FIP Proposal: Almgren-Chriss additive formula for base fee update

[mtefagh]

There is a simple price manipulation strategy exploiting round trips to attack EIP-1559, which I have discussed extensively in the Ethereum community but is relevant to Filecoin as well. You can read more about this here. Also, see the ideas near the end of this thread for more details. The minimal remedy is to solve this problem by changing the multiplicative update formula into an additive one. Please let me know if anyone is interested, and I can provide more links and resources.

[Leozhang404]

@mtefagh So interesting, please leave more links and documents.

[mtefagh]

It all started two years ago when I came up with the first version of this attack and discussed it with Vitalik in the following posts:
https://ethereum-magicians.org/t/eip-1559-fee-market-change-for-eth-1-0-chain/2783/24?u=mtefagh

Recently, I generalized the initial version and extended this attack and once again brought up the subject with Vitalik:
https://ethresear.ch/t/path-dependence-of-eip-1559-and-the-simulation-of-the-resulting-permanent-loss/8964?u=mtefagh

For a minimal solution to this problem from economy literature with lots of supporting research, see here:
https://hackmd.io/@PIncentivus/EIP-3416#Relation-to-constant-function-market-makers

Also, there are extended solutions with additional stability features like this proposal:
https://github.com/ethereum/EIPs/blob/master/EIPS/eip-3416.md

[Leozhang404]

thanks, Let me read it firstly.

[mtefagh]

Some more resources:

https://ethereum-magicians.org/t/eip-3416-median-gas-premium/5755?u=mtefagh

https://ethereum-magicians.org/t/why-should-we-make-miners-prefer-the-premium-and-hate-the-base-fee/5866?u=mtefagh

[kaitlin-beegle]

@Leozhang404 have you had a chance to follow up on this issue? I am presently auditing the FIPs repo and would love to know if this is a discussion point that should be reintroduced to the community.

CC: @mtefagh

[mtefagh]

I guess you must have already heard about the wild oscillations of the Ethereum's gas price after the London hard fork, but in case you need to see some charts and diagrams I have recently updated this short article with the real-world data of base fee post-upgrade:
https://mtefagh.github.io/fee/

[kaitlin-beegle]

Great, thanks @mtefagh. @zixuanzh have you previously had a chance to review this topic?

[kaitlin-beegle]

@mtefagh we have a new workflow for the Filecoin Improvement Proposals process, which requires discussion items to move to the FIPs Discussion Forum. Could you please migrate this issue ASAP? All you need to do is open a new issue and, at a minimum, link to this Issue as reference. Doing so is necessary to avoid issue deprecation, but will also highlight your proposal for the broader community!

Alternatively, you may want to reframe some of this material using the FIP section template available HERE so that it is easier for community members to understand the context of the Almgren-Chriss formula you're proposing.

If you would like, or if I do not hear back in the next few days, I will migrate this issue on your behalf. Thank you!

[mtefagh]

@kaitlin-beegle I opened a new issue in the discussion forum as you instructed. I would write an FIP in the format of the template you sent ASAP, if I get any feedback from the community implying that this proposal might be implemented and merged someday.

[kaitlin-beegle]

Wonderful, thank you @mtefagh! I appreciate your help and quick response.

I would highly encourage you to translate this proposal into a FIP at your convenience. The challenge is that this proposal is sufficiently complex that you would likely need to take the lead in writing the FIP. However, I would be happy to work with you to identify resources and support.

As a first step, I would recommend you share your Discussion Post item in the Filecoin Slack community. This ought to help spur some new discussion and get the ball rolling. I can also help you with this, and will more visibly publicize open Discussion Items in coming weeks.