@g5179h

When slashing probability doubles, how should the reward multiplier change? If the slashing probability doubles, the reward multiplier must more than double to maintain the same level of operator participation, assuming risk aversion. In a risk-neutral world, a doubling of probability from p to 2p would simply require a doubling of the reward multiplier to 2R to keep the expected value constant. However, operators are not risk-neutral. A higher probability of a ruinous event makes the investment significantly less attractive. The utility lost from the increased variance and fear of total loss requires an additional compensatory premium. Therefore, to attract the same quality and quantity of operators, the new reward multiplier would need to be 2R + δ, where δ is a positive risk premium that increases with the base probability and the degree of operator risk aversion.

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