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Ethereum solo stakers were surveyed (n=125) for a sentiment check about their experiences with node bandwidth capacity, usage, monitoring, and whether they would anticipate adverse impacts if requirements were increased in future protocol updates.
This survey is limited in scope and was intended as a pulse check on the specific bandwidth subject. For a more exhaustive survey of solo stakers that EthStaker conducted in early 2024, see the Ethereum Staking Survey 2024 published on July 2, 2024.
Stay tuned for the next full Ethereum Staking Survey we plan to begin collecting responses for in early 2025.
Methods
A total of 125 responses were received during the dates of September 27 - October 8, 2024. The survey was conducted on DeForm, access was gated with a collection of POAP NFTs, and it was publicized on EthStaker's social channels including Reddit and Twitter.
Results
The .csv data file and .xlsx analysis file can be found on Github.
90% of the 125 respondents were home stakers.
56% track bandwidth usage with the majority using Grafana followed by modem apps and ISP tracking.
55% of Home or Partial Home Stakers expect increased bandwidth usage to have an adverse effect on their ability to run a node from home.
Adverse effect expectations rise by Download Speed Range and Upload Speed Range tiers as both speeds decrease, with the trend more pronounced for upload speed.
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Independent operators (often broadly referred to as “solo stakers”) were surveyed for information that gives better visibility into their profiles, demographics, pain points, and motivations. We note a high degree of confidence in staking and resilience among respondents despite an emerging feeling of structural disenfranchisement and concern for centralization pressures on the validator set.
The intent of the data is to provide the perspective of a very privacy-oriented set of actors, in their own words, so that their needs can be represented accurately. This survey is intended to be annual and feedback on the question set is welcome.
Survey results were collected using LimeSurvey software. Questions included branching display logic to ensure continued relevance to the respondent. Cookies were used to deter repeated participation and a CAPTCHA to deter bot activity. The survey was open to the public and responses were anonymous.
Responses were solicited on EthStaker’s social channels (Reddit, Discord, Twitter, Farcaster), on Obol’s Twitter account, in public channels of the most popular Staking as a Service providers, hardware providers, and client software. The survey was also posted on the Beaconcha.in website and in the Rhino Review and Week in Ethereum newsletters. Submissions were collected between 8 April 2024 and 6 May 2024.
Only data from completed surveys were used. Incomplete surveys were discarded. Results were manually inspected for bot activity and no complete surveys were discarded. Data displayed as pie charts were the result of single-choice answers. Multiple choice answers are denoted in discussion with a star✶ unicode✶ character✶.
While the data show a preference toward home staking over more disengaged methods of staking, this is potentially a consequence of who is engaged and who this survey was able to reach. Stakers who engage frequently in staking communities tend to be the ones managing their configurations. Those who don’t manage their own configuration can afford to tune out because their immediate attention is not often needed to maintain their validators.
This information should considered more qualitative than quantitative as it relies on subjective data from a self-selected subset of stakers.
Publicly available node crawlers put Ethereum node counts at anywhere between 6000 and 11,000. Not all of these are validating nodes. Many are run by professional operators. This survey was only aimed at stakers using their own capital - questions were not relevant to professional operators. At the time of writing, validating nodes using Rocket Pool can be estimated at 1832, using the number of nodes with node ETH at a staking snapshot and subtracting Allnodes nodes. This can loosely be used as a floor for the number of independent operators. With 868 responses from stakers who claim to control their node’s configuration (out of 1024 total responses), we can estimate that somewhere between 8% and 47% of node operators responded to this survey, with the either edge of this range unlikely. Bear in mind that this is as a percentage of all node operators, which includes professional operators. This survey is primarily interested in non-professional operators.
Though it’s easy to see the number of validators on the network, it is not currently possible to collect an accurate count of the number of validating nodes or individual operators or even just nodes that are on the network (this can be interpreted as a feature rather than a bug). Node operators can choose to self-identify their validators but most independent operators and many professional operators do not.
Raw data can be found here.
32% are genesis stakers
80% are home stakers, with an additional 4% running a home / remote combo
84% do not also hold any significant capital in liquid staking tokens
85% have not changed their primary method of staking
77% are staking between 66 and 100% of their ETH
30% use smoothing pools, 61% do not, and 9% aren’t familiar with the concept or don’t know of options relevant to them
95% use Linux to run their validator(s) ✶
51% did not use staking software to set up their validator. 27% used Rocket Pool, 15% DAppNode, and 10% Eth Docker (\"did not use staking software\" generally means they followed guides and used systemd) ✶
85% have not changed their method of staking since they first began
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Primary concerns included supermajority client risks, suboptimal tax structures for staking, hardware issues, and key management ✶
69% do not track their bandwidth and 78% were unsure if it has increased since Dencun
Respondents spend an average of 3.4 hours (median 2 hours) per month maintaining their setup. Removing a single outlier data point (x = 155 hours) that had a z-score of 22 brings the average to 3.2 hours per month
On a scale of 1-10, 10 being the largest possible risk to the network, stakers rated a supermajority risk as a 7.4 and the risk of centralization of stake as 7.2 (adjusted scales for clarity)
When asked what percentage of ETH they expect to be staked in 2-3 years, answers (n = 1003) averaged to 49.4% of ETH
When asked what percentage of ETH staked they suspected was operated by independent operators like themselves, answers (n = 924) averaged to 15.9% of ETH staked
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89% feel today either more or equally adamant that solo stakers are important for the network, as compared to when they first began staking (11% feel that it’s less valuable)
66% feel today either more or equally adamant that solo stakers derive as much benefit from participating in consensus, as compared to when they first began staking (34% feel that they derive less value)
When asked how well they feel their interests in ongoing research and protocol development are represented, the average was a 5.8 out of 10, with 10 being ‘very well represented’ and 1 being ‘not at all represented’ (adjusted scale for clarity)
50% felt that protocol research either ignores solo stakers or is largely powerless to help solo stakers against monied interests (19% reported that they don’t pay attention)
92% either supported or felt neutral about the statement that the issuance curve needs to be changed to better incentivize decentralized forms of staking (without regard to existing proposals)
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The leading motivation for initially staking was to support the Ethereum protocol (84%), followed by yield (81%) ✶
65% plan on continuing to add new stake
35% plan on continuing to add new stake but plan to stop when some external condition is met
31% do not plan on adding new stake
62% indicated that they have no plans to exit ✶
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69% used technical guides as a primary source for learning (e.g. Someresat, CoinCashew, Rocket Pool docs, client docs) ✶
63% used EthStaker as a primary source for learning ✶
53% used ethereum.org as a primary source for learning ✶
The most commonly reported sources for keeping up with necessary updates and protocol research (these two questions seemed to be confused with each other, so we’ll discuss them together) were Discord, explorer notification services, Twitter, Reddit, ethresear.ch and podcasts, with a substantial portion naming The Daily Gwei specifically ✶
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At the end of the survey, stakers were given the opportunity to comment on anything that they felt hadn’t been adequately covered in the survey. Full answers are available in the raw data and an AI-assisted summary of answers is provided here:
n = 204
Decentralization and Centralization Risks (n = 68): Many respondents are worried about the centralizing effects of current protocol developments and the insufficient representation of solo stakers. LSTs are seen as a centralizing force that makes independent node operation less attractive and feasible, and restaking as a potential vector of centralization.
UX, technical barriers, hardware (n = 46): There are numerous requests for simplifying the staking process and making it more accessible for non-technical users. Concerns around bandwidth, the need for IPV6 support, and needs for estate planning solutions were also mentioned.
Issuance Curve Adjustments (n = 38): There is significant concern about the impact of changing the issuance curve, especially how it might affect independent operators, with some expressing support for the research direction. Many believe that decreasing yields would result in conditions favorable only to large, centralized staking entities.
Economic and Tax Implications (n = 28): Tax policies are a significant burden for solo stakers, making it less economically viable compared to holding liquid staking tokens (LSTs) which have more favorable tax treatment.
MEV (n = 24): There is a divide among stakers regarding the use of mevboost, with some choosing not to enable it due to ethical concerns. These respondents advocate for alternative solutions and further research to address the issues posed by MEV. MEV is perceived as a tool that could potentially enable protocol capture by large, centralized entities. Respondents call for more robust measures to prevent MEV from undermining the decentralized nature of Ethereum.
Privacy Concerns (n = 15): Stakers are concerned about the exposure of their operational details, such as IP addresses and transaction inclusions, which compromises their privacy and security. Respondents desire the development and integration of privacy-preserving technologies. Privacy concerns extend to issues of censorship, with respondents noting that the lack of privacy forces some stakers to censor transactions, impacting the neutrality and inclusiveness of the network.
95% self-reported as male
90% identified as somewhat or strongly technical
74% do not work in crypto
88% are staking from North America, Europe, or Australia
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That independent operators are largely tech savvy men from North America, Europe & Australia running on Linux are all unsurprising results - these imbalances have multifaceted causes and are the target of many diversity initiatives across the staking community. How, why, and with what percentage of their ETH these operators run their validators is less well-known since stakers tend to be reticent in sharing information that may create vulnerabilities in their security.
An abundance of engaged Genesis stakers, 80% running from home, 84% not holding any significant amount of liquid staking tokens, and 77% staking more than 66% of their ETH are all new and highly encouraging data that indicate a high degree of confidence and resilience in staking among independent operators.
A recent report by StakeCat looked at addresses identified as independent operators (methodology here) and determined that the ratio of independent operators on the network has increased since the merge. These survey data show a significant portion (32%) of respondents have been staking since the Beacon Chain Genesis event. As survey data is from a self-selected subset of stakers, it is likely that these survey results do bias toward stakers who were onboarded around Genesis, when EthStaker was the only comprehensive source for staking education and support.
Now that independent operators are increasingly being onboarded through protocols and products with improved UX and their own support, these latter cohorts of stakers may be checking in with the general staking community less frequently. This is desirable as software, education, and support for independent operators shifts to a diverse set of self-sustaining projects that may onboard less ‘tech savvy’ operators.
Since withdrawals were enabled at the Shapella hard fork, the slope of ETH staked over time has increased and, with it, interest from professional entities utilizing delegated stake.
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These professional entities often benefit from the economies of scale as they’re able to run hundreds or thousands of validators per node, bringing down the cost of hardware per ETH staked, whereas an independent operator generally runs single or double digit validators per node. Large entities are also able to pool execution layer rewards to smooth over their validator set, an option only recently available for independent operators with the introduction of two solo staker smoothing pools. Professional operators may yet also be able to take advantage of additional yield by participating in extra-protocol services that require more robust hardware or operational expertise. These factors have resulted in LST holders sometimes receiving higher rewards than independent operators, even accounting for the fee paid to the staking service provider.
There is a feeling of disenfranchisement among respondents when considering these outcomes. They feel now that their role is equally or even more valuable to the network than they did when they first began staking but do not feel likewise about the way that the protocol values their participation. When asked about advocacy for their interests in protocol research, most fell solidly in the middle between “not represented” and “well represented”, with a slight inclination toward the latter. Over half of respondents felt research is either hostile, neglectful, or ineffective in representing their interests. A majority expressed support for changing the reward structure of the protocol to remedy this perceived disenfranchisement (with the understanding that this support did not necessarily signal endorsement of existing proposals).
Over the years, independent operators have been referred to as “irrational actors” and “altruistic”, and it has been suggested that stake operated by them has a ‘stickier’ quality than stake injected by delegated stakers. It’s not possible from this survey to compare the two groups but respondents do convey a desire to continue staking regardless of small fluctuations in APR or broader staking ecosystem changes.
While most respondents anticipate remaining staked in any positive yield scenario, 21% of respondents indicated that they have a specific yield threshold under which they would exit (n = 184) and averaged 2.3%* for that threshold.
(*As an aside, this number should be understood to be biased by a rational desire to keep income high, as some stakers indicated that they’re currently running validators but would unstake under a threshold that we’ve long since passed, which suggests that some may not keep active tabs on what their actual current yield is.)
This reluctance to unstake combined with ideological motivations for initially staking (”to support the Ethereum protocol”) is often cited as a feeling that independent operators are ‘altruistic’. It should be noted that their inertia is likely bidirectional. An independent operator is unlikely to unstake with small market or issuance fluctuations but is equally unlikely to bring their stake back to the network once they have removed it, even if conditions become slightly more favorable. Consequently, their losses are likely to be more permanent than those of delegated stake. Overreliance on altruistic motives rather than structural equity for independent operators is likely to erase this subset of stakers over time.
A string of airdrops in 2023 and 2024 targeting independent operators as recipients has recognized the current disparity in rewards and power between independent and professional operators and the value of maintaining independent operators on the network. These one-time incentives are helpful for the interim but also should not be relied upon to close this gap in the long-term.
StakeCat’s recent report show that the hunger for solo staking is as strong as it’s ever been and the ratio of independent operators to professional operators has remained relatively stable, even increasing, over time. Much of recent research seeks to preserve an independent operator’s meaningful participation in light of centralization pressures emerging from the current protocol design. These proposals should rely heavily on insights directly from the motivations and concerns of independent operators - this survey and report aim to provide that data for brainstorming and research to rely upon.
Point of contact: team (at) ethstaker (dot) cc
Graphs illustrated by electropillow
Becoming a node operator to safeguard the Ethereum protocol requires reliable and top-quality infrastructure. For some individuals, achieving this at home is possible, which EthStaker generally recommends as the gold standard to foster decentralization. However, for many others, it's simply not feasible due to their environment or the services available at their residence. In such cases, utilizing a hosted service like those offered by OVHcloud can be a solution.
Observing or Securing
There are a few types of nodes you can run on Ethereum. A regular node is typically built with a machine that will execute an execution client and a consensus client. It can be used to observe and interact with the Ethereum network. A staking node, on the other hand, includes everything a regular node does, plus a validator client and one or more validator signing keys to perform the regular duties expected of a validator. The primary purpose of a validator is to secure the Ethereum network, and a compensation is provided for correctly and timely executing its tasks. A regular node can easily be converted into a staking node, and vice versa, since the validator client component often has a relatively small resource usage when the number of validators is small. A single machine is capable of running thousands of validators, but proper risk management is necessary when operating a large number of validators.
Being a staker comes with additional responsibilities. A well-functioning validator is expected to perform its regular duties round-the-clock. Validator tasks include attesting to the current state of the blockchain every 6.4 minutes and constructing or selecting a block when randomly chosen as the proposer for a slot. Failure to perform these duties will result in penalties accruing, which are applied to the initial stake supplied by the operator. Reliable infrastructure will assist in executing these duties correctly and promptly.
Reliable Infrastructure
What exactly constitutes reliable infrastructure? While many elements contribute to the complete equation, the main ones we're concerned with here are internet and power. Running a node on Ethereum requires between 500 GB and 4 TB of bandwidth every month. It also necessitates connecting to numerous peers in a peer-to-peer (P2P) network. Unfortunately, many internet service providers (ISPs) worldwide don't offer plans that support these use cases or could potentially throttle their service above a certain bandwidth usage or when they detect substantial P2P traffic. The default home modem + router combination can also be underpowered and struggle to maintain numerous connections with peers. Services can vary significantly depending on your physical location. It's often challenging to determine the quality of internet service you will receive, even if you thoroughly read the fine print in your contract. Reputable hosting providers will provide you with all the necessary information upfront about their networking and internet service for each plan.
Being without internet or power for a regular node means you cannot access Ethereum. Having a power or internet outage for a staking node means your validators will slowly start losing money due to penalties for missing timely duties. Additionally, having adequate hardware components can also be an issue to address.
Hosting providers can mitigate some of these concerns. Reputable hosting providers will have redundant internet providers, redundant network devices, redundant power supplies, and robust backup power systems. A great hosting provider will manage all hardware issues for you. They usually disclose the hardware components they utilize and often employ server-grade hardware.
EthStaker's Hosting Provider Recommendation
OVHcloud is a recommended hosting provider for Ethereum staking. They offer a dedicated server plan, unmetered public bandwidth, and a policy of being friendly to crypto-related use cases (except mining).
Cost-Benefit Analysis for a Staking Node
While securing the Ethereum protocol is generally not considered an investment, you can profit from performing this task. I will use the simple solo staking case here for the cost-benefit analysis. A solo staker is someone who will perform multiple 32 Ether (ETH) deposits to run one or more validators independently. I will also use USD as the stable currency and the owner's preferred currency for this analysis.
The total benefits or profits you can make by staking can be denoted with a simple formula: the final profit plus the recurring profit minus the initial cost minus the recurring cost, or TP = FP + RP - IC - RC, where:
- TP is the total profit
- FP is the final profit
- RP is the recurring profit
- IC is the initial cost
- RC is the recurring cost
Let's assume someone commits to running validator(s) for a specific period, with a specific number of validators, and that person has to exchange USD to purchase ETH initially and wants to obtain USD at the end. We will define an initial exchange rate and a final exchange rate. The initial cost of running these validators will be primarily the stake required for each validator: the number of validators someone wants to run multiplied by 32 ETH multiplied by the initial USD exchange rate for ETH, or IC = V 32 USDr1, where:
- V is the number of validators someone wants to run
- USDr1 is the initial USD exchange rate for ETH
Similarly, the final profit someone will receive from staking is simply the return of their stake for each validator: the number of validators someone wants to run multiplied by 32 ETH multiplied by the final USD exchange rate for ETH, or FP = V 32 USDr2, where:
- USDr2 is the final USD exchange rate for ETH
As you can see, someone staking will be well exposed to the USD <> ETH exchange rate. All profits are denominated in ETH until they are converted back to another currency. This exchange rate can significantly impact the total profits someone can obtain. You can expect someone delving into staking to have a strong confidence in the ETH value or someone with a high-risk tolerance.
