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Average in figure 6 and 7 #1
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Thank you very much for the kind words on the paper. I think I caused the
confusion in picking the name solitarius, which is not the same as solo
staking. Both graphs show the output of participating in a smoothing pool
vs. running your validator without participating in the smoothing pool (SP)
(Calling that later case a solitarius validator).
For example, in Figure 6, the purple lines are a plot of each of the 1,000
Montecarlo tries for a non-SP (e.g., a solitarius) validator. Here, most of
the tries earn less than 5 ETH over the 5-year period. (The purple lines
all combine and make the large purple smear on the bottom of the chart.).
In some of these tries, the single validator is very lucky, and they earn a
lottery block. These lottery-winning validators end up with 10 or more ETH
after 5 years of validating. You can see these lines because they
skyrocket up, and you can see the individual lines from the smear.
So if you take all these 1,000 tries, the average earn is 4.93 ETH. But if
you take the median, it's only 3.31 ETH. The reason the median is lower is
because the luckiest validator, 220 ETH earning validator, cancels with the
most unlucky 0.1 ETH earning node. Do this another 498 times, leaving you
with the validator in the middle of the list with the median value.
The large discrepancy between the median and mean makes a soothing pool
attractive. If you participate in a smoothing pool, you are guaranteed to
earn the average of the rewards, but you have zero chance of winning a
lottery block for yourself. If you do NOT participate in a smoothing pool,
you have equal odds of earning less than or more than the median and a
slight chance of winning and keeping a lottery block.
The short answer is that if the pool is much larger (90% greater) than the
number of validators that you have in the pool, you have a (4 out of 5) 80%
chance of doing better in the SP. This is because 1 out of 5 (20%) of the
SP participants will be lottery block winners (to some degree), and their
winning will help raise the earnings of 4 out of 5 groups. Hence, most
people (80%) will do better since they earn the average. 20% of the
participants were the lucky ones who now are sharing their windfall with
all the pool's members and are performing less.
So by joining the SP, you get a guaranteed earn, but you risk the chance of
being lucky and having to give up your lottery winnings.
…On Wed, Dec 20, 2023 at 2:49 AM XofEE ***@***.***> wrote:
I recently read your paper, "Modeling the Profitability of the Rocket Pool
Smoothing Pool," with great interest. It provided valuable insights into
the advantages of pooling over solo staking in terms of profitability.
However, I am having difficulty understanding the disparity between
Figures 6 and 7 in your paper. *Why is the average reward for solo
staking lower than that for staking in a pool?* I expected that the
median reward for solo staking would be lower than that for a pool, but I
assumed the averages would be similar.
I may not have the full expertise to deeply understand the calculations in
your paper, but I would greatly appreciate it if you could help me
understand this point.
Thank you in advance for your time and assistance.
Figure.6.png (view on web)
<https://github.com/htimsk/SPanalysis/assets/83547957/9d36f5bc-4e35-4404-9284-70a892c18d2b>
Figure.7.png (view on web)
<https://github.com/htimsk/SPanalysis/assets/83547957/f446c16d-5073-4407-bf0f-bb7be38c7168>
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Thank you for this response, it has helped me to better understand your work. |
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I recently read your paper, "Modeling the Profitability of the Rocket Pool Smoothing Pool," with great interest. It provided valuable insights into the advantages of pooling over solo staking in terms of profitability.
However, I am having difficulty understanding the disparity between Figures 6 and 7 in your paper. Why is the average reward for solo staking lower than that for staking in a pool? I expected that the median reward for solo staking would be lower than that for a pool, but I assumed the averages would be similar.
I may not have the full expertise to deeply understand the calculations in your paper, but I would greatly appreciate it if you could help me understand this point.
Thank you in advance for your time and assistance.
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