Thank you Izzy! Some really good points.
You could argue the liquidity of the stETH token is part of its utility and appeal - i.e. users choose stETH not just because of the ease with which one can stake but also the liquidity of the receipt token too. If arbitrageurs ‘benefit’, arguably so does the stability of the market rate of stETH to ETH.
But quite a good point you make is that although the playing field is ostensibly ‘fair’ between shrimps and whales, this would be predominantly a facility only really usable by whales. Non-fair-weather use would similarly likely get zapped by whales before it could benefit other users.
There’s a reasonable counter in that a higher threshold to the depositor bot would help stabilize the market rate for all participants in non-fair-weather conditions, but it’s a fair point.
I think this is the strongest argument against either of these whole-protocol proposals. A reasonable counter point is that you could make the above proposals ‘in-protocol’ too, it just depends on how to choose to evaluate it. When new node operator modules get added by token holders, they may have specific risk considerations built ‘in-protocol’, for example.
It’s true that catastrophic network-wide slashing events may well likely overwhelm the ability of the surplus to mitigate against slashing. However, the fact that the validator sets that participate within Lido are demonstrably quite diversified and decentralized, suggests there may be eventualities of non-correlated slashing events that could be appropriately covered. This is of course, just an opinion, and may well never be satisfactorily sized.
In general though, completely agree, as well as that, in our view, the “simple and pure protocol” framing should weigh more often than not on considerations that token holders decide to include in the protocol as it more accurately describes its function at the moment and is a more appealing end-state goal.
In that light, the above analysis and considerations are all in a strictly narrow-protocol view, and are not intended to interact at all with the Treasury Management Committee.
By its foundational principles, this committee is a temporary (its ultimate objective is to automate itself and disband) community-driven initiative to bootstrap minimalist programmatic and autonomous governance policies over surplus that might come after, in some sense, the protocol.