulate ETH to stake in Eth2 and keep participating in the community, and exploring the other revenue opportunities.

@JHancock: Thanks @hudsonjameson ! For 1559, "incremental improvements over time have exponential benefits".

@MicahZoltu: if you are a miner who wants to better understand MEV, ping him on Discord.

@tkstanczak: always willing to explain 1559 further and listen to folks concerns about it!

@f2pool_official: cares more about the future of Ethereum than exactly what miners are being paid, feels that the goal to stop 1559 is organized by small mining pools.

me: happy to have heard from several miners on this call, which is not something we get to do first hand often!

@BitsBeTrippin: more in favor than 1559 than he was at first, bit still thinks it should compensate miners more, suggests a 1 ETH block reward increase, and invite more feedback on his models.

@flexpool_io: miners support the improvements from 1559, but it feels like part of the community is asking another part of the community to make a large sacrifice for 1559.

He adds that there is a risk of a miner attack prior to PoS.

Last is InnoSillicon: they are strong believers in Ethereum, which is why they've made a large investment in developing ASICs. Supports the idea for 1559, hoping the approach can be more moderate. Whatever the community decides, they will support it.

Oops, @hasufl is last: Ethereum exists to serve users and holders. If Ethereum overpays for security, it is fine for the network to lower security. Also, we've seen much stronger declines that 1559 in mining revenue, and BTC + ETH were fine.

@poojaranjan19 wrapping it up from the ECH side: it's great to see researchers, miners, developers, etc. on a single call.

It's impressive to see everyone come here to discuss the proposal. Thanks everyone who joined and watched on behalf of @EthCatHerders !