Is there an advantage to bonded, but unslashable, stake in a world of staking derivatives?

Introduction In the Staking Hub telegram channel, Gavin (from Figment) asked this interesting question - is there any social utility to bonded, but unslashable, stake in a world of staking derivatives? This post dissects the problem and presents my view on the topic. It would be great to hear alternative opinions. Detailing the question In recent days, Solana announced its intention to have 100% of staked capital slashable. That policy is a radical departure from the design of the Cosmos Hub. On the Cosmos Hub: • Delegators bond ~70% (~180 million atoms) of the supply. • Only 5% of the bonded amount is slashable. Therefore, 9 million atoms are slashable. • 171 million atoms are locked up but at no risk of slashing. There might be an alternate design to the Cosmos Hub Alt, which makes all of the bonded capital slashable. It might end up at an operating point, such as: • 25% of the supply - 65 million atoms - are bonded. All of the bonded amounts are slashable. • 75% of the supply exists as liquid atoms. The question is whether the 171 million atoms that are locked up, but at no risk, produce any utility. They provide social disutility due to the reduction in…

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Tuckermint is experimenting with a 0% slashable model, which is the opposite of Cosmos Hub Alt.

It’s possible that a whole spectrum of slashing models will prove to be viable.
I guess the validity of each model will be borne out in practice.

Yeah, I’m looking forward to Tuckermint with 0% slashing and the data it generates as a socioeconomic experiment.

I want to reply to this thread with below viewpoint. bonded atom as an investment • expected return : price gain(major factor) + reward(minor factor) • expected risk : price drop(major factor) * 3week unbonding period illiquidity(medium factor) * liquidity risk(major factor for large holders) + slash(minor factor) As you see in above factorization, reward and slash is NOT a major factor for both return and risk side of atom as an investment. Let me calculate the REAL cost of total expected risk of double signing(which is argued that it is the main source of security of the chain) as below. • risk of double signing of power weighted average validator per year : 0.3%(estimated) • double signing slashing : 5% of bonded atoms • number of bonded atoms : 171m atoms –> yearly cost of expected slash risk for the chain = 171m*5%*0.3% = 25k atoms = 87k USD –> assume 3% risk free rate --> 87k USD / 3% = 2.9m USD at stake for security of the chain I don’t believe that 2.9m USD is the total amount of security in this chain. It is rarely a practical guess. Then what risk is staked on the chain for the security of the chain? It is easy. Just look at the factorization of…

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