Funds to bootstrap the first BoLD validator

Non-Constitutional

Abstract

The Arbitrum Foundation is seeking 5,134 ETH, which is a combination of:

• Assertion and challenge bonds. 4,234 ETH to allow the Arbitrum Foundation to run a BoLD validator and fulfill the role of being the first honest and active proposer.
• Service fees. 500 ETH to pay proposers who are actively participating and advancing the chain. We estimate the funds will last for 3 years of operation and the Arbitrum Foundation will not be entitled to collect any service fees.
• Refund L1 gas costs. 400 ETH to reimburse all L1 gas costs for active proposers who are actively advancing the chain and defending against malicious challenges, assuming 1 challenge per year.

This proposal is contingent on the proposal “AIP to upgrade the DAO-governed chains to use BoLD” (constitutional AIP) being approved by the ArbitrumDAO. If the AIP to upgrade the DAO-governed chains to use BoLD does not pass - then the Arbitrum Foundation will return the funds, in its entirety, to the ArbitrumDAO within 30 days of the BOLD proposal being hypothetically rejected.

Motivation

The AIP to upgrade the DAO-governed chains to use BoLD is scoped to only propose the technical upgrade and intentionally does not yet include the introduction of an economic incentive mechanism. In the absence of an economic incentive, the ArbitrumDAO holds the risk that no entity will fulfill the role of being the first honest party to secure Arbitrum One. By adopting this proposal, the ArbitrumDAO is appointing the Arbitrum Foundation to be the first active proposer for Arbitrum One.

Key Terms

• Active proposer. A proposer who is actively posting assertions and helping advance the chain. Validators are not considered active proposers until they successfully propose an assertion with a bond. In order to become an active proposer for Arbitrum One, post-BoLD, a validator has to propose an L2 state assertion to Ethereum. If they do not have an active bond on L1, they then need to attach a bond to their assertion in order to successfully post the assertion. Subsequent assertions posted by the same address will simply move the already-supplied bond to their latest proposed assertion. There can only be 1 “active” proposer at any point.
• Assertion. A claim posted to the Arbitrum rollup contracts on Ethereum L1 about the Arbitrum L2 execution state. Each claim consumes messages from the Arbitrum rollup inbox contract that are ordered by the Sequencer.
• Assertion bond. Creating an assertion in the rollup contracts requires the proposer to join the validator set by putting up a bond, in the form of 3,600 ETH. Subsequent assertions posted by the same party do not require more bonds, instead, the protocol always considers validators to be bonded to their latest posted assertion until they withdraw.
• Challenge bond. The challenge process in BoLD requires a proposer to post a bond whenever they want to challenge a malicious (and invalid) assertion from a dishonest proposer. This applies to the block level, big-step sub-challenge, and one-step sub-challenge levels, as part of the interactive dispute game played between challengers.
• One honest party. In BoLD, a single, honest party can protect the integrity and liveness of the system. While only a single party is required to act, it is still an open and permissionless system, allowing anyone to step up at any time.
• Proposer. An agent who looks up the list of ordered transactions, executes them off-chain, and then proposes a claim on the final execution output by posting an assertion on-chain. A proposer must have a bond deposited into the BoLD rollup contracts on Ethereum to be considered eligible, by the protocol, to post assertions.
• Service fee. A fee for proposers who are actively and successfully posting on-chain assertions which should amount to the same income that Ethereum validators receive over the same time period. The fee is paid for every on-chain assertion posted by the proposer once their assertion is confirmed. This fee removes the disincentive to lock up capital and be a proposer for the protocol and should not be viewed as an incentive or reward.

Budget Request

This section focuses on the budget request from the ArbitrumDAO treasury alongside the motivation for why the funding is required.

Assertion and Challenge Bonds (4,234 ETH)

We are requesting 4,234 ETH from the ArbitrumDAO treasury to cover the bonds required to establish a single honest proposer with the capability to defend the system.

The requested ETH is a combination of:

• 3600 ETH required to post an assertion bond, and;
• Subsequent 555 ETH + 79 ETH for challenge bonds for one challenge.

The Arbitrum Foundation will deposit these funds in the RollupCore.sol contracts on L1 Ethereum for the validator. If the BoLD AIP passes, then the Arbitrum Foundation’s staked validator will be enabled to immediately act as a proposer for Arbitrum One

Note: the Arbitrum Foundation is proposing to be the first active validator, not the ONLY validator. BOLD removes the reliance on a permissioned set of validators, and any interested parties and/or teams can permissionlessly run nodes and validators for Arbitrum chains upon a successful upgrade of the dispute protocol.

Service Fees for BOLD Validators (500 ETH)

All blockchain systems, including Arbitrum, should reward participants who actively work to advance the system.

In the case of Arbitrum, the DAO will pay a service fee to an active proposer who is helping to advance the system by posting assertions. If approved, the service fee will correlate to the same annualized income earned by a validator on Ethereum mainnet. At the time of writing, the estimated annual income is approximately 3% to 4% of the staked ETH, according to the Composite Ether Staking Rate benchmark by CoinDesk Indices.

We must highlight that this payment is a fee and not a reward. In BoLD, a new assertion can be posted every round (1 hour) and only a single fee is paid per round. There can be multiple agents who deposit the required assertion bond and run a proposer, but the fee will only be paid to the proposer whose assertion is the first to be accepted on L1. The proposer whose assertion is accepted by L1 and paid the service fee is called the active proposer for this round. Subsequent assertions posted by the same address will simply move the already-supplied bond to their latest proposed assertion. Meanwhile, if an entity, say Bob, has posted a successor assertion to one previously made by another entity, Alice, then Bob would be considered by the protocol to be the current active proposer. Alice would no longer be considered by the protocol as the active proposer and once Alice’s assertion is confirmed, then Alice gets her assertion bond refunded.

We estimate the following service fee per year:

• Assuming a 4% service fee based on the 3600 ETH bond size, equates to a maximum of 144 ETH per year per active proposer.

The Foundation is therefore requesting 500 ETH to support service fee payments for up to 3 years (with a buffer of 68 ETH in case the average Ethereum validator income increases) in the event that an active proposer, who is not the Arbitrum Foundation, steps up to advance the chain. Moving forward, the DAO may consider allocating a portion of ETH from the ArbitrumDAO governed chains’ sequencer fees to fund the ongoing service fees for active proposers.

To learn more, please read the section on Service Fees in the BOLD AIP.

Note: The Arbitrum Foundation will NOT be entitled to receive the service fee.

Reimbursement of L1 Gas Costs (400 ETH)

We are requesting 400 ETH to reimburse the on-chain gas costs for active (and honest) proposers who are helping advance and defend the Arbitrum chain. It is estimated that 400 ETH will be sufficient to cover ~3 years of operational costs.

There are two on-chain gas costs:

• Posting assertions. An active proposer must post an assertion for the chain to advance.
• Challenges. A proposer who is defending the system must participate in a multi-round challenge process.

*Note: we only propose to reimburse L1 gas costs since that is publicly verifiable and computable by all. The off-chain costs to run a proposer will not be reimbursed and it is expected the

... please visit link below to view full proposal

https://tally.xyz/gov/arbitrum/proposal/30828395120264250515588826110157291466999820796280987022346439005676672544691