KIP-68 Proposal for Adjusting the Allocation of Staking Rewards between Ethereum Mainnet and Gnosis Chain

Author: Kleroterion

Context

Staking PNK tokens plays a crucial role in maintaining the security of the Kleros protocol. The Juror Rewards Program has been successful in increasing the proportion of staked PNK since originally implemented.

The current allocation of staking rewards is 90% on Ethereum Mainnet and 10% on Gnosis Chain, however, this allocation was established before the introduction of Lemon cases on Gnosis Chain.

Proposal

Given the increased activity on Gnosis Chain, it is proposed to adjust the allocation of staking rewards to 80% on Ethereum Mainnet and 20% on Gnosis Chain. This adjustment aims to enhance the security on Gnosis Chain while still maintaining a high level of security on Ethereum Mainnet.

The rationale behind this proposal is twofold:

  1. Increased Activity on Gnosis Chain: With the introduction of Lemon cases (as well as the increased litigiousness in Curation court), there has been an increase in activity on Gnosis Chain. This increased activity warrants a higher level of security.

  2. Balanced Security: While it is important to ensure the security of Ethereum Mainnet, it is equally important to not neglect the security of Gnosis Chain. This proposal aims to strike a balance between the two.

This proposal maintains the same reward structure and long-term incentive program as established by KIP-66. The only change is the allocation of rewarded PNK tokens between Ethereum Mainnet and Gnosis Chain.

Conclusion

This proposal aims to adapt to the evolving needs of the Kleros protocol. By adjusting the allocation of staking rewards, we can ensure that both Ethereum Mainnet and Gnosis Chain are adequately secured, thereby maintaining the overall integrity and trust in the Kleros protocol.

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Thank you @Kleroterion for this proposal and the valid points raised ! As the Kleros Cooperative, we believe that the current distribution of rewards between Gnosis Chain and Ethereum mainnet is an important topic to be discussed. In our opinion, we should maintain the initial allocation from KIP-66 (90% on Ethereum and 10% on Gnosis Chain). Here are several key points to support our stance:

Considering the upcoming Kleros 2.0

The courts on Gnosis Chain are designed to handle low-value cases like TCR before the launch of Kleros 2.0. It is a non-decentralized experimental court that is ultimately upgradable by The Cooperative. In our view, there is no need to incentivize more jurors to stake in Gnosis courts, with Kleros 2.0 we will have the best of both worlds: the security of mainet and the low costs from Gnosis courts.

Considering Juror Incentives and Coherence Rewards

It’s important to recognize that there are differences between Gnosis Chain and Ethereum, particularly in the volume of cases Jurors receive. While the staking APR may be slightly lower for Jurors on Gnosis Chain according to KIP-66, this is offset by coherence rewards they can earn from their participation. This balance should be taken into account when considering reward allocations.

Top priority Ethereum Mainnet Security

The value of Kleros relies on its ability to provide economic security, for instance, the protocol is securing 1inch Treasury worth over $17 million via the Kleros Snapshot Module. This means attackers have high incentives to attack Kleros courts on mainnet, while having no incentive at all to attack courts on Gnosis Chain. Guaranteeing security on Ethereum Mainnet should be the top priority of the protocol.

In conclusion, the new ratio for rewards proposed in this proposal (80/20) could harm the overall security of Kleros, so we are opposed to such a change. As a Cooperative we believe that retaining the current allocation of 90% on Ethereum Mainnet and 10% on Gnosis Chain aligns with our long-term objectives and ensures the continued integrity and security of the Kleros protocol.

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Note that, as the staking rewards as currently structured give the same reward regardless of whether you are just staked in the General Court or in a child court, they are mostly useful for increasing the resistance of the General Court on mainnet and the xDAI General Court on Gnosis Chain to 51% attacks.

So. regarding the Lemon cases specifically, it is worth noting that Lemon has a policy of implementing the first round ruling of those cases, even if there is an appeal. (This allows them to have stricter guarantees on how long the process will take, and they only view the Kleros ruling as binding on the company but not on the customers who still have access to whatever legal avenues of consumer dispute resolution they would otherwise have.) The court on a technical level still allows for the possibility of appeals in these cases, and indeed a juror who believed that they had been penalized inappropriately might appeal the decision to a higher court for the sake of the correct decision being used in allocating juror rewards. However, by the time you appeal to the xDAI General Court, there is no “value secured” at stake between the parties in the Lemon disputes that an attacker could try to manipulate or steal via a 51% attack in the way that the 1Inch treasury integration contributes to the “value secured” on mainnet. Generally, to echo Alex’s point, while most of the activity is currently on Gnosis Chain, the vast majority of the total value secured is on mainnet, so one should be careful to not to change the incentives in a way that lures too many stakers away from mainnet.

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Recent Observations: In the 11 days since I originally created this proposal, there has been a notable imbalance in case activity between Ethereum Mainnet and Gnosis Chain. Ethereum Mainnet has seen four Humanity court cases, while Gnosis Chain has experienced no new cases.

Implications: @0xAlex believes that a higher case volume on Gnosis Chain justifies the lower rewards. However, the current lack of activity could potentially prompt jurors to transition their stake back to Ethereum, thereby affecting the security and reliability of the Gnosis Chain courts.

In light of the recent case volume trends, it appears increasingly necessary to consider an enhancement of the staking rewards. This measure is proposed to ensure robust participation, especially during periods when the case volume on Gnosis Chain does not exceed that on Ethereum.

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Hi @Kleroterion, we appreciate your follow-up on this.

Regarding the observation you highlighted:

I intended this to be seen in the context of broader trends. Year-to-date in 2024, there were 17 cases on Ethereum courts compared to 35 on Gnosis courts. In Q4 2024 alone, there were 17 cases on Ethereum courts versus 77 on Gnosis courts. This is a side argument to showcase the potential for jurors to earn yield from cases on Gnosis Chain, despite lower staking rewards.

The core argument against the proposed changes is the fact that we should prioritise the security on Ethereum Mainnet. This is the most important metrics for the long term success of the protocol. Decreasing juror staking rewards on Ethereum Mainnet, as suggested with a 80/20 ratio, could compromise the protocol’s security. That’s why the Cooperative is strongly opposed to it.

Regarding this specific statement:

We disagree with this assertion. As previously stated, Gnosis Court is an experimental, non-decentralized court that is upgradable by The Cooperative. Ultimately, its security relies on The Cooperative’s admin key. We think present juror participation on Gnosis suffices for the ongoing experiments, anticipating the transition to Kleros 2.0, which will have the best of both worlds, low gas fees and high security.

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gm @Kleroterion,

Please let me know if you have any other specific feedbacks and/or questions for the Kleros Cooperative ? And if you want to push this to a snapshot vote ?

Based on the information you’ve presented, and without the general support of the Kleros Cooperative, I no longer believe it would be productive to pursue this KIP at this time.

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