By using a hosting provider, the recurring costs are primarily the plan cost: the monthly cost of the hosting plan multiplied by the number of months someone will commit to staking, or RC = MC * M, where:
- MC is the monthly cost of the hosting plan
- M is the number of months someone will commit to staking
The recurring profit generated from staking is liquid and can be sold immediately after it is withdrawn from the validator's balance or deposited directly into the fee recipient address. For simplicity, I will assume they are converted back to USD at the end of the commitment period. The recurring profit can vary widely depending on factors such as the chances of being selected to propose a block and the fees that can be extracted when proposing a block. For simplicity, I will use a generic average rewards rate. Note that there can be some variance from that average rewards rate to the final rate, but that difference should be smaller the longer the commitment period and the larger the number of validators someone wants to run. The average rewards rate is also dependent on the Ethereum protocol usage and the number of active validators on the network. The more transactions and users there are on the network, the higher the average rewards rate tends to be. The more validators there are, the lower that average rewards rate tends to be. The recurring profit can be denoted with this formula: the number of validators someone wants to run multiplied by 32 ETH multiplied by the average rewards rate multiplied by the final USD exchange rate for ETH, or RP = V 32 ARR M USDr2, where:
- ARR is the average rewards rate over the commitment period per month
This analysis assumes that proper maintenance and monitoring are performed on the staking node to follow all client updates and any other necessary steps to keep it functioning properly. Under normal circumstances and with a proper initial setup, maintenance and monitoring are generally minimal.
There are various other protocols or staking tools that can expose you to the rewards given to stakers without having to spend 32 ETH for a single validator. Some of them offer rewards on a fraction of a validator, for instance. These options can be a good alternative if you cannot afford 32 ETH for a whole validator.
A Few Concrete Examples
Let's use OVHcloud Advance-1 dedicated server plan as our hosting plan. This plan is an excellent offering for running an Ethereum node for several reasons. It comes with a 1Gbit/s unmetered public bandwidth. It is available in numerous regions. It has various storage options. For a great staking setup, you want fast SSDs to run your node. My base setup will be to use the 2x1.92TB SSD NVMe Soft RAID option at $139.37 USD/month (with a 12-month commitment) in the Europe - North America region.
Let's assume the average rewards rate is 3.66% per year, which is approximately the current rate as of today. Our monthly cost for the hosting plan will be $139.37 USD.
Example 1
Let's simplify the total profits formula by assuming that the initial and final USD exchange rates for ETH will be the same, or USDr1 = USDr2. We are left with a much simpler total profits formula: recurring profit minus recurring cost, or TP = RP - RC. Let's also assume that the USD exchange rate for ETH will be $2,938 USD/ETH, the current exchange rate as of today.
Let's compare running 1 validator and running 2 validators for a 2-year period.
For both cases, our recurring cost will be: RC = MC * M = $139.37 USD/month times 24 months = $3,344.88 USD
For 1 validator, our initial cost will be: IC = V 32 USDr1 = 1 validator times 32 ETH times $2,938 USD/ETH = $94,016 USD
For 1 validator, our recurring profit will be: RP = V 32 ARR * USDr2 = 1 validator times 32 ETH times 3.66%/year times 2 years times $2,938 USD/ETH = $6,881.97 USD
For 1 validator, our total profits will be: TP = RP - RC = $6,881.97 USD minus $3,344.88 USD = $3,537.09 USD
For 2 validators, our initial cost will be: IC = V 32 USDr1 = 2 validators times 32 ETH times $2,938 USD/ETH = $188,032 USD
For 2 validators, our recurring profit will be: RP = V 32 ARR * USDr2 = 2 validators times 32 ETH times 3.66%/year times 2 years times $2,938 USD/ETH = $13,763.94 USD
For 2 validators, our total profits will be: TP = RP - RC = $13,763.94 USD minus $3,537.09 USD = $10,419.06 USD
With 1 validator and a $94,016 USD investment, the result would be a $3,537.09 USD profit over 2 years, or approximately a 3.76% return. With 2 validators and a $188,032 USD investment, the result would be a $10,419.06 USD profit over 2 years, or about a 5.54% return. As you can see, the return rate improves with the number of validators you run on a single machine, as the cost of that machine is fixed.
Example 2
Let's assume we are speculating on the price of ETH and the USD exchange rate for ETH. As mentioned previously, anyone willing to engage in staking is likely to have strong confidence in its value over time. Let's assume the price of ETH will be 20% higher after a 2-year staking commitment. Let's assume we are running 2 validators. Let's also assume that the initial USD exchange rate for ETH will be $2938 USD/ETH, the current exchange rate as of today. This means our final USD exchange rate for ETH will be 20% higher, or $3,525.60 USD/ETH.
Our recurring cost will be the same as in Example 1: RC = MC * M = $139.37 USD/month times 24 months = $3,344.88 USD
Our initial cost will be: IC = V 32 USDr1 = 2 validators times 32 ETH times $2,938 USD/ETH = $188,032 USD
Our final profit will be: FP = V 32 USDr2 = 2 validators times 32 ETH times $3,525.60 USD/ETH = $225,638.40 USD
Our recurring profit will be: RP = V 32 ARR * USDr2 = 2 validators times 32 ETH times 3.66%/year times 2 years times $3,525.60 USD/ETH = $16,516.73 USD
Our total profits will be: TP = FP + RP - IC - RC = $225,638.40 USD plus $16,516.73 USD minus $188,032 USD minus $3,344.88 USD = $50,778.25 USD, or about a 27,01% return rate over 2 years with a $188,032 USD investment. Compared to simply holding ETH over the same period, you get a bonus 7.01% return rate.
This last example makes several assumptions and is quite speculative, but it can give you an idea of the potential profits available with staking.
","author":["ethstaker@newsletter.paragraph.xyz (nixo)","ethstaker@newsletter.paragraph.xyz (Rémy Roy)"],"category":["staking","hardware","hosting"],"enclosure":{"@url":"https://storage.googleapis.com/papyrus_images/e9f254d6b7e438ac2866c84da44afd95.jpg","@length":"0","@type":"image/jpg"}},{"title":"Am I a solo staker?","link":"https://paragraph.xyz/@ethstaker/define-solo-staker","guid":"1E574qn09uW6fGuGUhmu","pubDate":"Tue, 30 Apr 2024 00:00:00 GMT","description":"Who cares about defining a \"solo staker\"? Airdrops to solo stakers have a lot of people talking about the definition of a \"solo staker\"...","content:encoded":"ty for feedback to Patches & Adam Hurwitz
Airdrops to solo stakers have a lot of people talking about the definitions of a \"solo staker\". Those who did the work to come up with lists to identify solo stakers had to make some choices about who qualified as a solo staker and who didn't. Understandably, it ruffled the feathers of people who self-identify as solo stakers, some of whom have supported the Beacon Chain since Genesis. Without hard and fast delineations, the whole thing can feel a little gatekeepy, so I'm going to try my best to bring some clarity.
First, we should talk about why it matters. These airdrops are intended to reward those who bring the most decentralization to the chain. These are the non-professional, \"indie\", independent operators of validating nodes. They're a last line of defense against corruption, collusion, and censorship on Ethereum. They're disorganized, erratically engaged, difficult to identify, and nearly impossible to sway in any sort of private interaction. It would be extremely difficult to convince a bunch of solo stakers to collude to benefit some large entity or to comply with changing laws in one of the world's many jurisdictions.
Data has also shown that 'non-professional, indie, independent operators' are also often much more responsible when it comes to network health - when a supermajority client was at nearly 90%, the leading group of minority client users were Rocket Pool node operators and solo stakers. At the time, rated.network was reporting that professional operators ran an average of 600 validators per node whereas independent operators ran 4 validators per node. Client distribution across nodes was healthier than across validators, loosely indicating that smaller, independent node operators were more conscientious about running minority clients.
So, with that in mind, I aim to sort groups not just by where they run hardware but how much control they have over the software that they run and whether decisions can be made for them.
Keep in mind - this aims to be an extremely simplified set of definitions that don't necessarily fully capture the spectrum of variables that could go into measuring the amount of value that a validator setup brings to the chain. Without the ability to directly observe some of these variables (e.g. where is the BLS key and who has access to it?), it's simply not possible to take them all into account at this time.
Solo staker: Anybody who runs one or more 32 ETH validators. They custody their keys, know their specific validator indices, and actively choose their software. This means they must have control over what clients they're running and whether or not they're using mevboost or only building blocks locally. No dependence on location of hardware.
Home staker: Anybody who runs hardware at home. This can be a 32 ETH validator or be using a protocol that lowers the financial barrier of running a validator (Rocket Pool minipools, DVT). This definition is dependent on the location of the hardware. Not all home stakers are solo stakers and not all solo stakers are home stakers.
Remote staker: h/t to adamhurwitz.eth for this one. This is someone who runs their hardware away from where they live. This can be someone who's using a bare metal service (renting a dedicated server at a data center) or a digital nomad who runs it at a friend's house (me!). This person actively chooses their software and custodies their keys. They can be running a 32 ETH validator or be using a protocol that lowers the financial barrier (Rocket Pool minipools, DVT). This definition is dependent on the location of the hardware.
Managed staker: Someone who uses a Staking as a Service provider who controls their config. They deposited ETH (either 32 or something like a minipool), they know their specific validator indices, but they aren't able to choose their clients. In some instances, they may have control over something like whether or not their validator uses mevboost, but control is indirect - you have to ask your provider to turn it on or off.
Liquid staker: Someone who deposited any amount of ETH in return for a receipt token like cbETH, stETH, rETH, etc.
Staker: Anyone with ETH on the Beacon Chain.
And it can all get a bit muddier, so we can mix and match these terms. You can be a home solo staker, or you can be a remote solo staker. A home staker isn't necessarily a solo staker - they can be a home DVT staker or a home minipool staker, just as long as they've got the hardware at home. Bonus, some people are home genesis stakers or remote genesis stakers! (Genesis stakers deposited at the inception, or genesis, of the Beacon Chain). It can get even muddier when a staker is running their software on a combination of hardware in their home and in a data center. What would I call that? For now... an edge case :)
In general, I think I'll stick to describing a staker as:
\"{Where}{How} staker\"
e.g. home solo staker, remote solo staker, home minipool staker
I would argue that the first three (solo stakers, home stakers, & remote stakers) are all a class of independent operators [of validating nodes]. This is the important distinction to make because these are the operators who are in a position where nobody can make decisions for them.
Do we want to address the supermajority situation? An independent operator can switch from the supermajority client to the minority client. Anyone who doesn't manage their config must badger their provider and hope that they understand the situation in time to make the change and that the team has the engineering resources to do so. Do we want the chain to be censorship resistant? An independent operator can decide, without needing permission from anybody, to build blocks locally instead of using mevboost.
Back to airdrops - we love to reward people who put in the work to secure the chain but the tricky part comes in identifying these independent node operators. Being disorganized, disparate, and difficult to identify is a feature for decentralization but a bug for reward mechanisms. At the moment, our best lists are GLC's lists. One is more inclusive than the other and, if you're a project looking to do an airdrop, we recommend that you use List A or contact GLC to discuss the differences. We also have recommendations on some do's and dont's to best ensure that independent node operators are actually able to claim.
At the beginning, there were only solo stakers and professional operators. As Ethereum's Proof of Stake consensus layer has grown and changed, the landscape has shifted around these definitions and I think it's time to start working on better characterizing the different ways that people choose to stake.
","author":"ethstaker@newsletter.paragraph.xyz (nixo)","category":["ethereum","staking","validators","blockchain","cryptocurrency","airdrops"],"enclosure":{"@url":"https://storage.googleapis.com/papyrus_images/7f5915e15d620939ad5386ef3a606562.jpg","@length":"0","@type":"image/jpg"}},{"title":"Enhancing Censorship Resistance Options For Stakers","link":"https://paragraph.xyz/@ethstaker/enhancing-censorship-resistance-options-for-stakers","guid":"hs7IjLjAx0OHMb4x16ht","pubDate":"Fri, 23 Feb 2024 00:00:00 GMT","description":"Newly implemented client features serve for more granularity and expressivity with regards to payload preference for stakers.","content:encoded":"Many thanks to Michael from Lighthouse for feedback.
Lots of things have changed since last attempting to explore and frame the landscape of stakers’ options for extracting Maximal Extractable Value (MEV) nearly 18 months ago, shortly after the merge. With the introduction of MEV-boost as an optional sidecar for processing blocks built by third parties, concerns have arisen primarily around trust assumptions related to relays acting as new intermediaries in block processing. Specifically, worries about their ability to censor transactions.
From today's perspective, these concerns extend not only to relays but also to external block builders. These highly specialized entities, often regulated, find themselves compelled to act in accordance with their respective national legislation. This may involve excluding certain addresses and transactions from block inclusion (e.g., OFAC compliance).
![](\"https://storage.googleapis.com/papyrus_images/2bf032740de78bec0f2f2d67ac1804eb.png\")
Censorship resistance is a fundamental promise of the Ethereum network. For the given article, the definition of censorship revolves around whether a transaction can or cannot be appended to the blockchain. The latter case may arise when a transaction deems invalid, a block happened to be full, or a slot remained empty. If a transaction has been publicly available but not included in a block, however, we may refer to it as temporary or weak censorship, which can last seconds or even minutes due to censoring block builders or relays refusing to process it further.
This situation undermines Ethereum's credible-neutrality pledge. The remaining neutral block space consists of either non-censoring external builders or of non-MEV-boost blocks produced by altruistic self-builders who construct blocks locally, per default without censoring.
![](\"https://storage.googleapis.com/papyrus_images/0e4954a73eab619196ed32e0ccb734e4.png\")
To strengthen censorship resistance, comprehensive protocol-level solutions are essential. Encrypted mempools, inclusion lists, MEV-burn, or even enshrined Proposer-Builder-Separation (ePBS) are promising options. These mechanisms aim at increasing the costs of censorship for block builders or render relays obsolete altogether.
However, until these technologies are fully deployed or at least partially implemented, it seems worthwhile to continually refine transitional mechanisms for stakers to tackle censorship. While relying on altruistic actors is suboptimal in of itself, they should at least be provided with ways to minimize the costs of their altruism.
Until recently, stakers faced three practical choices:
Complete Abandonment of MEV-Boost: Some stakers opted to entirely forgo using MEV-boost, which means missing out on significantly higher additional returns, including the chance to propose rare lottery blocks.
Static Minimum Bid Threshold in MEV-Boost: Others set a static minimum threshold (-min-bid) for processing external blocks (technically referred to as \"payloads\") within MEV-boost. For instance, they might choose a long-term median MEV reward value (typically around 0.04 - 0.06 ETH per payload).
Leveraging client-specific parameters: Other stakers have ventured into the depths of client documentations and configured their client to allow for an individual preference to be set following the valuation comparison of external and local payloads (e.g. builder-bid-compare-factor in Teku, or prioritising local blocks in Prysm)
![](\"https://pbs.twimg.com/media/GBYK6AJXIAAWvb5.png\")
![\"Like](\"https://paragraph.xyz/editor/twitter/heart.png\")
\n 47\n \n 10:06 • 15. Dez. 2023
\nWith the introduction and rollout of a new standard beacon-API (blocksv3), the features specifically outlined in section (3) have been harmonized across all clients and are currently being deployed in recent client releases. The essence of this advancements lies in enabling a more nuanced and granular expression of payload preferences by stakers.
The builder_boost_factor is a parameter that stakers can now select on a per-validator basis. For validators utilizing MEV-boost, this parameter offers increased granularity and control over whether to propose a local or external payload. Importantly, this represents a significant improvement over the static threshold set by the -min-bid flag in MEV-boost, as mentioned in (2).
In practical terms, the builder_boost_factor acts as a percentage multiplier applied to the external builder payload when comparing it to a local payload. If the builder_boost_factor is set to 0, the execution client payload is preferred unless an error renders it unviable. By default, clients use a builder_boost_factor of 100, which corresponds to profit maximization mode—choosing whichever payload pays more.
![](\"https://storage.googleapis.com/papyrus_images/25bb029b9cb774ac06b727423062f31e.png\")
In other words: In the example illustrated above a staker is willing to altruistically give up on at max 30% of their average execution rewards in favor of censorship resistance.
Note: A specified -min-bid value in MEV-boost may lead to not providing the consensus client with an external payload at all.
Additionally, the new endpoint is capable of returning locally constructed payloads from all connected beacon nodes (not just one) in a much faster way. This essentially widens the local view of the mempool and thus the scope of potentially censored transactions. In cases where a user runs one or multiple failover nodes or uses Vouch, this feature ensures a more efficient selection of the most valuable (local) payload among several.
Overall, the harmonization of the above mentioned functions across all clients marks a valuable progression, especially when considering more complex multi-client setups such as those found in DVT clusters.
The recent addition of the should_override_builder field to the execution-APIs allows the execution client to monitor the mempool and look for signs of ongoing censorship from block builders. By employing certain heuristics, it is now possible to identify transactions that may potentially be censored. Depending on the client implementation, there is an increased flexibility to revert to local block production when necessary.
All this is to say that newly implemented client features allow for fine-tuning stakers’ subjective cost preference for providing credibly-neutral block space.
","author":"ethstaker@newsletter.paragraph.xyz (Ladislaus)","category":["staking","validators","ethereum","network health"],"enclosure":{"@url":"https://storage.googleapis.com/papyrus_images/86b561a0051ed3590adea48a1d0facd9.jpg","@length":"0","@type":"image/jpg"}},{"title":"Announcing the DVT Home Staker Program","link":"https://paragraph.xyz/@ethstaker/dvtprogram","guid":"m0dDAZl9N9AwrngH33UQ","pubDate":"Tue, 12 Dec 2023 00:00:00 GMT","description":"tl;dr - Even with lower-bond DVT validators, many people can't justify buying hardware. This 10-week pilot program aims to create and subsidize hardware for new node operators","content:encoded":"Even with lower capital requirements with DVT, many people can't justify buying the hardware for the rewards. EthStaker, in collaboration with Diva & Stakesaurus, is launching a 10-week pilot program to create and subsidize hardware for new node operators
DVT and Capital Requirements: DVT protocols reduce the need for large initial investments (32 ETH) to operate a validator, allowing for a 1 ETH bond and collaboration with other users to meet the full requirement
Economic Viability: A standard 32 ETH validator can earn about $150/month, recouping hardware costs in 4-5 months. However, for a DVT setup with only a 1 ETH deposit, the return doesn't justify the hardware investment (for now! Hardware costs are forever going down)
EthStaker is a grant-funded organization dedicated to decentralizing the validator set primarily by supporting home stakers with resources and technical guidance. To address prohibitive hardware costs, we're introducing a pilot program to facilitate new home stakers using DVT
Cohort: The first group will consist of twenty stakers, aiming to draw applicants of diverse skill sets and from areas that are underrepresented in node distribution
Curriculum: Participants will engage in a practical curriculum, achieving milestones for setup, practicing on testnet, and eventually making a mainnet deposit
Incentives: After two months of successful mainnet operation, participants will be reimbursed for their hardware costs, allowing subsequent rewards to be 100% profit
Timeline: Application details will be released soon. The selection is expected by mid-January for a February program start
Duration: A 10-week asynchronous course on our Discord forums. Each week will have a milestone for participants to achieve
Content: The course covers fundamentals, node operation basics, testnet practice, and concludes with a mainnet deposit
Cost: No cost (outside of initial hardware purchase & mainnet deposit)
Mentorship: A mentor specifically dedicated to this program will hold 3 office hours per week for guidance
Hardware Investment: Participants must initially invest in the necessary hardware (approximately $500-800). Reimbursement will require program completion, with a validator live on mainnet for two months (dependent on Diva mainnet launch date)
Capital for Validator Deposit: A 1 ETH bond is required for the mainnet DVT validator deposit
Internet Connectivity: A stable and reliable internet connection with over 2 TB of monthly bandwidth is essential
Skill level: Must have experience using a self-custodied Ethereum wallet and be willing to be guided through command line usage!
