EGL Economics

  • EGL: a coordination token that allows holders to vote on what their individual desired Ethereum block gas limit is, and rewards miners for listening to the community and user preferences.
  • EGL creates an economic incentive for the community to research, vote and ultimately discover what the “economically efficient” gas limit is and rewards mining pools for listening and taking the economic risk of listening to them.
  • EGL builds on Ethereum’s experiment of moving some parameters away from core devs to miners, by giving some of that power back to not only core devs, but also the entire community.

Key Design Choices

Several key design choices are worth emphasizing:

  • Genesis: EGL is designed to solve a coordination problem on Ethereum and thus it should be owned by the Ethereum community. Any ETH holder can participate in the Genesis.
  • Core Devs’ Guidance. Core devs have the greatest insight to the nodes’ technical limitations, and their opinions should carry significant weight and act as a signal to others in the community. Thus, EGLs will be awarded to all interested core devs, both to directly affect the EGL vote, and to signal to other actors their respective opinions.
  • Carrot-only Incentive. EGL rewards mining pools for adjusting the gas limit according to the ecosystem’s collaborative desired gas limit — that’s the “carrot”. But there is no “stick” forcing them to follow the EGL desired gas limit, an EGL cannot force pools to adjust their gas limit to levels they consider unsafe.
  • Creating Value for EGLs. EGL is designed to quickly deploy an ETH-EGL pool (using Balancer). This is intended to provide the best setting to spin the flywheel:
  • Incentivize Large Actors’ Participation. Optimizing the gas limit to its maximum safe limit creates value for the entire ecosystem, but also opens the door for the tragedy of the commons; every actor will ask herself why should it fall upon her to invest capital and effort to hold EGLs and vote. To incentivize the participation of tier-1 actors, who benefit the most from EGL, EGL leverages a two-step mechanism.
  1. For a weekly tally to pass, a minimum threshold of EGLs must participate in the vote, and this threshold gradually increases over time.
  2. If the threshold is not met, the desired gas limit does not remain unchanged. Instead, it is set to revert to 95% of the current gas limit. Thus, failure to participate in voting begins to revert the value EGL creates.

EGL Supply and Distribution:

Community — 2,000M EGLs

Genesis: 1,250M EGLs

Pools will not be incentivized by a worthless token, so EGLs must be bootstrapped with value. Any ETH holder can stake ETH to the EGL Genesis contract to participate in the launch. The contract will collect staked ETH and reward stakers with EGLs. At the conclusion of the Genesis lockup, participants can claim their staked ETH and EGLs.

Matching EGLs

The contract will match all the staked ETH during Genesis with 750,000,000 EGLs — regardless of total ETH collected — and deploy both the ETH and EGL to a 50–50 Balancer pool. Thus, the more ETH that is collected, the higher the EGL-ETH ratio is at deployment.

Bonus Voting EGLs

Additionally, all EGL Genesis participants will receive Bonus Voting EGLs totaling 500,000,000 EGLs to be used for voting. Since those who participated last will be locked into EGL for the longest term, those that participate later will receive exponentially more than those that participated first.

  • Early participation -> released sooner
  • Later participation -> more voting EGLs

Voting Rewards — 500M EGLs

To bootstrap early participation and build a long-term user base, EGL voters — i.e. EGL holders who lock their EGLs and vote on their desired gas limit — are awarded with EGLs. For one year (52 weeks), a predetermined amount of EGLs is distributed weekly among EGL voters. EGL voters who lock up their EGLs for longer periods of time multiply their share of the reward and the weight of their vote, as outlined below.

  • Amount of EGLs
  • Desired lockup period (1–8 weeks)
  • Desired gas limit (+/- 4M from current gas limit)
  • voter1 locks up 10 EGLs for 1 week (Share1 = 10 · 1 = 10)
  • voter2 locks up 10 EGLs for 2 weeks (Share2 = 10 · 2 = 20)
  • voter3 locks up 20 EGLs for 1 week (Share3 = 20 · 1 = 20)

DAO — 250M EGLs

EGLs are to be distributed in the future to support further development, security audits, etc. Allocation of these funds will be decided upon by the EGL voters as part of the voting process in future upgrades.

Core Devs

It is obvious that the core devs are among the most important stakeholders (regardless of their capital). Furthermore, the Ethereum ecosystem would greatly benefit from the guidance of the Core Devs, and from insight into their individual preferences for the gas limit.

Pools — 1,250M EGLs

To incentivize pools to follow the EGL Desired Gas Limit, pools can “sweep” free EGLs when they produce a block that follows the EGL desired gas limit. The initial reward can be as high as 500 EGLs, which may account for a significant portion of the pools’ block reward. The EGL reward begins at 1,250M EGLs and reduces gradually, every time an EGL reward is swept by a pool following the EGL vote. Specifically,

EGL Creators — 750M EGLs (subject to vesting)

EGL was born out of years of work on the networking layer and took over a year to develop and launch. We took Andre Cronje’s advice from “Building in DeFi Sucks (Part 2)“ to heart when he said “Don’t give away your tokens…Don’t do this, I was an idiot.” And we’re not alone, Comp, Uni, Maker, and many other tokens have taken a portion to cover the risk and time it took to build. Thus, we reserved less than the standard 20% for the EGL Creators.

Tokens Unlocking

The BPT, Bonus Tokens as well as the Creator’s Fund all unlock on a strong exponential curve, releasing very small quantities early to stabilize the system, and larger quantities towards the end of the lock-up period.

  1. Find the percentage of time that has passed from day 70 to the date in question
  2. Take percentage of time passed, raise it to the forth and multiply by 750,000,000
  • 78.57% of time has passed = ((301–70) / (364–70))
  • 78.57%⁴ x 750,000,000 = 285,837,932.11

Conclusion

EGL’s token economics is designed to encourage voter participation and incentivize miners to follow the vote. Given this, EGLs are given away to the community for their participation in the Genesis and kickstarting the flywheel and rewarded to miners for listening to the community. Concurrently, the DAO gives EGLs to core devs who can act as a signal to the community on what the “right” gas limit may be and provides a foundation to grow the EGL community and continue to develop the protocol.

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EGL

EGL

The Ethereum Gas Limit (EGL) project passes control over the gas limit ("blocksize") back to the community.