PIP-53: Revision of Social Escrow Expiry Claims

Abstract

This proposal aims to revise the current Social Escrow distribution method to remove epoch rewards expiry from the next epoch onwards.

With this change, the Governance Committee will be able to verify and produce the distribution files again during the grace period, ensuring a timely distribution of rewards. Additionally, this is a strong first step towards the decentralization and automation of the verification and distribution process of Social Escrow rewards.

Review

When the current Social Escrow distribution system was established, a Grace Period of a week was set to allow the Governance Committee to calculate, verify, and potentially contest the epoch distribution.

While the Grace Period worked as expected during the first six epochs, the start of expiring claims introduced an additional constraint that affected the epoch distribution calculation. The fact that a user can claim their previous epochs accumulated rewards during the grace period makes it nonviable to calculate and verify them until the end of the grace period, as the rewards balance would have to be recalculated again.

The narrowing of the calculation period from one week to within the day of distribution is far from ideal, as this period has to include calculations, data verification, validation, and signature collection. Thus, delays in each epoch of reward distributions become inevitable. This also magnifies the risk of distribution errors and calculations, leading to potential loss of funds.

Adding numbers to it, since the start of PSP 2.0 and until Epoch 11 (the last epoch with reward expires at the moment of writing), less than 3% of the ETH distributed was not claimed (19.47 ETH unclaimed from 665.92 ETH distributed). The average unclaimed ETH over total ETH distributed was higher during the first 3 epochs (3.9%) but decreased during the following 8 epochs as the PSP 2.0 system consolidated, multichain staking was released, and stakers got used to the claiming process reaching 2.2%.

Following this analysis, we believe the costs of delayed and potential errors with fund loss in distributions significantly outweigh the ETH that can be claimed back. Removing the epoch expiry can serve as a key first step to facilitate the distribution and unlock higher degrees of composability and automation.

Goals

• Remove the epoch rewards expiry, which is currently set to 6 epochs.
• Incentivise participation from new/small stakers initially limited by the 6 epoch expiry times
• Eliminate the post-distribution verification required for expired claims, allowing for complete calculation, verification, and signature collection throughout the Grace Period
• Prepare for the transition to a more automated distribution system
• Facilitate the composability of PSP staking into other DeFi products (eg. Interest Rate derivatives, auto-compounders)

Means

The change does not require any additional development resources from the DAO.

Implementation Overview

The proposal will alter the way future distribution Merkle roots are generated, resulting in no expirations from all future distributions.