The application to participate will be open on ethstaker.cc/dvtprogram on Friday, 15 Dec and will close on Friday, 19 Jan
EthStaker is partnering with Stakesaurus and Diva to pilot the program. Stakesaurus is a well-regarded staking guide creator who runs a business in SEA doing 1:1 hands-on training for solo stakers. Diva is a DVT-integrated liquid staking protocol, currently in testnet phase. We're aiming for the conclusion of the program to coincide with Diva's launch on mainnet. EthStaker intends to partner with additional DVT programs for future cohorts
You can leave a comment here, pop over to EthStaker's #general Discord channel (discord.gg/ethstaker), email us (team at ethstaker dot cc), ask a question in our subreddit (reddit.com/r/ethstaker), or tag us on twitter (twitter.com/ethstaker)
","author":"ethstaker@newsletter.paragraph.xyz (nixo)","category":["staking","validators","ethereum","blockchain","cryptocurrency","beginner"],"enclosure":{"@url":"https://storage.googleapis.com/papyrus_images/df11881d383255103959e8209bfca394.png","@length":"0","@type":"image/png"}},{"title":"Tickets are available and schedule is live for Staking Gathering","link":"https://paragraph.xyz/@ethstaker/tickets-are-available-and-schedule-is-live-for-staking-gathering","guid":"vJARq66exNZ8Is4Fqout","pubDate":"Fri, 15 Sep 2023 13:30:15 GMT","description":"Hey there EthStakers!The moment you've all been waiting for is finally here - tickets for the Staking Gathering event are officially on sale! This is ...","content:encoded":"Hey there EthStakers!
The moment you've all been waiting for is finally here - tickets for the Staking Gathering event are officially on sale! This is your golden opportunity to join the vibrant EthStaker community in Istanbul for an unforgettable weekend of talks, panels, workshops, and networking, all dedicated to maximizing the decentralization of the Ethereum network.
Here's the lowdown on what you need to know:
Limited Supply of Tickets and Ticket Waves: We're thrilled to announce that tickets are available, but they are in limited supply. It's a first-come, first-served situation, so don't miss your chance to secure your spot in the heart of the Ethereum action. Tickets will be released in waves, with Wave 1 going live on September 15th, offering 128 tickets. Keep a close eye on our social channels (linked below) for updates on future ticket waves in case you miss this one.
Special Voucher Codes: For our sponsors, volunteers, speakers, or event partners, we've got you covered. You won't need to purchase your own ticket. We'll be reaching out to you individually with voucher codes. Stay tuned!
Ticket Price: General admission tickets are priced at $100 USD. This is your investment in an enriching experience and the chance to connect with like-minded Ethereum enthusiasts.
Your Ticket: Once you've snagged your ticket, you'll be able to download it as a PDF complete with a QR code. Make sure to bring it with you during registration. You'll also find it conveniently linked in your order confirmation email.
Live Schedule and Speaker Opportunities: We're thrilled to announce that our event schedule is now live! While most of our speakers are confirmed, keep in mind that we may still make some tweaks and additions as we get closer to the event. Interested in speaking at the event? You can still apply for a talk, but please note that new applications are likely to be placed on our waitlist unless we experience cancellations.
Sched App: We're using Sched as our scheduling application, available on the web and as a mobile app. We highly recommend creating your own schedule and tagging the talks you're eager to attend. It provides an intuitive experience for both attendees and speakers.
Don't miss out on this incredible opportunity to be part of the Ethereum staking revolution! Get your tickets now, and mark your calendars for November 13th and 14th, 2023, in Istanbul.
Join us for two days of knowledge sharing, networking, and community building. We can't wait to see you at the Staking Gathering event as part of the Devconnect conference. Let's make history together!
Stay connected with us on our social channels for all the latest updates and announcements. It's going to be an epic Ethereum gathering!
","author":"ethstaker@newsletter.paragraph.xyz (Rémy Roy)","enclosure":{"@url":"https://storage.googleapis.com/papyrus_images/fbc22138ab72e7bd0af07780c953b1f1.png","@length":"0","@type":"image/png"}},{"title":"clientdiversity.org execution diversity data","link":"https://paragraph.xyz/@ethstaker/new-clientdiversity-data","guid":"bPlLCiDBpOTn86ev4jUq","pubDate":"Thu, 31 Aug 2023 00:00:00 GMT","description":"tl;dr: clientdiversity.org has removed ethernodes data and now only shows execution-diversity.info data. This is because the two datasets are not compa...","content:encoded":"![](\"https://paragraph.xyz/editor/callout/tip-icon.png\"){kind=icon}
tl;dr:
clientdiversity.org has removed ethernodes data and now only shows execution-diversity.info data. This is because the two datasets are not comparable and don’t answer the same question.
ethernodes scrapes the network and answers “how many peers might run each client?”, which is a reasonably accurate count of number of nodes, but says nothing about number of validators on those nodes. For Ethereum, it matters that a client does not have a supermajority of validators. Whether it has a supermajority of individual nodes is not concerning to the health of the network.
execution-diversity.info better answers the question of “What is the state of client diversity on the Ethereum network?”, which is what matters for safety from a supermajority bug.
Note: ethernodes and execution-diversity.info data are both Bitfly-affiliated projects. Thank you to Butta for letting me interrogate him about both
There was recently an update to the data published on clientdiversity.org. The data that was shown before is from ethernodes.org and showed that execution layer client diversity had improved to the majority client being only ~48% of the network. This seemed to be a huge improvement over the ~70-80% range we had been seeing in months previous. However, the data source was changed to execution-diversity.info and what’s displayed now shows that the supermajority client is ~84% of the network. So why the change? Was the improvement we witnessed a phantom? Which dataset is correct?
![](\"https://storage.googleapis.com/papyrus_images/afa520540cab209ca5b85606ef2e6755.jpg\")
execution-diversity.info methodology is simple to understand: Large operators were simply asked what clients they run. It’s assumed that these operators are honest and they have no incentive to misrepresent their setups. Only a portion of the network is covered by this manual survey (estimated 57%). This data is likely similar to other large operators on the network that aren’t covered. It may not be representative of home stakers, who likely represent a majority of nodes but a very small minority of validators.
It’s important to note that the number we’re after is client diversity across validators. So while this means that execution-diversity.info may underrepresent home stakers, it wouldn’t have a very large impact on how accurate the data is overall.
Ethernodes uses a node scraper that connects to a node that has a free peer, collects some data, and then disconnects. This means that if a node doesn’t have any free peers, it will be invisible to the scraper. There are a number of things that can influence whether a node has free peers and those factors might be more or less relevant to certain clients, which would influence how ‘visible’ they are to the scraper. For example, if a client’s default peer count is set very high, it has more available slots and may therefore be more likely to have a free peer for the scraper to connect to. In this case, that client would be overrepresented in the data.
As is noted in a paper published in 2022, available peer slots are scarce resources, so the ethernodes data, like the execution-diversity.info data, is only representative of a portion of the network. What portion of the network is unclear.
Are professional operations less likely to have available peer slots and thus be invisible to a scraper? That would mean that home operators would be overrepresented in the data. Home operators have a lower barrier for switching clients (less complicated setups, answering to no one for some missed attestations) and are likely to be engaged with the community and conscious of the need for client diversity, so an overrepresentation of home stakers would make client diversity look healthier than its actual state.
Maybe the node scraper gets an abundance of data when a setup is coming online from 0 - are home operators more likely to be these setups? A professional operator will add or subtract validators from an existing setup and run thousands of keys with a low number of nodes, whereas a home operator may be bringing on a node for a single validator. They’re also more likely to do something silly, like allow their hard drive to become full and need to resync the database.
So while execution-diversity.info may underrepresent home stakers, ethernodes may overrepresent home stakers, who account for a much smaller portion of the overall number of validators.
Ethernodes data doesn’t answer the question “what is the client diversity of the overall network” but rather “what clients have the most free peers”, with client diversity being only one variable in this equation.
For this reason, clientdiversity.org has removed the ethernodes data in favor of the execution-diversity.info data. Neither is perfect, and the latter will require manual check-ins to receive updates to the data but, without knowing how exactly ethernodes data correlates to overall diversity, we believe that execution-diversity.info data better highlights the state of execution layer client diversity than ethernodes data.
","author":"ethstaker@newsletter.paragraph.xyz (nixo)","category":["staking","client diversity","ethernodes","validators","ethereum"]},{"title":"EthStaker Staking Gathering 2023 in Istanbul","link":"https://paragraph.xyz/@ethstaker/ethstaker-staking-gathering-2023-in-istanbul","guid":"HteAZ6C8ZWPVcGDT6DWr","pubDate":"Tue, 22 Aug 2023 15:34:18 GMT","description":"Are you passionate about Ethereum staking and looking to immerse yourself in the latest developments and discussions? Look no further! We are thrilled...","content:encoded":"Are you passionate about Ethereum staking and looking to immerse yourself in the latest developments and discussions? Look no further! We are thrilled to announce that EthStaker is once again hosting the Staking Gathering event at Devconnect in Istanbul, and we can't wait to welcome you on November 13 and 14, 2023.
Devconnect is a unique week-long gathering of independent Ethereum events, providing an incredible platform for learning, sharing insights, and advancing the Ethereum ecosystem as a community. This year, EthStaker's Staking Gathering is set to be a standout event within the Devconnect lineup.
After a successful debut in Amsterdam, where we saw an enthusiastic turnout of around 450 attendees, we are excited to bring the Staking Gathering back for its second iteration. Our previous event in April 2022 was a resounding success, and we're confident that this year's gathering will be even more impactful.
This two-day event is all set to take place at the Hilton Istanbul Bosphorus, just a quick 3-minute stroll away from the Devconnect co-working space. We've lined up an impressive lineup of speakers, including Danny Ryan, Core Researcher at the Ethereum Foundation, Sreeram Kannan, founder and CEO at EigenLayer, and Collin Myers and Oisín Kyne, co-founders at Obol. These thought leaders are sure to provide unique insights and perspectives on Ethereum staking and related technologies.
Our event promises to deliver deep-dives into a range of topics, from protocol design and distributed validator technology (DVT) to discussions on liquid staking token (LST) protocols, restaking strategies, and more. With two stages dedicated to talks, panels, workshops, and discussions, you're guaranteed to find sessions that align with your interests.
We're still on the lookout for passionate individuals to join us as speakers, volunteers, and sponsors. If you're eager to contribute to the event's success and share your expertise with the community, we'd love to hear from you.
In addition to the rich lineup of sessions, the venue offers opportunities to connect with sponsors, visit booths, and unwind in a designated chill-out area. And don't worry, food and beverages will be provided throughout the event to keep you fueled and energized.
For all the latest details about the EthStaker Staking Gathering 2023, including updates on speakers, schedule, and logistics, be sure to visit our official event page: https://ethstaker.cc/staking-gathering-2023 .
So mark your calendars for November 13 and 14, 2023, and get ready to be a part of an engaging, enlightening, and inspiring event. We can't wait to see you in Istanbul!
Authors: Nixo(a), Thorsten Behrens(a,b), Sam Coffey(a,c)
a. EthStaker, b. CryptoManufaktur, c. POAP
Contact: team@ethstaker.cc
![](\"https://paragraph.xyz/editor/callout/information-icon.png\"){kind=icon}
Call to action: Node operators should diversify their execution clients away from a majority Geth setup. In the current supermajority execution client environment, there is a significant monetary risk present for operators running only Geth.
Ethereum is built to be a robust and resilient network with 100% uptime. In order to achieve this, any central point of failure is identified, addressed, researched, and mitigated. Decentralization of these points of failure is a multifaceted problem that requires active and ongoing attention at every layer of the stack, including but not limited to geography, software implementations, hardware in use, block building methods, staking pool protocol dominance, etc.
Ethereum client diversity is a focus of the staking community, especially among those who run nodes. Maximizing client diversity benefits the network as a whole, keeps an operator’s investment safe and robust, and minimizes the potential of a catastrophic event due to an error in a single client, which would impact every entity: individual and commercial operators alike.
This document summarizes the current state of execution clients, especially at scale, and asserts that this state is more than sufficient to begin to push for diversification into two minority execution clients, Nethermind and Besu, for larger operations. Large staking operations would be prudent to consider diversifying their validators into a mix of execution clients and away from a Geth majority.
EthStaker initiated a concerted effort in late 2021 to inform stakers and larger staking operations of the vulnerability that was created by the Prysm consensus client supermajority that existed at the time. Prysm was a robust first-mover in the consensus client software arena but, by that time, Lighthouse, Teku, and Nimbus were on par with Prysm performance, and the supermajority represented an urgent threat to the beaconchain.
Solo stakers, who are generally very engaged, quickly began switching to minority clients, and many larger staking operations followed, committing to diversification. Data and testimonials from the EthStaker community that reported their experiences with these minority clients helped enormously. Prysm soon lost its supermajority while the presence of minority clients, especially Lighthouse, began to climb. Today we are at a much healthier, though not perfectly ideal, mix of consensus clients. With five viable and robust consensus clients, we would ideally see each at an equal 20% marketshare.
![](\"https://storage.googleapis.com/papyrus_images/563c73c94ababa435b534c2d38b1e804.png\")
An incident in May of 2023 illuminated the potential vulnerability of unpredictable software bugs. An exceptional scenario caused many nodes to struggle to follow the chain and led to a delay in finality for four epochs on May 11th and for nine epochs on May 12th. The issue was assessed, diagnosed, and fixed by patches to the Prysm and Teku clients the following day. The full post-mortem can be found here.
During these issues of delayed finality, transactions continued to be processed on the network with no effects felt by the end user. This was possible because Lighthouse had a different design approach and dealt with the situation in a way that Prysm did not (Lighthouse and Prysm currently represent ~75% of the network).
Had Prysm still been a supermajority, the effects of this bug would have been far more severe for both the network and stakers, who experienced an inactivity leak for the first time in Ethereum’s history - this penalty affects non-attesting validators and grows quadratically over time. Validators that continued to attest (Lighthouse users) did not experience this penalty.
Execution client diversity data is more difficult to assess than consensus client diversity data. The consensus client utilizes the execution client and publishes blocks, leaving fingerprints in the way that they order attestations, but the execution client doesn’t leave identifiable traces on-chain.
There is currently an effort by execution-diversity.info to gather self-reported data from staking providers about the execution clients that they use. Some protocols (e.g. Lido) conduct quarterly surveys where this data can be found, some (e.g. Rocket Pool) make theirs visible through graffiti, and some have reported privately.
![](\"https://storage.googleapis.com/papyrus_images/966204f67597ff21fc97caa8cd0a4e8c.png\")
With 44.5% of the network self-reporting, Geth comes in at 86.8%, a worrying supermajority. Until now, EthStaker has made an intentional decision to not push for execution client diversity because of the state of the other execution clients - they simply weren’t robust or reliable enough to replace Geth, especially in commercial staking operations.
Geth is a safe execution client to run until there’s a bug either in a Geth release or an exceptional scenario similar to the one that affected consensus clients in May of 2023 arises on the execution layer. The likelihood of this arising is very small, but with Geth at an estimated 86.8% share of the network, this scenario would be catastrophic.
![](\"https://storage.googleapis.com/papyrus_images/b698e1d08c71c34c24ce9bb752f1b92e.png\")
![](\"https://storage.googleapis.com/papyrus_images/21b808a890a85395fda4043452431b6b.png\")
These recommendations are based on extensive testing on mainnet and testnets, within the community and reported by Cryptomanufaktur and Ethpool.
Cryptomanufaktur is a commercial node operator running thousands of keys for various entities and has been testing minority clients at scale for robustness and reliance in an effort to identify an appropriate time to push for execution client diversity and has shared findings with EthStaker. Ethpool by bitfly was known for running the largest Ethereum mining pool, Ethermine. Since genesis, they relied on Geth and Parity clients. However, after extensive testing and the recent shift of block building to relays, Ethpool has switched to running Nethermind for their thousands of keys.
EthStaker is confident recommending minority clients Nethermind and Besu for at-scale operation. While all three minority clients (Nethermind, Besu, Erigon) are being used in production with at-scale validation, Nethermind and Besu currently present the lowest risk.
Geth
The main advantage of running Geth is that it is reliable and battle-tested and has been shown to be robust under normal circumstances. It prunes offline and is working toward path-based state storage (PBSS), which will remove the need to prune entirely.
At its current supermajority status, the use of Geth presents a risk to both Ethereum as a whole and to the individual operator running it. This risk is discussed in the next section.
Nethermind
A recent release by Nethermind (v1.8) allows an operator to start attesting to blocks in ~1 hour, and download old bodies and receipts with better attestation in 4 hours. Nethermind can online prune and is also working towards PBSS.
Nodes running Nethermind were seeing an issue where the client would resource-starve a machine during prune, but this has been addressed and fixed in recent released by Nethermind and nodes running Nethermind are no longer experiencing this issue.
Besu
After the merge, there were reports that Besu was slow in processing blocks, causing missed attestations. This issue has been addressed and fixed by their latest releases. A current potential point of concern is that when it runs out of space, it needs to be resynced, which results in downtime while resyncing for that CL-EL pair.
Erigon
Erigon is stable and robust with efficient syncing but is not yet recommended for commercial stakers or larger operations.
Erigon has a history of changing command line parameters in a breaking manner without warning. Additionally, when Erigon moves to their V3 and V4, the versions will require operators using their software to complete full resyncs from scratch. These are the primary reasons for not recommending their use in larger operations at this time.
The primary focus of this memo is the risk associated with Geth, specifically the vulnerability it introduces through a supermajority. Should an extraordinary situation occur in a supermajority environment where validators using Geth are left isolated and operating on a separate chain, there is a significant monetary risk to the node operator running Geth.
In a blog post in February of 2022, developer Jonathan Cook (jmcook.eth) addressed the risk of execution client diversity in the context of consensus client diversity:
a bug affecting the execution clients can also propagate through to the consensus layer since, after the merge, the two will be coupled together with the execution payload generated by the execution clients being a core component of Beacon Blocks.
There are two significant numbers to look for here when evaluating the risk of a client’s dominance to the chain: 33% and 66%.*
33%
33% of the network experiencing failure can prevent finalization of the chain - it is not catastrophic, but it does present a potential monetary loss for validators unable to attest correctly. This is the scenario that occurred on the consensus layer where affected clients represented more than 33% of the network.
In order to encourage adoption of the multi-client architecture that Ethereum utilizes to maximize its robustness, penalties are dynamic and are highest for highly correlated errors. If one validator goes offline, penalties are minor. In the case of a non-finalizing chain, where between 33 and 66% of the network are unable to attest and Ethereum fails to finalize for some number of epochs, the chain enters a “inactivity leak” mode, where non-attesting validators are penalized a quadratically increasing amount each epoch until they have leaked enough for the attesting validators to finalize the network or until client developers are able to diagnose the issue and release a patch for the affected clients.
This penalty is 1% of the validator’s balance at ~4.5 days, 5% at ~10 days, and 20% after three weeks, as outlined in a March 2022 blog post by Dankrad Feist, a researcher at the Ethereum Foundation.
66%
There are three types of bugs to consider for a failure by a client that is being run on >66% of validators on the network, outlined in Dankrad’s above-mentioned blog post:
a bug that creates a double-signing event
a bug that causes validators running that client to be offline
a bug where validators running that client produce an invalid block.
With the first (very unlikely) type of bug, all validators running the supermajority client would be slashed and penalized the entire value of their validator’s balance. With the second type of bug, they would experience the inactivity leak until validators running other clients are able to finalize with their increasing portion of the network.
With the third type of bug, validators running the supermajority client would finalize an invalid chain. At this point, the majority of the network would be following this invalid chain. This would throw the network into chaos because it would require an intervention from the social layer to decide whether to recover the valid chain or continue with the invalid chain because the majority of validators followed it. Such a bug is illustrated in an example on the Kintsugi testnet in early 2022, where a missing check in two clients resulted in an invalid block being declared valid and, even after the fix was deployed, an additional related error caused validators on another client to fail to join the valid fork.
This would not only affect validators, but every application built on top of Ethereum that continues to operate during this period. A social layer intervention could choose to slash and severely penalize the affected validators, simply exit them from the network, or choose to follow a chain that isn’t valid. Any available choice here would shake faith in the immutability and reliability of Ethereum.
Geth is currently run by an estimated 86.8% of validators on the network.
*There is an additional disruptive scenario between 50 and 66% of the network, where buggy validators would still build a second chain, and it would be subject to the same inactivity leak. You can read about it in Dankrad’s blog post.
Low. Client developers test their implementations and compatibilities on testnets under a variety of circumstances and, with a number of clients in active development, it is likely that at least one will catch most bugs and work together to avoid errors on mainnet. But just as we did not anticipate the non-malicious bug that occurred on the consensus layer recently, there will always be unpredictable bugs that are caused by exceptional circumstances and we should be prepared for that scenario. In our current state of execution client diversity, such a bug would require social intervention, likely causing a monetary loss to a majority of validators, and be catastrophic for Ethereum’s reputation.
For commercial operators EthStaker recommends avoiding a monoculture client setup and instead running a mix of EL and CL clients. In a mix of clients, any client pair presenting an issue can be taken out of operation without issue.
For small scale or individual operators If switching to a new execution client results in a worst case scenario, the operator will be offline for 1-2 days while they switch to another client. Offline penalties are minor and should not be a major concern for small operators.
An execution client supermajority represents an urgent threat to the network and the state of execution clients has now reached a point where at least two minority clients, Nethermind and Besu, can be confidently recommended by EthStaker for use in large staking operations. It is in every operator’s best interest to diversify their execution clients or move to minority clients entirely to minimize their risk.
Client Diversity Initiative. (https: /clientdiversity.org/)
Offchain Labs. \"Post-Mortem Report: Ethereum Mainnet Finality - 05/11/2023.\" (https: /offchain.medium.com/post-mortem-report-ethereum-mainnet-finality-05-11-2023-95e271dfd8b2)
Edgington, Benjamin. \"Inactivity Leaks.\" Eth2.0 Book. (https: /eth2book.info/capella/part2/incentives/inactivity/)
Execution Diversity. (https: /execution-diversity.info/)
Cook, JM. \"The Importance of Client Diversity in Ethereum.\" (https: /mirror.xyz/jmcook.eth/S7ONEka_0RgtKTZ3-dakPmAHQNPvuj15nh0YGKPFriA)
Feist, Dankrad. \"Run the Majority Client at Your Own Peril.\" (https: /dankradfeist.de/ethereum/2022/03/24/run-the-majority-client-at-your-own-peril.html)
Parithosh. \"Eth2 Merge Call Notes.\" (https: /notes.ethereum.org/@parithosh/BkkdHWXTY)
For people who have been in crypto for a few cycles, it’s not hard to separate out the most obvious scams and gambling from projects that aim to create real-world value. To identify projects whose developers and community and enthusiasts are there for the tech, and not for a get-rich-quick scheme. For people new to the space, it can be a bit harder to distinguish without the context to understand what the root causes of these scams and catastrophic events have been.
So if you’ve recently heard about staking and you’re wondering if it’s just another thing that could rug people of their life-savings with one founder-exit or exploit, I’m here to help you understand what happened in the biggest catastrophic crypto events you’ve heard in the news and also how to avoid them in the future.
Let’s split these events into three categories: traditional banks, centralized platforms, and crypto itself. These three categories will be about what kind of asset was involved (e.g. dollars or crypto?) and who had custody of those assets.
These events had nothing to do with and no impact on how crypto fundamentally works. They do have implications on and are symptoms of how crypto is treated by the government and financial sectors, but these events posed no risk at all to people who hold crypto themselves. Their biggest impact on crypto projects was de-banking them. No matter how much we believe in crypto, banks are the current reality, and one needs a bank account to be able to operate a business in order to pay for real-life services that don’t yet accept crypto. Bank mismanagement and subsequent government intervention will make other US banks think twice about providing bank accounts to businesses whose core product centers around crypto. This will play out in courts and you’ll see a lot of campaign material on supporting or fighting crypto in the next election. If the US wages a war on crypto, the outcome will be that tech innovation in that sector will move overseas and continue building there.
This is an illustration of the importance of self-custody. FTX was a centralized exchange (CEX) and functioned as a bank… but without the oversight and regulation of a bank. They were able to do that because the US government hasn’t provided any clarification on what crypto ‘banks’ need to be doing to be compliant with laws that are designed to protect investors. We desperately need these clarifications and new laws that will govern how these custodial entities operate.
In order to use FTX, you sent them your assets. Sending your assets to FTX meant that you no longer held the keys to those assets, you just trusted that they were keeping good records of the assets that you had sent them, were taking good care of them, and would send them back to you when requested. This is the opposite of onchain activity. It is antithetical to the ideals that created crypto.
These were also centralized entities - they weren’t made for trading (not a CEX), but they were entities that took custody of your assets and promised to hold onto them for you. They were marketed as ways for people uncomfortable with crypto to engage with it in a more recognizable way. They prioritized ease of use so that your grandma could figure out how to deposit money and get yield from crypto.
In reality, these entities were far more dangerous than investing in crypto yourself. Imagine the most risk-seeking person you can - that person is essentially who was generating the yield that BlockFi and Celsius were promising you. They took these extremely risky traders, bundled them together, and packaged them up as a product that would generate yield on the assets that you deposited. This worked great… when the market was up-only. As soon as these traders started to lose money with their risky bets, the product no longer worked - and your grandma found out that she was considered an ‘unsecured creditor’ - a phrase she had never heard before she learned that she wasn’t getting any of her money back.
A note on CEXs
So why do entities like this exist?
CEXs function as a way to turn government currencies into crypto on a platform that requires you to show your identity. This is an anti-money laundering, anti-tax evasion measure. CEXs will typically have you upload your government-issued ID so that they can, if necessary, report your activities to tax revenue services (e.g. IRS) or law enforcement agencies (e.g. FBI). This is known in the traditional finance world as KYC - ‘know your customer’.
They also function as a place for people to save on gas while trading. Because you’re not actually transacting onchain, the CEX can just record on their internal ledger “Bob traded 15 XXX for 1 ETH, so deduct 15 XXX from his account and add 1 ETH.” No funds move when you do this - the CEX just changes their internal records on their centralized database. So traders can trade back and forth without needing to pay onchain gas fees, which can be high depending on chain activity and what network you’re using.
This is why CEXs should only be used to buy and sell cryptocurrency. You should not be using a CEX to store your assets long-term. If you’re not actively trading, you should move your assets to an onchain, self-custodied wallet.
Unfortunately, this is one on the list that actually was crypto. This is one of those ones that would have been difficult at the time for the untrained eye to identify for sure as a scam. Terra created a stablecoin, a coin whose value is pegged to the value of the US dollar, and called it UST. The stablecoins you might already be familiar with, like USDC and USDT (Tether) are backed by real-world assets that ensure their value. UST was an algorithmic stablecoin, which is to say that there was a complicated mechanism behind it that’s meant to ensure its value. UST maintained its peg by an algorithm tied to its cryptocurrency LUNA. An algorithmic stablecoin is very difficult to get right and risks a de-pegging event where it very quickly plummets to zero, as UST did.
The biggest red flags that personally kept me away from the Terra LUNA fiasco were its incredibly rapid growth, the high yields promised on its stablecoin, and the hubris of its founder. Stablecoins should be boring - they’re not meant to produce high yield, they’re meant to produce stability. And it’s a trope in crypto that, once a crypto founder becomes the ‘main character’, it’s doom from there. Arrogance, a god-like sense of self, and high social media engagement (instead of building) are signs that there might be just a bit more hubris in a project than there is actual product. These aren’t absolute, foolproof signs of a scam, but they certainly should make you wary.
Crypto is full of scams because there’s excitement about a tech disruption. Tech disruptions happen when everybody’s arguing about how to make some technology better while someone comes along and changes how that technology fundamentally functions in society. It happened to the telegraph when the telephone came along, to the radio when television came along, and to personal computing when the internet came along. We can see the disruption, but it takes a community of innovators to figure out what it makes possible, so people rush around trying to find which innovators are finding the best product-market fit for the new technology.
The problem is that the people running around with cash in their hands looking for the innovators don’t always know how to recognize those innovators. So grifters see the opportunity and LARP as an innovator while venture capital (VC) and retail pours money into their lap, hoping to get in on what’s fundamentally good tech - but the grifter isn’t actually building something innovative, they’re building whatever will keep money pouring into their laps. As long as VCs and retail have targets on their back by throwing money around without doing research, and as long as the government refuses to regulate who can hold assets for those VCs and retail investors, grifters gon grift.
The only reason the scams exist is because anybody who spends some time learning about it can sense that something very exciting is happening and that opportunity is lurking around somewhere, but not everybody has the time or resources to sift through the garbage.
It’s up to you to do your own research (DYOR), but staking on Ethereum is a sustainable yield generated by helping secure Ethereum. Yields are low, nobody custodies your assets, and everything is transparent. Staking is an agreement between you and a smart contract. Yield from this smart contract is dynamic to keep it sustainable - as more stakers enters, yield goes down. If stakers leave, yield goes up. This way, it finds an equilibrium based on what operators think is fair for their labor. Current yield is viewable on the Launchpad.
The deposit contract is audited, can be viewed here, and sits directly on the most decentralized network of node operators in the world. Meaning - no one can go in and unilaterally edit the contract or manipulate the validators. Every change to the protocol is proposed, meticulously discussed, debated, planned, tested, and implemented by hundreds of developers from different organizations - the entire process is transparent and you can even sit in on these meetings if you’d like.
Proposals are first drafted here: https://github.com/ethereum/EIPs/
They’re officially proposed here: https://eips.ethereum.org/
The EIP process is explained here: https://eips.ethereum.org/EIPS/eip-1
Discussion happens over months or years in the all core devs calls that you can watch live or even join in on: https://www.youtube.com/@EthereumProtocol/streams
It’s always safer to keep your funds in a cold wallet, but if you’re willing to put in a bit of research and effort, staking is, in my opinion, the best option if you want to put your assets to work in a sustainable way.
If a centralized entity is custodying your funds, they are at risk
If it feels like gambling, it probably is
If it feels too good to be true, be very wary: it probably is
If your trust in a product hinges on a famous influencer personality, be cautious
A cold wallet is always the safest place to keep your assets
Always DYOR: having context is key to understanding how a product works
As always, if you find any inaccuracies in these blog posts, please contact nixo and let her know so she can hastily correct them.
","author":"ethstaker@newsletter.paragraph.xyz (nixo)","category":["web3","cryptocurrency","staking","blockchain","ethereum","beginner"],"enclosure":{"@url":"https://storage.googleapis.com/papyrus_images/dd4b2071c577e2dcf5903d67a4dcaa69.jpg","@length":"0","@type":"image/jpg"}},{"title":"Finding your best way to stake","link":"https://paragraph.xyz/@ethstaker/staking-beginners-p6","guid":"sJFHKudPrggJBvkovbec","pubDate":"Mon, 22 May 2023 00:00:00 GMT","description":"This is Part 6 of a six part series called A Beginner’s Guide to Staking. There are so many options to stake - which do I choose?","content:encoded":"This is Part 6 of a six part series called A Beginner’s Guide to Staking
Whether you’re looking to stake only your own assets or learning about staking to get your company involved or wanting to stake as a service for others, these are all important concepts that are relevant to you.
For the sake of clarity, let’s separate staking into four separate camps, from most recommended to least recommended:
Solo staking
Running a minipool
Staking with a decentralized service
Custodial Staking (centralized)
Think of these four options as a spectrum. Solo staking is on one end of the spectrum, custodial staking on the opposite. The space in between them is a range of options where a staking service could lie.
![](\"https://storage.googleapis.com/papyrus_images/8f85021aab584d9d2f839db359485143.png\")
Our answer is 22%. The ideal is more like all entities controlling less than 10%, but EthStaker is comfortable with the idea that no operator should control more than 22% of the network.
![\"🤷\"](\"https://twemoji.maxcdn.com/v/14.0.2/72x72/1f937.png\")
\n \n \n \n \n 70\n \n 2:50 PM • Apr 3, 2023
\nSolo staking is operating a 32 ETH validator - you hold the keys for that validator, and there’s no smart contract between you and the Beaconchain. It’s the safest way to stake because the only risk is Ethereum itself imploding. Once you start adding contracts between you and the Beaconchain, you start adding risk.
As I’ve mentioned before, the number 32 was chosen for good reason, but it unfortunately prices out a large swath of the world from running their own validator. For this reason, there have been a ton of products and services that are seeing this need and working to create solutions. There are some that are far along in their development and many more that are running on testnets and / or very early in their development.
Solo staking is the most direct relationship between an operator and Ethereum and is the gold standard for staking. It’s securing the network with no middle man, no protocol, no extra risk. On the technical side, it’s a little complex at the moment. It was originally only possible by using command line interface (CLI), which can be a little intimidating to someone who’s never used it before. Now there are a host of tools available to make this process easier - some of which still use CLI, but automate some of the processes involved, and some remove the need for CLI entirely by creating a user interface (UI).
Requirements:
32 ETH
Stable internet (but you don’t need 100% uptime!)
A computer with a 2 TB hard drive & at least 16 GB RAM (Hardware guide)
Caveats:
None! This is the best way to stake. Go to the EthStaker discord or subreddit for help if you get stuck in the process.
Guides:
The EthStaker Knowledge Base list of guides
A minipool is a term specific to the decentralized staking service Rocket Pool. Rocket Pool will allow you to run a validator with less than 32 ETH. How does this work?
Rocket Pool allows people to stake with any amount of ETH - Ana, Elena & Muhammed can deposit their 0.02 ETH in order to stake it with Rocket Pool. But who is running the validator that uses Ana, Elena, & Muhammed’s ETH to stake?
The answer is… maybe you! Rocket Pool has a permissionless validator set. Each Rocket Pool validator needs to put down 8 ETH and then Rocket Pool pairs you with the rest of the ETH needed to make a validator. So you’re using Ana, Elena, & Muhammed’s ETH to run a validator. You don’t actually get custody of their ETH - there’s a smart contract that lets you use it for your validator but also ensures that it goes back to the rightful owner if the validator is exited.
So there are two ways to stake with Rocket Pool:
Run a minipool
Stake any amount of ETH, no hardware required
This second option is staking with a decentralized service, which is the next section in this post. Running a minipool is as close to solo staking as you can currently get without having the necessary 32 ETH. There’s still some smart contract risk, but you actually earn more as a Rocket Pool validator than you do as a solo staker. How?
When you take Ana, Elena, & Muhammed’s ETH in your validator, it’s a win / win. You get to run a validator and earn rewards even though you don’t have 32 ETH and those three folks get to stake and earn rewards even though they don’t have the 32 ETH and they don’t have to run hardware. Because you’re the one running the validator (the computer), you get a commission from their rewards (15%), but the initial amount they put down always belongs to them. So you earn 100% of the rewards on your 8 ETH, but also 15% of the rewards on Ana, Elena, & Muhammed rewards.
Requirements:
10.4 ETH (8 ETH + 2.4 ETH worth of RPL, you can look at the explanation for that here)
Stable internet (but you don’t need 100% uptime!)
A computer with a 2 TB hard drive & at least 16 GB RAM (Hardware guide)
Caveats:
Smart contract risk. If Rocket Pool has a bug, it could be exploited
Examples:
So far, Rocket Pool is the only decentralized staking service with a permissionless operator set with a lower-than-32-ETH bond requirement that EthStaker can heartily recommend. We are actively seeking to support new protocols that create permissionless operator sets - the more, the better!
Decentralized pooled staking is simply depositing your ETH to a pool, and then that pool is used to create validators. Someone else runs the validator and you’ll be charged a fee to use the service.
Requirements:
Any amount of ETH
Caveats:
Smart contract risk. If the service has a bug, it could be exploited. Reputable audits, time live on Ethereum, and low complexity decreases this risk.
Many services claim to be decentralized when they’re actually not. It’s your responsibility to do your research here and learn
What to consider when using a service
The variables that determine where that service is on the spectrum include:
Who holds the validator key? You, the service, or both?
Who holds the withdrawal key or what is the withdrawal address?
If the withdrawal address belongs to the service, is the contract upgradable
What percentage of all ETH staked on Ethereum are in validators operated by this service? Have they committed to self-limiting?
Examples:
Rocket Pool (fully decentralized, most recommended*)
StakeWise (semi decentralized, recommended*)
Lido (semi decentralized, not recommended*)
EthStaker’s recommendations take into account their network share, impact on Ethereum, security and audits, level of complexity and risk, and time that they’ve been live on the Ethereum mainnet.
This is absolutely the easiest way to stake but it’s also the least recommended. Custodial staking is handing your assets to someone and saying ‘can you please do this for me? I trust you to do it right and to give all my assets back to me’. It’s trust-based and it’s antithetical to the concept of crypto.
Banks are custodial. FTX was custodial. Coinbase staking is custodial. One of the basic tenets of crypto is that it is an asset that you can have complete self-sovereignty over. Meaning - when you hold decentralized assets in an onchain wallet and keep your key safe, there’s not a person in the world who could freeze or steal your funds. I could rant about this for a long time - I’ll write another section later that will help you understand the origin of the devastating crypto events you’ve likely seen a lot in the media and how keeping decentralized assets onchain and in your custody is the thing that keeps you safe from these events.
Requirements:
Any amount of ETH
Caveats:
You could get rugged at any point by the custodian who holds your ETH. There’s no guarantee that you get it back. You have to rely on the custodians reputation.
Examples:
Coinbase
This is the end of the A Beginner’s Guide to Staking series.
As always, if you find any inaccuracies in these blog posts, please contact nixo and let her know so she can hastily correct them.
","author":"ethstaker@newsletter.paragraph.xyz (nixo)","category":["web3","cryptocurrency","staking","blockchain","ethereum","beginner"],"enclosure":{"@url":"https://storage.googleapis.com/papyrus_images/865b5635a95591069a4e8fb554c75684.jpg","@length":"0","@type":"image/jpg"}},{"title":"Why stake?","link":"https://paragraph.xyz/@ethstaker/staking-beginners-p5","guid":"sq36rkPxZQ5a4XjB3TXR","pubDate":"Mon, 15 May 2023 00:00:00 GMT","description":"Why would I want to stake? I’ll approach this by telling you why I stake:","content:encoded":"This is Part 5 of a six part series called A Beginner’s Guide to Staking
I’ll approach this by telling you why I stake:
It decentralizes an extremely exciting piece of technology Being part of the validator set lessens the possibility that this tech will be captured by a single or a few entities. I have a lot of hope for Ethereum and the only way that Ethereum has a shot of succeeding at benefitting all kinds of humans rather than benefitting a very few is if we participate in its infancy. Systems are built to benefit the people who build those systems - maximally diversify the people who are engaged and invested Ethereum is maximally diversifying who Ethereum will benefit
It’s passive income Ethereum is young and it’s still kind of finicky to set up a validator. There are a ton of projects making it easier, but once you’re set up, it’s pretty hands-off. I personally have done maybe an hour of updating / maintenance / curious-poking-around on my validator in the past six months. And the EthStaker community is more than enthusiastic about helping you climb over any stumbling blocks that you might encounter.
It’s low-risk I’m a risk-averse person. Crypto, in general, is a high-risk industry. The price of bitcoin and ether fluctuate wildly and you constantly hear about people getting liquidated, losing their money, or getting hacked. A lot of these stories you hear are about degens, a colloquial term embraced by this group of people. It’s short for ‘degenerates’ and refers to people taking high-risk bets for high yields. It’s gambling. Staking is the opposite of gambling - you’re still exposed to the asset price of ether, but you’re gaining a stable, low-yield, low-risk APR on that investment. It’s not the sexiest thing to be doing and it’s not going to make you a millionaire overnight. But it is going to keep your investment safe and put it work generating passive income. The only way staking falls apart is if Ethereum itself falls apart - and if Ethereum falls apart, I can guarantee you that the entire crypto industry will be devastated for years.
It keeps me engaged When I was a kid in the early 2000s, I remember a year where my family did a competition on the virtual stock exchange. It was my dad’s way of trying to get us a leg up - once you’re invested, you started doing research and learn more about that thing. Because I have a validator, I like to keep up with what’s going on in Ethereum. And I’m now realized how much of an advantage I have in this world because I took the time to figure out how a wallet works, what ‘onchain’ means, and what kinds of new, unexpected tech is being built on top of Ethereum
It depends on how you stake.
If you’re using a decentralized staking protocol, it’s as easy as trading your ETH for another token, and then you hold onto the token that got traded. rETH is an example of one of these tokens, and the steps would be:
Trading your dollars / euros / pesos / lyra for ETH
This can either be done on a CEX like Coinbase, or on a mobile wallet app like Argent, Metamask, Rainbow, Guarda, or Coinbase Wallet (which is different from Coinbase, the CEX!)
Trade ETH for rETH
If you did this on a CEX, you’ll first have to move your ETH onchain into a wallet (yay self-custody!).
If you did it on a mobile wallet like the ones mentioned above, you’re already self-custodying and can trade it directly
This is a bit more work, but is absolutely the better option if you have at least 17.6 ETH. There are very detailed guides and communities to get you through the process
Research and buy hardware. You’ll need a computer with at least 2 TB NVMe hard drive & 16 GB RAM. Then you wait a couple days for this to arrive.
Using your guide of choice (Someresat, CoinCashew, Rocket Pool, DAppNode, etc), you set it up. I’d allocate at least a full day for this if you’re tech-savvy and maybe 2-3 days if you’re unfamiliar with command line.
Use the beaconcha.in mobile app or desktop app and tell it which validator is yours - it’ll monitor for you and notify you if anything’s wrong with it. There are also other, more involved, and self-hosted options to monitor your validator.
All in all, this could be 2-5 days of work, and then it’ll be maybe one hour every 3ish months unless a piece of your hardware starts failing and you have to replace it.
I’m not a technical person, I’ve never built a computer, and I’m able to run a validator. My hard drive failed last year and I just bought a new mini computer (~$600) and loaded my seed phrase in and re-setup my validator. It would have been cheaper (~$100) for me to replace the hard drive, but I’m lazy and taking apart a computer intimidates me. If it happened again, I’d probably make the smarter choice and figure out how to replace the hard drive.
There are generally two types of people who get slashed:
Super shadowy secret hacker coders trying to do something malicious
Very tech-savvy people who are trying to achieve 100% uptime by setting up two duplicate machines, and they mess it up and accidentally run both at the same time, resulting in the validator double-attesting.
A validator won’t get slashed for normal behavior. You’re not going to get slashed if your internet goes down. You’re not going to slashed for accidentally messing up an update.
Even if you did manage to get slashed by double-attesting, which is having your validator keys on two machines at once, both trying to attest, you’d lose 1 ETH. The slashing penalty depends on how many other validators are also slashed in that incident - this ensures that, if someone managed to start up a ton of validators in order to attack the network all at once, they’d be penalized more heavily than someone who just made a mistake.
If you’ve pooled your ETH and are relying on someone else to run the validator that stakes your ETH, you should be aware of how they handle slashing risks. If they try to get fancy and create a failover (a duplicate computer that is supposed to run if the first goes down) that gets their validators slashed, will they reimburse you? This is specific to the staking service you choose and you should ask them how they’d handle this.
If you plan on running a validator, you don’t need a calculator or a tool to see this. You can see how much each validator earns on beaconcha.in - you can look at random validators (e.g. beaconcha.in validator/222222) or use beaconscan’s Daily Validator Income page.
At the time of writing this, the official APR on the launchpad is 4.65% and each validator earns about $6/day, which doesn’t take into account the appreciation of the price of ETH. As ETH grows, the income will too, as rewards are denominated in ETH.
Anecdotally, we can look at one of the first validators to come online in December of 2020:
Value at start: $18,880 Value now: $69,700 - including rewards & appreciation of the value of ether
You can never guarantee an increase in the price of ether, so this should be understood anecdotally, but I personally believe that anything denominated in ether is a good long-term investment. I think a lot of the financial system we know now will be running on rails that are built with Ethereum in the next decade and we won’t even know because it’s all under the hood.
Basically… a decade. If your validator earns you $6/day while it’s online, it will lose you $6/day while you’re offline. If it’s offline for week, you’ll see your balance decrease by $6 x 7 days = $42 (based on current prices and APR). If it’s offline for a month, $6 x 30 days = $180. You’ll never be slashed for being offline. If you leak long enough for your balance to get down to 16 ETH, you’ll be kicked off the network (not slashed) but that would literally take nearly a decade of having an offline validator. And we’d hope, if you were offline for that long, you’d just come to the EthStaker discord and ask for help to exit your validator. You can exit your validator any time if you no longer want to take care of it. An exited validator doesn’t lose any money at all, and post-Shanghai, they can withdraw their entire balance at any point.
Offline penalities are not slashing. Slashing is a serious penalty and kicks you off the network. Offline penalties are minor and never kick you off the network.
The next post’s topic is “Finding your best way to stake”. It will cover the different categories of staking, where they lie on a spectrum of decentralization, the options within those categories, and what to consider when evaluating different services.
Ben Edgington: “Slashing” (highly technical article)
As always, if you find any inaccuracies in these blog posts, please contact nixo and let her know so she can hastily correct them.
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We can look at this from a few different perspectives: the issues that potential and individual stakers face, and the issues that the Ethereum network, as a whole, faces.
The technical barrier for running a validator is still quite high today. Staking on Ethereum is still in its infancy - it went live fewer than three years ago. There are projects who are making it easy to stake, but there are still a lot of things to build. Some projects are building graphical user interfaces (GUIs) that automate a lot of the commands that are needed to launch a validator, but the most mature options right now still require interaction with command line interface (CLI).
The problem
Staking software needs more user design people. A great example of a very good project lowering the bar for solo staking is DAppNode. But even DAppNode could use some more people who are experts are abstracting away from the user the scary technical words and steps that are a barrier to someone who didn’t grow up troubleshooting computers.
It’s also difficult for someone new to Ethereum to come in and read what’s a scam and what’s not. Transacting on Ethereum is new and it takes a while to get the hang out of what’s normal. Systems should dissuade people from making small mistakes that lead to an irrevocable loss of funds, signing fraudulent transactions, or generally being phished and scammed. This needs to be done at the user design level - wallets should eventually use publicly available data to identify known wallets associated with scams and warn users when they’re potentially interacting with bad actors.
What you can do
If you’re a user design person - you’re needed! Read through the resources on ethstaker.cc and on ethereum.org/en/staking. Get help in the ethstaker discord setting up a testnet validator. Use software like Stereum, wagyu, eth-wizard, and DAppNode to do it. Familiarize yourself with the process and find a project you’d like to help.
On the other side of things, you can write docs! Good protocol have good, visible, search-engine optimized docs. The nerds coding these protocols sometimes don’t have the time or skills to write accessible docs. Anyone can come in, familiarize themselves with these projects, and write docs. Many projects in this ecosystem are open source and can be worked on by anyone by creating pull requests on Github.
The problem
The single biggest complaint that the community sees is about the 32 ETH deposit threshold. This was chosen for good reason and chosen when that value was <$10,000. That 32 ETH guarantees that the validator won’t lie to the network because they stand to lose a portion of it if they act maliciously.
Regardless, this does disproportionately affect lower-income nation citizens and access to a validator should be more geography-agnostic. There are projects who aim to lower that barrier. One of many examples is Rocket Pool, who have lowered the barrier to 16 ETH and will lower it further to 8 ETH this year. Another set of projects are Distributed Validator Technology (DVT) protocols.
While these add a layer of smart contract risk, this risk can be mitigated with testing, audits, bug bounties, & time live on mainnet. The longer a protocol is live, the less the likelihood that it has critical bugs that could put your stake in jeopardy.
What you can do
Get involved in the communities of the projects who are aiming to lower that barrier! Stake using their liquid staking token. Help them test their product on testnets. Write or edit docs and guides for the project.
Ethereum is very young. It’s being built with an eye to the future - the entire reason why people are so excited for this new technology is because it opens doors to all sorts of things that aren’t currently possible. We can improve an individual’s ability to manage and have full control over their own data and assets.
The term ‘web3’ comes from the idea that a decentralized blockchain gives us to the ability to read-write-own. We want to be able to own our assets and data in a way that we never have been able to before. But to achieve these goals, we have to build a solid foundation for the Ethereum ecosystem to sit on. Validators are the material that is used to build that foundation.
A natural tendency
Centralization is a natural tendency in a free market. The biggest players find product-market fit, their capital enables them to build better products, they outcompete or squash any new products, they acquire any decent competitors, and they eventually corner the market. This is not inevitable. Anti-trust laws are the way we address this issue in the traditional world where the law is used to interfere with the market to maintain some balance.
Ethereum is a system that humans are building with code. While we build, we watch these market forces test the limits of the system and we build to accommodate the nature of how these operate, in order to build a system that operates optimally taking those forces into account. A decentralized Ethereum is an optimal Ethereum.
Centralization in Ethereum today
At the moment, there are a few places where stake is concentrating and it presents a risk to Ethereum’s credible neutrality. Credible neutrality refers to an entity’s inability to discriminate against or favor any person or group of people. Stake concentrated in the hands of a few operators, or in the hands of operators under one umbrella is a threat to that credible neutrality.
Lido is semi-decentralized, permissioned staking protocol that currently occupies this role. Permissioned means that validators need to apply to become an operator with Lido and, as of now, very few operators have been onboarded. When users deposit to Lido, they deposit to validators run by 29 operators running 32% of all staked ETH. In comparison, a comparable decentralized protocol, Rocket Pool, has over 2000 operators who control 2% of all staked ETH.
The argument that Lido espouses in favor of having a small, permissioned operator set is that the validators are professionally run and have a higher participation rate and higher uptime. However, EthStaker’s position is that this small operator set and the influence that Lido could exert over their operators represents a threat to Ethereum’s credible neutrality. This is why we currently discourage deposits to Lido.
*A more nuanced and technical explanation can be found here.
What is MEV?
MEV is ‘maximum extractable value’ and is created by the way that new transactions are incorporated into Ethereum. A very simple explanation is that transactions on Ethereum get put into a waiting room for seconds before they get picked up and put on the blockchain.
Very sophisticated bots responsible for giving these transactions to validators are able to quickly change the order in which they’re processed or add in their own transactions that change the price of something before or after someone else’s transaction in order to create opportunities for more value. These sophisticated bots pay validators a fee, usually proportional to the MEV opportunity, for the validator to accept that bot’s transactions instead of another bot’s.
What risks does MEV create?
The ethics of MEV are questionable, but it’s an unintended side effect that exists and researchers are trying to find the best way to mitigate the problem that it causes (or a way to get rid of it altogether). There are lots of solutions and mitigation techniques in the works, but that’s a whole area of research you can look into later. Some key terms if you’d like a research starting point: Proposer-builder separation (PBS), mev-boost, MEV Blocker
Part of the reason that Lido, a staking provider running an alarming percentage of all staked ETH, continues to get so many deposits is that their APR is currently higher. This is partially because MEV is random and operators like a lottery and represents another vector of centralization where larger entities get higher rewards. MEV rewards are a type of execution layer reward and execution layer rewards are pooled in Lido’s validator set. Meaning: the more validators, the higher the chance of winning lottery tickets, and those lottery tickets are split among all Lido stakers. This is compounding problem - the higher the APR at Lido, the more people will want to stake with Lido. The more people stake with Lido, the higher the APR. This is a centralizing force that becomes a concern very quickly and has been the subject of much discussion.
If we want the opportunity to be able to build Ethereum to be sustainable, we have to advocate for best practices until researchers can research, develop, test, and implement ways to inherently incentivize behavior that leads to a healthier Beaconchain.
This is, by no means, an exhaustive list of issues that directly affect the future of staking on Ethereum, but they encapsulate some of the big ideas that are open areas of research with no definitive answer at hand yet.
The next post’s topic is “Factors that should play into your decision to stake or not”. It will cover potential motivations to stake, the amount of work involved in staking, slashing risks, how much you can earn, and offline penalties.
ethereum.org: “MEV”
Bankless: “What is MEV and why is it important?” (video)
Danny Ryan: “MEV, pandora’s box” (article)
As always, if you find any inaccuracies in these blog posts, please contact nixo and let her know so she can hastily correct them.
","author":"ethstaker@newsletter.paragraph.xyz (nixo)","category":["web3","cryptocurrency","staking","blockchain","ethereum","beginner"],"enclosure":{"@url":"https://storage.googleapis.com/papyrus_images/ed958fbe6a51445d206aad21c9b7bc83.jpg","@length":"0","@type":"image/jpg"}},{"title":"How staking stays healthy long-term","link":"https://paragraph.xyz/@ethstaker/staking-beginners-p3","guid":"9pfjIYU0CoZyrdQYCspj","pubDate":"Mon, 08 May 2023 00:00:00 GMT","description":"Why you care: because if you’re investing in ETH, you want Ethereum to remain sustainable. The better your choice of staking provider, the more you contribute to the effort to make your investment robust","content:encoded":"This is Part 3 of a six part series called A Beginner’s Guide to Staking
Why you care: because if you’re investing in ETH, you want Ethereum to remain sustainable. The better your choice of staking provider, the more you contribute to the effort to make your investment robust long-term.
Becoming a validator on Ethereum is permissionless. Permissionlessness refers to anyone’s ability to be a part of the system without being gated by anyone. There will always be some kind of barrier to joining (for example, electricity in proof of work, a capital bond in proof of stake) because this creates sybil resistance.
A sybil attack is when a people attack or exploit a network by pretending to have a lot of different identities. An example of this is setting up a network of bots to spam a service. Sybil resistance is the a quality of being able to lessen these attacks to some degree. If you have to invest a dollar, have account history, or do a small amount of work in order to use a service, you’re less likely to spam it using a lot of new accounts.
Ideally, however, barriers that increase sybil resistance don’t disproportionately affect any one group. An ideal permissionless protocol creates a disincentive to spam, but equal access to all real humans.
Permissionlessness is important to Ethereum’s values of being universally accessible and resistant to capture by interest groups. If all the Ethereum validators were owned by Google, Google could write anything it wanted to the blockchain. Similarly, if the creators of a blockchain controlled who was allowed to validate, they could choose the validators based on who would comply with their requests to edit the chain to their advantage. This would mean that the creators of the chain had captured the chain to potentially advantage themselves.
For example, some blockchains are run by a very low number of validators and, for that reason, are known as centralized chains. If the number of validators is very low, it could be easy to influence them to write false information to the chain.
The likelihood of false information being published to the chain goes down as the number of validators go up, especially if these validators are very dissimilar: different geographic locations, run by people of different cultures, speaking different languages. Decentralization is something that disrupts the potential for collusion. A decentralized blockchain is a capture-resistant blockchain.
Decentralization also makes a blockchain resilient. A chain that runs on validators running different hardware, different software, on different networks, under different jurisdictions is less likely to have downtime. A decentralized blockchain is a resilient blockchain.
Geographic locations
Who owns the validators?
What software are they using?
What hardware are they using?
This would be difficult-to-impossible to tell :)
Geography
Most Ethereum validators are concentrated in North America and Europe. These are places with the highest median income and have the most ease in getting the hardware that’s needed. This isn’t ideal and is being addressed in a number of ways, including a lower financial barrier (e.g. minipools, which we’ll discuss later), better guides, tools for more platforms (Windows & Mac since Ethereum largely runs on Linux machines at the moment), and more focus on good user experience.
Entities (who owns the validators)
You’ll notice that the top two entities operate >40% of the network. However, these two entities represent more than 2 operators - Lido is a semi-decentralized protocol with 29 operators and Coinbase is a centralized company that utilizes a number of different operators (but primarily Coinbase Cloud). EthStaker aims to educate new individuals or organizations coming into staking today on who to stake with in order to alleviate these concentrations.
Software
The software that runs on Ethereum validators is called a client. Ethereum is unique in its emphasis on using multiple client software implementations - there are five consensus layer clients and four execution layer clients (don’t worry about what those specifically mean right now).
Why would we want them using different software? Because there’s no one point of failure for Ethereum validators. If one pushes a bad update, the others will keep on going. They’re all written in different coding languages, so if one dependency in a language pushes a bad update, the others will keep going.
For these reasons, Ethereum doesn’t have downtime. Even when it pushes major upgrades (EIP 1559, the Merge, Shanghai), there’s no ‘maintenance’ time or time when you can’t count on your transactions being processed.
When you’re deciding how to stake, it’s important to understand the foundations of staking and what permissionlessness and decentralization are. If you want your stake to be a good long-term investment, you’ll want to choose the most decentralized way to stake and want to support the protocols that keep staking permissionless. When we go over ways to stake, the metrics above should help inform your decision on how you choose to stake.
The next post’s topic is “Broad issues in Ethereum staking today”. It will cover issues that stakers and the Ethereum protocol are facing today, including UX deficiencies, financial barriers, centralization risks, & Miner Extractable Value (MEV).
Gemini: “What does permissionlessness mean?” (article)
Ben DiFrancesco via Bankless: \"The power of permissionless platforms” (article)
Who are the people behind these computers running Ethereum?
People with computers download copies of the Ethereum blockchain to make their computer a node. If a person running a node also wants their computer to be one that the other computers check in with to make sure their copy is okay, and get paid to do this, they have to take an extra step to become a validator.
A validator is created by making a deposit to a specific smart contract that says “I will tell other computers what I see on the chain. If I lie about what I see, you can take $100 from my deposit. If I tell the truth, you pay me $1. If I don’t tell you anything at all, you can take $1.”* This is called staking because your assets are at stake.
*Absolute numbers are random for clarity. The actual numbers are denominated in ETH and the value depends on a variety of factors.
These validators are simply computer running code. There’s an operator (a person) behind the computer, but they install the software and keep the computer plugged in. They’re not doing any manual calculations and shouldn’t be doing anything involved at all. For the solo staker, this is 2-4 hours of work to set up, and subsequently 15 minutes of maintenance every 2-5 months. Most operators have their validator running quietly on a bookshelf without touching it for months at a time.
The draw of this is that, after set-up, it largely becomes passive income. The electricity costs are equal to keeping your laptop plugged in 24/7. The occasional maintenance, every few months, is logging in and telling the computer to look for updates and installing those updates. Sometimes the hard drive or RAM dies (just like in any normal personal computer) and that has to be replaced, but that should be a once-every-two-or-three-years issue.
The Ethereum network is in a very early stage of its development. Proof of stake launched in a beta mode in December of 2020 and has been the official and only consensus mechanism of Ethereum since September of 2022. A consensus mechanism is the method by which the blockchain validates the authenticity of transactions. Validators replaced miners in September of 2022, who served a similar function, but for a very energy-intensive consensus mechanism. Mining on Ethereum isn’t a thing anymore - you can still mine for Bitcoin and some smaller blockchains, but Ethereum has completely moved to using validators instead of miners.
Anyone with a computer, stable internet, and 32 ETH can become a validator. A validator is a staker. A staker isn’t necessarily a validator.
Not everyone has a computer, stable internet, and 32 ETH, so there are lots of staking products who have built ways for you to use someone else’s computer and internet to stake any amount of ETH. They do this by pooling your ETH with other people’s ETH until you get to the full 32 ETH to run a validator. But then who operates the node?
There are many staking products to pool ETH - who operates the actual node, the computer with the validator on it, will differ for each of these services. And products will be somewhere on a spectrum of trustlessness, with one end of the spectrum being trusted providers and the other end being trustless providers.
TRUSTED: I tell you that I’m starting a staking operation and I’m really good at this stuff. I have a track record of doing a good job staking people’s ETH for them. You send me your ETH and I stake it for you on my validator and give you the passive income it generates (minus a fee). I promise to return your staked ETH to you if you request it.
TRUSTLESS: I deploy a smart contract that says “If Julia deposits 1 ETH into my contract, send that to my validator. Take 90% of the passive income that it generates and send it back to her. If she wants the staked ETH back, let her send a message that says so and automatically send it back to her.”
Despite the intuition that the word ‘trusted’ sounds like a good thing, this is actually the least ideal option. Trusted means that you have to trust the person you’re sending it to. Trustless means that there’s no degree of trust needed because you can verify that the contract automatically does all the things that you want and that the person who’s validating for you has no possible way to steal your deposit. A trusted operator could theoretically steal your deposit (though it’s unlikely if they have a good reputation). Staking products are on a spectrum from trusted to trustless and you should know where there are on this spectrum before you stake with them.
In my opinion, if you use one of these staking products to pool your ETH and stake it on someone else’s validator, you’re not a validator, but you are a staker. I asked the crypto twitter community if they agreed with this and the opinion was split:
\n 7\n \n 3:13 PM • Apr 3, 2023
\n(We haven’t talked about them yet, but an “LST” is the token that someone gets as a kind of receipt for the ETH that they’ve deposited to a pooled staking service)
If you can’t read or interpret a contract, you have to rely on things like security audits, community trust, and time that the protocol has been live. A project should have security audits from reputable auditing companies that have gone through their contracts with a fine-toothed comb and they should post these findings publicly.
re: community trust - look at the discussion that a community has. Are there there people there discussing the technical aspects of the protocol? Are they talking about potential attack vectors? Theorizing on how the product can be made better? Or is it a bunch of hype people saying ‘gm’ and creating memes? A good product will have highly engaged, highly intelligent, highly technical people involved. A product that’s relying on hype to attract investors is going to have a lot of people asking about price and strings of people leaving valueless messages like “gm”.
The next post’s topic is “How staking stays healthy long-term (and how your choices help)”. It will cover permissionlessness, decentralization, and current analytics of Ethereum’s decentralization metrics.
Ethereum’s Launchpad: “Validator FAQ”
As always, if you find any inaccuracies in these blog posts, please contact nixo and let her know so she can hastily correct them.
","author":"ethstaker@newsletter.paragraph.xyz (nixo)","category":["web3","cryptocurrency","staking","blockchain","ethereum","beginner"],"enclosure":{"@url":"https://storage.googleapis.com/papyrus_images/bc789763ff00644e0e0bcdef78d58cb1.png","@length":"0","@type":"image/png"}},{"title":"What is Ethereum?","link":"https://paragraph.xyz/@ethstaker/staking-beginners-p1","guid":"bEHKrFglIjP2GT9gjpGF","pubDate":"Mon, 01 May 2023 00:00:00 GMT","description":"This is Part 1 of a six-part series called A Beginner’s Guide to Staking. Ethereum is a place where people can upload smart contracts and others can use...","content:encoded":"This is Part 1 of a six part series called A Beginner’s Guide to Staking
Ethereum is a place where people can upload smart contracts and others can use those smart contracts. A smart contract is like a regular, in-real-life contract: I tell you I’m going to give you $10k if you give me the deed to a car I chose. We sign a contract that’s legally binding. I have to check to make sure I received the deed and you have to check to make sure that you received the $10k and if one of those things didn’t happen, we have to take it to court. A smart contract makes these processes automatic and removes the intermediate parties required to check if conditions have been satisfied.
A smart contract is a way to make a contract that automatically executes when certain conditions are met.
An example: You and I use a smart contract on Ethereum. We tell it that the conditions are “$10k” and “a deed to this car” and that we’re going to trade these things. I send $10k to the contract, you send the car’s deed to the contract (imagine the deed is a signed digital copy), the contract checks that it received both, and trades them when the conditions are met. The smart contract somewhat functioned as an escrow*. This all happens in seconds, with a piece of a code, and you can see everything happen on a publicly-viewable blockchain.
That cuts out the bank, the lawyer, the notary if you needed one, extra fees, etc. It’s just you, the seller, and a way to guarantee the success of the trade with code.
*note that an escrow actually holds your assets whereas a contract can be granted permission to an asset that you’re holding under specified circumstances
When we say someone can ‘upload their smart contract to Ethereum’, where are they uploading it? ‘Uploading’ a contract to Ethereum is called ‘deploying’. A person broadcasts their contract and that broadcast gets picked up by all the computers that have a copy of the Ethereum blockchain. The computers all talk to each other, verify that they got the same thing, propose to each other that new things get added to the chain, and then do a series of actions that results in the contract being part of the chain that every computer on the network has a copy of.
This means that the person who deploys it no longer controls it… unless they added a piece of code to the contract that says “if I do X, change Y in the contract”. This is called a mutable smart contract, and anyone can see if a contract is mutable (changeable) or immutable (unchangeable). The person who deployed the contract doesn’t have the ability to delete the contract from the chain. They don’t have the ability to edit it beyond what the code allows. The contract, at that point, belongs to Ethereum and every computer that runs a node for Ethereum.
I basically just described to you the engine of Ethereum. I don’t have to know how Ethereum works to use it, just as I don’t have to know how a car engine works to be able to ride in it or even drive it. Smart contracts are deployed by developers and they’re audited by cybersecurity experts. Using those smart contracts is the part that normal users will do.
If someone in 1995 had told me that there was a really cool new technology where a mail user agent could use the world wide web to create message content that is sent to another using the Simple Mail Transfer Protocol, using port 25 to send and receive, I would never have assumed that it was something I’d be using every day. I probably would have blinked and told them “just tell me what I can do with it” - and here I am, sending emails every day. It’s hard to envision how a new technology will be used and described when it’s ubiquitous, but it seems really obvious in retrospect.
As a user, this will look like using the internet. Building on a blockchain is like replacing the engine of the car with a more efficient, smarter engine. Right now, it can be tricky to use because it’s all still in beta and processes like creating and using a wallet are still awkward processes that have no web2 equivalent, but the end result shouldn’t look too different from using the internet today.
The most major difference is that you should feel more confident about where your data, your assets, and your activity are stored and what they’re used for. Why? Because this info isn’t all locked in a company’s database in its basement - it’s stored on a publicly available, distributed computer. The way that they use your data or store your assets is verifiable in a way it’s never been with a traditional, web2, centralized database (but that doesn’t necessarily mean that your data is all public - we can address that later).
Ethereum is software running on thousands of computers. It’s still new, so it’s sort of hard to use, but the user experience of Ethereum will eventually be like the difference between driving a gas-powered car and an electric car: you won’t have to relearn how to drive, but there will be some differences and you’ll have a lot more automated features.
The next post’s topic is “What is a validator?”. It will cover nodes, validators, miners, stakers, and staking pools.
ethereum.org: “What is Ethereum?” (article)
ethereum.org: “Intro to smart contracts” (article)
Finematics: “Code is law? Smart contracts explained” (video)
Coinbase: “What is Ethereum?” (article)
Finematics: “Ethereum 2.0” (video)
Vitalik Buterin explains Ethereum (video)
The EthStaker community is creating better ways for everyone to more easily find the discussions, resources, and latest updates they need to get started staking and keep up with essential research and news in a space that’s moving oh-so-quickly and can be hard to keep up with. It’s also essential that it’s as simple as possible for new stakers to come in and easily evaluate the staking option that’s going to be best for both their specific situation and for the Ethereum network.
EthStaker is resource-rich with how active our community’s been helping one another, providing resources, building dashboards, creating newsletters, keeping up on current research, and asking and answering questions - for nearly four years now. That information has been dispersed across platforms and is somewhat difficult to sort through - this website is an effort to organize this wealth of information.
The website was spearheaded by a very active community member, hanniabu of Ether Alpha and is open source. If you built something that you want included in our resource list, or maybe you just recognize an omission, please feel free to make a pull request on the website’s github repo.
If you have an idea of something you’d like to build for stakers, contact nixo for resources on how to apply for small grants.
","author":"ethstaker@newsletter.paragraph.xyz (nixo)","category":["ethereum","blockchain","web3","cryptocurrency","staking"],"enclosure":{"@url":"https://storage.googleapis.com/papyrus_images/6ee554d54780c856d713c5461bbe395a.png","@length":"0","@type":"image/png"}},{"title":"A Beginner’s Guide to Staking - Intro","link":"https://paragraph.xyz/@ethstaker/a-beginners-guide-to-staking-intro","guid":"ky73YljDRSQCdz41RN9k","pubDate":"Thu, 27 Apr 2023 00:00:00 GMT","description":"I’ve decided to write a beginner’s guide to Ethereum staking. It’s meant to target people who are kind of interested in crypto, but not quite sure what Ethereum really is or why you’d want to stake. It’ll be as accessible as I can manage and come out in six parts twice a week:What is Ethereum?What is a validator?How staking stays healthy long-term (and how your choices help)Broad overview of some issues that Ethereum staking faces todayFactors that should play into your decision to stake or n...","content:encoded":"I’ve decided to write a beginner’s guide to Ethereum staking. It’s meant to target people who are kind of interested in crypto, but not quite sure what Ethereum really is or why you’d want to stake. It’ll be as accessible as I can manage and come out in six parts twice a week:
How staking stays healthy long-term (and how your choices help)
Broad overview of some issues that Ethereum staking faces today
Each section should take 15 minutes or less to read and will be accompanied by some links to learn more. This is meant to make you feel culturally oriented in the staking community before you dive into a technical guide.
If you find any technical inaccuracies in these posts, please DM me on twitter and let me know before I get roasted by the entire internet: twitter.com/nixorokish
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This survey is limited in scope and was intended as a pulse check on the specific bandwidth subject. For a more exhaustive survey of solo stakers that EthStaker conducted in early 2024, see the Ethereum Staking Survey 2024 published on July 2, 2024.
Stay tuned for the next full Ethereum Staking Survey we plan to begin collecting responses for in early 2025.
Methods
A total of 125 responses were received during the dates of September 27 - October 8, 2024. The survey was conducted on DeForm, access was gated with a collection of POAP NFTs, and it was publicized on EthStaker's social channels including Reddit and Twitter.
Results
The .csv data file and .xlsx analysis file can be found on Github.
90% of the 125 respondents were home stakers.
56% track bandwidth usage with the majority using Grafana followed by modem apps and ISP tracking.
55% of Home or Partial Home Stakers expect increased bandwidth usage to have an adverse effect on their ability to run a node from home.
Adverse effect expectations rise by Download Speed Range and Upload Speed Range tiers as both speeds decrease, with the trend more pronounced for upload speed.
Independent operators (often broadly referred to as “solo stakers”) were surveyed for information that gives better visibility into their profiles, demographics, pain points, and motivations. We note a high degree of confidence in staking and resilience among respondents despite an emerging feeling of structural disenfranchisement and concern for centralization pressures on the validator set.
The intent of the data is to provide the perspective of a very privacy-oriented set of actors, in their own words, so that their needs can be represented accurately. This survey is intended to be annual and feedback on the question set is welcome.
Survey results were collected using LimeSurvey software. Questions included branching display logic to ensure continued relevance to the respondent. Cookies were used to deter repeated participation and a CAPTCHA to deter bot activity. The survey was open to the public and responses were anonymous.
Responses were solicited on EthStaker’s social channels (Reddit, Discord, Twitter, Farcaster), on Obol’s Twitter account, in public channels of the most popular Staking as a Service providers, hardware providers, and client software. The survey was also posted on the Beaconcha.in website and in the Rhino Review and Week in Ethereum newsletters. Submissions were collected between 8 April 2024 and 6 May 2024.
Only data from completed surveys were used. Incomplete surveys were discarded. Results were manually inspected for bot activity and no complete surveys were discarded. Data displayed as pie charts were the result of single-choice answers. Multiple choice answers are denoted in discussion with a star✶ unicode✶ character✶.
While the data show a preference toward home staking over more disengaged methods of staking, this is potentially a consequence of who is engaged and who this survey was able to reach. Stakers who engage frequently in staking communities tend to be the ones managing their configurations. Those who don’t manage their own configuration can afford to tune out because their immediate attention is not often needed to maintain their validators.
This information should considered more qualitative than quantitative as it relies on subjective data from a self-selected subset of stakers.
Publicly available node crawlers put Ethereum node counts at anywhere between 6000 and 11,000. Not all of these are validating nodes. Many are run by professional operators. This survey was only aimed at stakers using their own capital - questions were not relevant to professional operators. At the time of writing, validating nodes using Rocket Pool can be estimated at 1832, using the number of nodes with node ETH at a staking snapshot and subtracting Allnodes nodes. This can loosely be used as a floor for the number of independent operators. With 868 responses from stakers who claim to control their node’s configuration (out of 1024 total responses), we can estimate that somewhere between 8% and 47% of node operators responded to this survey, with the either edge of this range unlikely. Bear in mind that this is as a percentage of all node operators, which includes professional operators. This survey is primarily interested in non-professional operators.
Though it’s easy to see the number of validators on the network, it is not currently possible to collect an accurate count of the number of validating nodes or individual operators or even just nodes that are on the network (this can be interpreted as a feature rather than a bug). Node operators can choose to self-identify their validators but most independent operators and many professional operators do not.
Raw data can be found here.
32% are genesis stakers
80% are home stakers, with an additional 4% running a home / remote combo
84% do not also hold any significant capital in liquid staking tokens
85% have not changed their primary method of staking
77% are staking between 66 and 100% of their ETH
30% use smoothing pools, 61% do not, and 9% aren’t familiar with the concept or don’t know of options relevant to them
95% use Linux to run their validator(s) ✶
51% did not use staking software to set up their validator. 27% used Rocket Pool, 15% DAppNode, and 10% Eth Docker (\"did not use staking software\" generally means they followed guides and used systemd) ✶
85% have not changed their method of staking since they first began
Primary concerns included supermajority client risks, suboptimal tax structures for staking, hardware issues, and key management ✶
69% do not track their bandwidth and 78% were unsure if it has increased since Dencun
Respondents spend an average of 3.4 hours (median 2 hours) per month maintaining their setup. Removing a single outlier data point (x = 155 hours) that had a z-score of 22 brings the average to 3.2 hours per month
On a scale of 1-10, 10 being the largest possible risk to the network, stakers rated a supermajority risk as a 7.4 and the risk of centralization of stake as 7.2 (adjusted scales for clarity)
When asked what percentage of ETH they expect to be staked in 2-3 years, answers (n = 1003) averaged to 49.4% of ETH
When asked what percentage of ETH staked they suspected was operated by independent operators like themselves, answers (n = 924) averaged to 15.9% of ETH staked
89% feel today either more or equally adamant that solo stakers are important for the network, as compared to when they first began staking (11% feel that it’s less valuable)
66% feel today either more or equally adamant that solo stakers derive as much benefit from participating in consensus, as compared to when they first began staking (34% feel that they derive less value)
When asked how well they feel their interests in ongoing research and protocol development are represented, the average was a 5.8 out of 10, with 10 being ‘very well represented’ and 1 being ‘not at all represented’ (adjusted scale for clarity)
50% felt that protocol research either ignores solo stakers or is largely powerless to help solo stakers against monied interests (19% reported that they don’t pay attention)
92% either supported or felt neutral about the statement that the issuance curve needs to be changed to better incentivize decentralized forms of staking (without regard to existing proposals)
The leading motivation for initially staking was to support the Ethereum protocol (84%), followed by yield (81%) ✶
65% plan on continuing to add new stake
35% plan on continuing to add new stake but plan to stop when some external condition is met
31% do not plan on adding new stake
62% indicated that they have no plans to exit ✶
69% used technical guides as a primary source for learning (e.g. Someresat, CoinCashew, Rocket Pool docs, client docs) ✶
63% used EthStaker as a primary source for learning ✶
53% used ethereum.org as a primary source for learning ✶
The most commonly reported sources for keeping up with necessary updates and protocol research (these two questions seemed to be confused with each other, so we’ll discuss them together) were Discord, explorer notification services, Twitter, Reddit, ethresear.ch and podcasts, with a substantial portion naming The Daily Gwei specifically ✶
At the end of the survey, stakers were given the opportunity to comment on anything that they felt hadn’t been adequately covered in the survey. Full answers are available in the raw data and an AI-assisted summary of answers is provided here:
n = 204
Decentralization and Centralization Risks (n = 68): Many respondents are worried about the centralizing effects of current protocol developments and the insufficient representation of solo stakers. LSTs are seen as a centralizing force that makes independent node operation less attractive and feasible, and restaking as a potential vector of centralization.
UX, technical barriers, hardware (n = 46): There are numerous requests for simplifying the staking process and making it more accessible for non-technical users. Concerns around bandwidth, the need for IPV6 support, and needs for estate planning solutions were also mentioned.
Issuance Curve Adjustments (n = 38): There is significant concern about the impact of changing the issuance curve, especially how it might affect independent operators, with some expressing support for the research direction. Many believe that decreasing yields would result in conditions favorable only to large, centralized staking entities.
Economic and Tax Implications (n = 28): Tax policies are a significant burden for solo stakers, making it less economically viable compared to holding liquid staking tokens (LSTs) which have more favorable tax treatment.
MEV (n = 24): There is a divide among stakers regarding the use of mevboost, with some choosing not to enable it due to ethical concerns. These respondents advocate for alternative solutions and further research to address the issues posed by MEV. MEV is perceived as a tool that could potentially enable protocol capture by large, centralized entities. Respondents call for more robust measures to prevent MEV from undermining the decentralized nature of Ethereum.
Privacy Concerns (n = 15): Stakers are concerned about the exposure of their operational details, such as IP addresses and transaction inclusions, which compromises their privacy and security. Respondents desire the development and integration of privacy-preserving technologies. Privacy concerns extend to issues of censorship, with respondents noting that the lack of privacy forces some stakers to censor transactions, impacting the neutrality and inclusiveness of the network.
95% self-reported as male
90% identified as somewhat or strongly technical
74% do not work in crypto
88% are staking from North America, Europe, or Australia
That independent operators are largely tech savvy men from North America, Europe & Australia running on Linux are all unsurprising results - these imbalances have multifaceted causes and are the target of many diversity initiatives across the staking community. How, why, and with what percentage of their ETH these operators run their validators is less well-known since stakers tend to be reticent in sharing information that may create vulnerabilities in their security.
An abundance of engaged Genesis stakers, 80% running from home, 84% not holding any significant amount of liquid staking tokens, and 77% staking more than 66% of their ETH are all new and highly encouraging data that indicate a high degree of confidence and resilience in staking among independent operators.
A recent report by StakeCat looked at addresses identified as independent operators (methodology here) and determined that the ratio of independent operators on the network has increased since the merge. These survey data show a significant portion (32%) of respondents have been staking since the Beacon Chain Genesis event. As survey data is from a self-selected subset of stakers, it is likely that these survey results do bias toward stakers who were onboarded around Genesis, when EthStaker was the only comprehensive source for staking education and support.
Now that independent operators are increasingly being onboarded through protocols and products with improved UX and their own support, these latter cohorts of stakers may be checking in with the general staking community less frequently. This is desirable as software, education, and support for independent operators shifts to a diverse set of self-sustaining projects that may onboard less ‘tech savvy’ operators.
Since withdrawals were enabled at the Shapella hard fork, the slope of ETH staked over time has increased and, with it, interest from professional entities utilizing delegated stake.
These professional entities often benefit from the economies of scale as they’re able to run hundreds or thousands of validators per node, bringing down the cost of hardware per ETH staked, whereas an independent operator generally runs single or double digit validators per node. Large entities are also able to pool execution layer rewards to smooth over their validator set, an option only recently available for independent operators with the introduction of two solo staker smoothing pools. Professional operators may yet also be able to take advantage of additional yield by participating in extra-protocol services that require more robust hardware or operational expertise. These factors have resulted in LST holders sometimes receiving higher rewards than independent operators, even accounting for the fee paid to the staking service provider.
There is a feeling of disenfranchisement among respondents when considering these outcomes. They feel now that their role is equally or even more valuable to the network than they did when they first began staking but do not feel likewise about the way that the protocol values their participation. When asked about advocacy for their interests in protocol research, most fell solidly in the middle between “not represented” and “well represented”, with a slight inclination toward the latter. Over half of respondents felt research is either hostile, neglectful, or ineffective in representing their interests. A majority expressed support for changing the reward structure of the protocol to remedy this perceived disenfranchisement (with the understanding that this support did not necessarily signal endorsement of existing proposals).
Over the years, independent operators have been referred to as “irrational actors” and “altruistic”, and it has been suggested that stake operated by them has a ‘stickier’ quality than stake injected by delegated stakers. It’s not possible from this survey to compare the two groups but respondents do convey a desire to continue staking regardless of small fluctuations in APR or broader staking ecosystem changes.
While most respondents anticipate remaining staked in any positive yield scenario, 21% of respondents indicated that they have a specific yield threshold under which they would exit (n = 184) and averaged 2.3%* for that threshold.
(*As an aside, this number should be understood to be biased by a rational desire to keep income high, as some stakers indicated that they’re currently running validators but would unstake under a threshold that we’ve long since passed, which suggests that some may not keep active tabs on what their actual current yield is.)
This reluctance to unstake combined with ideological motivations for initially staking (”to support the Ethereum protocol”) is often cited as a feeling that independent operators are ‘altruistic’. It should be noted that their inertia is likely bidirectional. An independent operator is unlikely to unstake with small market or issuance fluctuations but is equally unlikely to bring their stake back to the network once they have removed it, even if conditions become slightly more favorable. Consequently, their losses are likely to be more permanent than those of delegated stake. Overreliance on altruistic motives rather than structural equity for independent operators is likely to erase this subset of stakers over time.
A string of airdrops in 2023 and 2024 targeting independent operators as recipients has recognized the current disparity in rewards and power between independent and professional operators and the value of maintaining independent operators on the network. These one-time incentives are helpful for the interim but also should not be relied upon to close this gap in the long-term.
StakeCat’s recent report show that the hunger for solo staking is as strong as it’s ever been and the ratio of independent operators to professional operators has remained relatively stable, even increasing, over time. Much of recent research seeks to preserve an independent operator’s meaningful participation in light of centralization pressures emerging from the current protocol design. These proposals should rely heavily on insights directly from the motivations and concerns of independent operators - this survey and report aim to provide that data for brainstorming and research to rely upon.
Point of contact: team (at) ethstaker (dot) cc
Graphs illustrated by electropillow
Becoming a node operator to safeguard the Ethereum protocol requires reliable and top-quality infrastructure. For some individuals, achieving this at home is possible, which EthStaker generally recommends as the gold standard to foster decentralization. However, for many others, it's simply not feasible due to their environment or the services available at their residence. In such cases, utilizing a hosted service like those offered by OVHcloud can be a solution.
Observing or Securing
There are a few types of nodes you can run on Ethereum. A regular node is typically built with a machine that will execute an execution client and a consensus client. It can be used to observe and interact with the Ethereum network. A staking node, on the other hand, includes everything a regular node does, plus a validator client and one or more validator signing keys to perform the regular duties expected of a validator. The primary purpose of a validator is to secure the Ethereum network, and a compensation is provided for correctly and timely executing its tasks. A regular node can easily be converted into a staking node, and vice versa, since the validator client component often has a relatively small resource usage when the number of validators is small. A single machine is capable of running thousands of validators, but proper risk management is necessary when operating a large number of validators.
Being a staker comes with additional responsibilities. A well-functioning validator is expected to perform its regular duties round-the-clock. Validator tasks include attesting to the current state of the blockchain every 6.4 minutes and constructing or selecting a block when randomly chosen as the proposer for a slot. Failure to perform these duties will result in penalties accruing, which are applied to the initial stake supplied by the operator. Reliable infrastructure will assist in executing these duties correctly and promptly.
Reliable Infrastructure
What exactly constitutes reliable infrastructure? While many elements contribute to the complete equation, the main ones we're concerned with here are internet and power. Running a node on Ethereum requires between 500 GB and 4 TB of bandwidth every month. It also necessitates connecting to numerous peers in a peer-to-peer (P2P) network. Unfortunately, many internet service providers (ISPs) worldwide don't offer plans that support these use cases or could potentially throttle their service above a certain bandwidth usage or when they detect substantial P2P traffic. The default home modem + router combination can also be underpowered and struggle to maintain numerous connections with peers. Services can vary significantly depending on your physical location. It's often challenging to determine the quality of internet service you will receive, even if you thoroughly read the fine print in your contract. Reputable hosting providers will provide you with all the necessary information upfront about their networking and internet service for each plan.
Being without internet or power for a regular node means you cannot access Ethereum. Having a power or internet outage for a staking node means your validators will slowly start losing money due to penalties for missing timely duties. Additionally, having adequate hardware components can also be an issue to address.
Hosting providers can mitigate some of these concerns. Reputable hosting providers will have redundant internet providers, redundant network devices, redundant power supplies, and robust backup power systems. A great hosting provider will manage all hardware issues for you. They usually disclose the hardware components they utilize and often employ server-grade hardware.
EthStaker's Hosting Provider Recommendation
OVHcloud is a recommended hosting provider for Ethereum staking. They offer a dedicated server plan, unmetered public bandwidth, and a policy of being friendly to crypto-related use cases (except mining).
Cost-Benefit Analysis for a Staking Node
While securing the Ethereum protocol is generally not considered an investment, you can profit from performing this task. I will use the simple solo staking case here for the cost-benefit analysis. A solo staker is someone who will perform multiple 32 Ether (ETH) deposits to run one or more validators independently. I will also use USD as the stable currency and the owner's preferred currency for this analysis.
The total benefits or profits you can make by staking can be denoted with a simple formula: the final profit plus the recurring profit minus the initial cost minus the recurring cost, or TP = FP + RP - IC - RC, where:
- TP is the total profit
- FP is the final profit
- RP is the recurring profit
- IC is the initial cost
- RC is the recurring cost
Let's assume someone commits to running validator(s) for a specific period, with a specific number of validators, and that person has to exchange USD to purchase ETH initially and wants to obtain USD at the end. We will define an initial exchange rate and a final exchange rate. The initial cost of running these validators will be primarily the stake required for each validator: the number of validators someone wants to run multiplied by 32 ETH multiplied by the initial USD exchange rate for ETH, or IC = V 32 USDr1, where:
- V is the number of validators someone wants to run
- USDr1 is the initial USD exchange rate for ETH
Similarly, the final profit someone will receive from staking is simply the return of their stake for each validator: the number of validators someone wants to run multiplied by 32 ETH multiplied by the final USD exchange rate for ETH, or FP = V 32 USDr2, where:
- USDr2 is the final USD exchange rate for ETH
As you can see, someone staking will be well exposed to the USD <> ETH exchange rate. All profits are denominated in ETH until they are converted back to another currency. This exchange rate can significantly impact the total profits someone can obtain. You can expect someone delving into staking to have a strong confidence in the ETH value or someone with a high-risk tolerance.
By using a hosting provider, the recurring costs are primarily the plan cost: the monthly cost of the hosting plan multiplied by the number of months someone will commit to staking, or RC = MC * M, where:
- MC is the monthly cost of the hosting plan
- M is the number of months someone will commit to staking
The recurring profit generated from staking is liquid and can be sold immediately after it is withdrawn from the validator's balance or deposited directly into the fee recipient address. For simplicity, I will assume they are converted back to USD at the end of the commitment period. The recurring profit can vary widely depending on factors such as the chances of being selected to propose a block and the fees that can be extracted when proposing a block. For simplicity, I will use a generic average rewards rate. Note that there can be some variance from that average rewards rate to the final rate, but that difference should be smaller the longer the commitment period and the larger the number of validators someone wants to run. The average rewards rate is also dependent on the Ethereum protocol usage and the number of active validators on the network. The more transactions and users there are on the network, the higher the average rewards rate tends to be. The more validators there are, the lower that average rewards rate tends to be. The recurring profit can be denoted with this formula: the number of validators someone wants to run multiplied by 32 ETH multiplied by the average rewards rate multiplied by the final USD exchange rate for ETH, or RP = V 32 ARR M USDr2, where:
- ARR is the average rewards rate over the commitment period per month
This analysis assumes that proper maintenance and monitoring are performed on the staking node to follow all client updates and any other necessary steps to keep it functioning properly. Under normal circumstances and with a proper initial setup, maintenance and monitoring are generally minimal.
There are various other protocols or staking tools that can expose you to the rewards given to stakers without having to spend 32 ETH for a single validator. Some of them offer rewards on a fraction of a validator, for instance. These options can be a good alternative if you cannot afford 32 ETH for a whole validator.
A Few Concrete Examples
Let's use OVHcloud Advance-1 dedicated server plan as our hosting plan. This plan is an excellent offering for running an Ethereum node for several reasons. It comes with a 1Gbit/s unmetered public bandwidth. It is available in numerous regions. It has various storage options. For a great staking setup, you want fast SSDs to run your node. My base setup will be to use the 2x1.92TB SSD NVMe Soft RAID option at $139.37 USD/month (with a 12-month commitment) in the Europe - North America region.
Let's assume the average rewards rate is 3.66% per year, which is approximately the current rate as of today. Our monthly cost for the hosting plan will be $139.37 USD.
Example 1
Let's simplify the total profits formula by assuming that the initial and final USD exchange rates for ETH will be the same, or USDr1 = USDr2. We are left with a much simpler total profits formula: recurring profit minus recurring cost, or TP = RP - RC. Let's also assume that the USD exchange rate for ETH will be $2,938 USD/ETH, the current exchange rate as of today.
Let's compare running 1 validator and running 2 validators for a 2-year period.
For both cases, our recurring cost will be: RC = MC * M = $139.37 USD/month times 24 months = $3,344.88 USD
For 1 validator, our initial cost will be: IC = V 32 USDr1 = 1 validator times 32 ETH times $2,938 USD/ETH = $94,016 USD
For 1 validator, our recurring profit will be: RP = V 32 ARR * USDr2 = 1 validator times 32 ETH times 3.66%/year times 2 years times $2,938 USD/ETH = $6,881.97 USD
For 1 validator, our total profits will be: TP = RP - RC = $6,881.97 USD minus $3,344.88 USD = $3,537.09 USD
For 2 validators, our initial cost will be: IC = V 32 USDr1 = 2 validators times 32 ETH times $2,938 USD/ETH = $188,032 USD
For 2 validators, our recurring profit will be: RP = V 32 ARR * USDr2 = 2 validators times 32 ETH times 3.66%/year times 2 years times $2,938 USD/ETH = $13,763.94 USD
For 2 validators, our total profits will be: TP = RP - RC = $13,763.94 USD minus $3,537.09 USD = $10,419.06 USD
With 1 validator and a $94,016 USD investment, the result would be a $3,537.09 USD profit over 2 years, or approximately a 3.76% return. With 2 validators and a $188,032 USD investment, the result would be a $10,419.06 USD profit over 2 years, or about a 5.54% return. As you can see, the return rate improves with the number of validators you run on a single machine, as the cost of that machine is fixed.
Example 2
Let's assume we are speculating on the price of ETH and the USD exchange rate for ETH. As mentioned previously, anyone willing to engage in staking is likely to have strong confidence in its value over time. Let's assume the price of ETH will be 20% higher after a 2-year staking commitment. Let's assume we are running 2 validators. Let's also assume that the initial USD exchange rate for ETH will be $2938 USD/ETH, the current exchange rate as of today. This means our final USD exchange rate for ETH will be 20% higher, or $3,525.60 USD/ETH.
Our recurring cost will be the same as in Example 1: RC = MC * M = $139.37 USD/month times 24 months = $3,344.88 USD
Our initial cost will be: IC = V 32 USDr1 = 2 validators times 32 ETH times $2,938 USD/ETH = $188,032 USD
Our final profit will be: FP = V 32 USDr2 = 2 validators times 32 ETH times $3,525.60 USD/ETH = $225,638.40 USD
Our recurring profit will be: RP = V 32 ARR * USDr2 = 2 validators times 32 ETH times 3.66%/year times 2 years times $3,525.60 USD/ETH = $16,516.73 USD
Our total profits will be: TP = FP + RP - IC - RC = $225,638.40 USD plus $16,516.73 USD minus $188,032 USD minus $3,344.88 USD = $50,778.25 USD, or about a 27,01% return rate over 2 years with a $188,032 USD investment. Compared to simply holding ETH over the same period, you get a bonus 7.01% return rate.
This last example makes several assumptions and is quite speculative, but it can give you an idea of the potential profits available with staking.
","author":["ethstaker@newsletter.paragraph.xyz (nixo)","ethstaker@newsletter.paragraph.xyz (Rémy Roy)"],"category":["staking","hardware","hosting"],"enclosure":{"@url":"https://storage.googleapis.com/papyrus_images/e9f254d6b7e438ac2866c84da44afd95.jpg","@length":"0","@type":"image/jpg"}},{"title":"Am I a solo staker?","link":"https://paragraph.xyz/@ethstaker/define-solo-staker","guid":"1E574qn09uW6fGuGUhmu","pubDate":"Tue, 30 Apr 2024 00:00:00 GMT","description":"Who cares about defining a \"solo staker\"? Airdrops to solo stakers have a lot of people talking about the definition of a \"solo staker\"...","content:encoded":"ty for feedback to Patches & Adam Hurwitz
Airdrops to solo stakers have a lot of people talking about the definitions of a \"solo staker\". Those who did the work to come up with lists to identify solo stakers had to make some choices about who qualified as a solo staker and who didn't. Understandably, it ruffled the feathers of people who self-identify as solo stakers, some of whom have supported the Beacon Chain since Genesis. Without hard and fast delineations, the whole thing can feel a little gatekeepy, so I'm going to try my best to bring some clarity.
First, we should talk about why it matters. These airdrops are intended to reward those who bring the most decentralization to the chain. These are the non-professional, \"indie\", independent operators of validating nodes. They're a last line of defense against corruption, collusion, and censorship on Ethereum. They're disorganized, erratically engaged, difficult to identify, and nearly impossible to sway in any sort of private interaction. It would be extremely difficult to convince a bunch of solo stakers to collude to benefit some large entity or to comply with changing laws in one of the world's many jurisdictions.
Data has also shown that 'non-professional, indie, independent operators' are also often much more responsible when it comes to network health - when a supermajority client was at nearly 90%, the leading group of minority client users were Rocket Pool node operators and solo stakers. At the time, rated.network was reporting that professional operators ran an average of 600 validators per node whereas independent operators ran 4 validators per node. Client distribution across nodes was healthier than across validators, loosely indicating that smaller, independent node operators were more conscientious about running minority clients.
So, with that in mind, I aim to sort groups not just by where they run hardware but how much control they have over the software that they run and whether decisions can be made for them.
Keep in mind - this aims to be an extremely simplified set of definitions that don't necessarily fully capture the spectrum of variables that could go into measuring the amount of value that a validator setup brings to the chain. Without the ability to directly observe some of these variables (e.g. where is the BLS key and who has access to it?), it's simply not possible to take them all into account at this time.
Solo staker: Anybody who runs one or more 32 ETH validators. They custody their keys, know their specific validator indices, and actively choose their software. This means they must have control over what clients they're running and whether or not they're using mevboost or only building blocks locally. No dependence on location of hardware.
Home staker: Anybody who runs hardware at home. This can be a 32 ETH validator or be using a protocol that lowers the financial barrier of running a validator (Rocket Pool minipools, DVT). This definition is dependent on the location of the hardware. Not all home stakers are solo stakers and not all solo stakers are home stakers.
Remote staker: h/t to adamhurwitz.eth for this one. This is someone who runs their hardware away from where they live. This can be someone who's using a bare metal service (renting a dedicated server at a data center) or a digital nomad who runs it at a friend's house (me!). This person actively chooses their software and custodies their keys. They can be running a 32 ETH validator or be using a protocol that lowers the financial barrier (Rocket Pool minipools, DVT). This definition is dependent on the location of the hardware.
Managed staker: Someone who uses a Staking as a Service provider who controls their config. They deposited ETH (either 32 or something like a minipool), they know their specific validator indices, but they aren't able to choose their clients. In some instances, they may have control over something like whether or not their validator uses mevboost, but control is indirect - you have to ask your provider to turn it on or off.
Liquid staker: Someone who deposited any amount of ETH in return for a receipt token like cbETH, stETH, rETH, etc.
Staker: Anyone with ETH on the Beacon Chain.
And it can all get a bit muddier, so we can mix and match these terms. You can be a home solo staker, or you can be a remote solo staker. A home staker isn't necessarily a solo staker - they can be a home DVT staker or a home minipool staker, just as long as they've got the hardware at home. Bonus, some people are home genesis stakers or remote genesis stakers! (Genesis stakers deposited at the inception, or genesis, of the Beacon Chain). It can get even muddier when a staker is running their software on a combination of hardware in their home and in a data center. What would I call that? For now... an edge case :)
In general, I think I'll stick to describing a staker as:
\"{Where}{How} staker\"
e.g. home solo staker, remote solo staker, home minipool staker
I would argue that the first three (solo stakers, home stakers, & remote stakers) are all a class of independent operators [of validating nodes]. This is the important distinction to make because these are the operators who are in a position where nobody can make decisions for them.
Do we want to address the supermajority situation? An independent operator can switch from the supermajority client to the minority client. Anyone who doesn't manage their config must badger their provider and hope that they understand the situation in time to make the change and that the team has the engineering resources to do so. Do we want the chain to be censorship resistant? An independent operator can decide, without needing permission from anybody, to build blocks locally instead of using mevboost.
Back to airdrops - we love to reward people who put in the work to secure the chain but the tricky part comes in identifying these independent node operators. Being disorganized, disparate, and difficult to identify is a feature for decentralization but a bug for reward mechanisms. At the moment, our best lists are GLC's lists. One is more inclusive than the other and, if you're a project looking to do an airdrop, we recommend that you use List A or contact GLC to discuss the differences. We also have recommendations on some do's and dont's to best ensure that independent node operators are actually able to claim.
At the beginning, there were only solo stakers and professional operators. As Ethereum's Proof of Stake consensus layer has grown and changed, the landscape has shifted around these definitions and I think it's time to start working on better characterizing the different ways that people choose to stake.
","author":"ethstaker@newsletter.paragraph.xyz (nixo)","category":["ethereum","staking","validators","blockchain","cryptocurrency","airdrops"],"enclosure":{"@url":"https://storage.googleapis.com/papyrus_images/7f5915e15d620939ad5386ef3a606562.jpg","@length":"0","@type":"image/jpg"}},{"title":"Enhancing Censorship Resistance Options For Stakers","link":"https://paragraph.xyz/@ethstaker/enhancing-censorship-resistance-options-for-stakers","guid":"hs7IjLjAx0OHMb4x16ht","pubDate":"Fri, 23 Feb 2024 00:00:00 GMT","description":"Newly implemented client features serve for more granularity and expressivity with regards to payload preference for stakers.","content:encoded":"Many thanks to Michael from Lighthouse for feedback.
Lots of things have changed since last attempting to explore and frame the landscape of stakers’ options for extracting Maximal Extractable Value (MEV) nearly 18 months ago, shortly after the merge. With the introduction of MEV-boost as an optional sidecar for processing blocks built by third parties, concerns have arisen primarily around trust assumptions related to relays acting as new intermediaries in block processing. Specifically, worries about their ability to censor transactions.
From today's perspective, these concerns extend not only to relays but also to external block builders. These highly specialized entities, often regulated, find themselves compelled to act in accordance with their respective national legislation. This may involve excluding certain addresses and transactions from block inclusion (e.g., OFAC compliance).
Censorship resistance is a fundamental promise of the Ethereum network. For the given article, the definition of censorship revolves around whether a transaction can or cannot be appended to the blockchain. The latter case may arise when a transaction deems invalid, a block happened to be full, or a slot remained empty. If a transaction has been publicly available but not included in a block, however, we may refer to it as temporary or weak censorship, which can last seconds or even minutes due to censoring block builders or relays refusing to process it further.
This situation undermines Ethereum's credible-neutrality pledge. The remaining neutral block space consists of either non-censoring external builders or of non-MEV-boost blocks produced by altruistic self-builders who construct blocks locally, per default without censoring.
To strengthen censorship resistance, comprehensive protocol-level solutions are essential. Encrypted mempools, inclusion lists, MEV-burn, or even enshrined Proposer-Builder-Separation (ePBS) are promising options. These mechanisms aim at increasing the costs of censorship for block builders or render relays obsolete altogether.
However, until these technologies are fully deployed or at least partially implemented, it seems worthwhile to continually refine transitional mechanisms for stakers to tackle censorship. While relying on altruistic actors is suboptimal in of itself, they should at least be provided with ways to minimize the costs of their altruism.
Until recently, stakers faced three practical choices:
Complete Abandonment of MEV-Boost: Some stakers opted to entirely forgo using MEV-boost, which means missing out on significantly higher additional returns, including the chance to propose rare lottery blocks.
Static Minimum Bid Threshold in MEV-Boost: Others set a static minimum threshold (-min-bid) for processing external blocks (technically referred to as \"payloads\") within MEV-boost. For instance, they might choose a long-term median MEV reward value (typically around 0.04 - 0.06 ETH per payload).
Leveraging client-specific parameters: Other stakers have ventured into the depths of client documentations and configured their client to allow for an individual preference to be set following the valuation comparison of external and local payloads (e.g. builder-bid-compare-factor in Teku, or prioritising local blocks in Prysm)
\n 47\n \n 10:06 • 15. Dez. 2023
\nWith the introduction and rollout of a new standard beacon-API (blocksv3), the features specifically outlined in section (3) have been harmonized across all clients and are currently being deployed in recent client releases. The essence of this advancements lies in enabling a more nuanced and granular expression of payload preferences by stakers.
The builder_boost_factor is a parameter that stakers can now select on a per-validator basis. For validators utilizing MEV-boost, this parameter offers increased granularity and control over whether to propose a local or external payload. Importantly, this represents a significant improvement over the static threshold set by the -min-bid flag in MEV-boost, as mentioned in (2).
In practical terms, the builder_boost_factor acts as a percentage multiplier applied to the external builder payload when comparing it to a local payload. If the builder_boost_factor is set to 0, the execution client payload is preferred unless an error renders it unviable. By default, clients use a builder_boost_factor of 100, which corresponds to profit maximization mode—choosing whichever payload pays more.
In other words: In the example illustrated above a staker is willing to altruistically give up on at max 30% of their average execution rewards in favor of censorship resistance.
Note: A specified -min-bid value in MEV-boost may lead to not providing the consensus client with an external payload at all.
Additionally, the new endpoint is capable of returning locally constructed payloads from all connected beacon nodes (not just one) in a much faster way. This essentially widens the local view of the mempool and thus the scope of potentially censored transactions. In cases where a user runs one or multiple failover nodes or uses Vouch, this feature ensures a more efficient selection of the most valuable (local) payload among several.
Overall, the harmonization of the above mentioned functions across all clients marks a valuable progression, especially when considering more complex multi-client setups such as those found in DVT clusters.
The recent addition of the should_override_builder field to the execution-APIs allows the execution client to monitor the mempool and look for signs of ongoing censorship from block builders. By employing certain heuristics, it is now possible to identify transactions that may potentially be censored. Depending on the client implementation, there is an increased flexibility to revert to local block production when necessary.
All this is to say that newly implemented client features allow for fine-tuning stakers’ subjective cost preference for providing credibly-neutral block space.
","author":"ethstaker@newsletter.paragraph.xyz (Ladislaus)","category":["staking","validators","ethereum","network health"],"enclosure":{"@url":"https://storage.googleapis.com/papyrus_images/86b561a0051ed3590adea48a1d0facd9.jpg","@length":"0","@type":"image/jpg"}},{"title":"Announcing the DVT Home Staker Program","link":"https://paragraph.xyz/@ethstaker/dvtprogram","guid":"m0dDAZl9N9AwrngH33UQ","pubDate":"Tue, 12 Dec 2023 00:00:00 GMT","description":"tl;dr - Even with lower-bond DVT validators, many people can't justify buying hardware. This 10-week pilot program aims to create and subsidize hardware for new node operators","content:encoded":"Even with lower capital requirements with DVT, many people can't justify buying the hardware for the rewards. EthStaker, in collaboration with Diva & Stakesaurus, is launching a 10-week pilot program to create and subsidize hardware for new node operators
DVT and Capital Requirements: DVT protocols reduce the need for large initial investments (32 ETH) to operate a validator, allowing for a 1 ETH bond and collaboration with other users to meet the full requirement
Economic Viability: A standard 32 ETH validator can earn about $150/month, recouping hardware costs in 4-5 months. However, for a DVT setup with only a 1 ETH deposit, the return doesn't justify the hardware investment (for now! Hardware costs are forever going down)
EthStaker is a grant-funded organization dedicated to decentralizing the validator set primarily by supporting home stakers with resources and technical guidance. To address prohibitive hardware costs, we're introducing a pilot program to facilitate new home stakers using DVT
Cohort: The first group will consist of twenty stakers, aiming to draw applicants of diverse skill sets and from areas that are underrepresented in node distribution
Curriculum: Participants will engage in a practical curriculum, achieving milestones for setup, practicing on testnet, and eventually making a mainnet deposit
Incentives: After two months of successful mainnet operation, participants will be reimbursed for their hardware costs, allowing subsequent rewards to be 100% profit
Timeline: Application details will be released soon. The selection is expected by mid-January for a February program start
Duration: A 10-week asynchronous course on our Discord forums. Each week will have a milestone for participants to achieve
Content: The course covers fundamentals, node operation basics, testnet practice, and concludes with a mainnet deposit
Cost: No cost (outside of initial hardware purchase & mainnet deposit)
Mentorship: A mentor specifically dedicated to this program will hold 3 office hours per week for guidance
Hardware Investment: Participants must initially invest in the necessary hardware (approximately $500-800). Reimbursement will require program completion, with a validator live on mainnet for two months (dependent on Diva mainnet launch date)
Capital for Validator Deposit: A 1 ETH bond is required for the mainnet DVT validator deposit
Internet Connectivity: A stable and reliable internet connection with over 2 TB of monthly bandwidth is essential
Skill level: Must have experience using a self-custodied Ethereum wallet and be willing to be guided through command line usage!
The application to participate will be open on ethstaker.cc/dvtprogram on Friday, 15 Dec and will close on Friday, 19 Jan
EthStaker is partnering with Stakesaurus and Diva to pilot the program. Stakesaurus is a well-regarded staking guide creator who runs a business in SEA doing 1:1 hands-on training for solo stakers. Diva is a DVT-integrated liquid staking protocol, currently in testnet phase. We're aiming for the conclusion of the program to coincide with Diva's launch on mainnet. EthStaker intends to partner with additional DVT programs for future cohorts
You can leave a comment here, pop over to EthStaker's #general Discord channel (discord.gg/ethstaker), email us (team at ethstaker dot cc), ask a question in our subreddit (reddit.com/r/ethstaker), or tag us on twitter (twitter.com/ethstaker)
","author":"ethstaker@newsletter.paragraph.xyz (nixo)","category":["staking","validators","ethereum","blockchain","cryptocurrency","beginner"],"enclosure":{"@url":"https://storage.googleapis.com/papyrus_images/df11881d383255103959e8209bfca394.png","@length":"0","@type":"image/png"}},{"title":"Tickets are available and schedule is live for Staking Gathering","link":"https://paragraph.xyz/@ethstaker/tickets-are-available-and-schedule-is-live-for-staking-gathering","guid":"vJARq66exNZ8Is4Fqout","pubDate":"Fri, 15 Sep 2023 13:30:15 GMT","description":"Hey there EthStakers!The moment you've all been waiting for is finally here - tickets for the Staking Gathering event are officially on sale! This is ...","content:encoded":"Hey there EthStakers!
The moment you've all been waiting for is finally here - tickets for the Staking Gathering event are officially on sale! This is your golden opportunity to join the vibrant EthStaker community in Istanbul for an unforgettable weekend of talks, panels, workshops, and networking, all dedicated to maximizing the decentralization of the Ethereum network.
Here's the lowdown on what you need to know:
Limited Supply of Tickets and Ticket Waves: We're thrilled to announce that tickets are available, but they are in limited supply. It's a first-come, first-served situation, so don't miss your chance to secure your spot in the heart of the Ethereum action. Tickets will be released in waves, with Wave 1 going live on September 15th, offering 128 tickets. Keep a close eye on our social channels (linked below) for updates on future ticket waves in case you miss this one.
Special Voucher Codes: For our sponsors, volunteers, speakers, or event partners, we've got you covered. You won't need to purchase your own ticket. We'll be reaching out to you individually with voucher codes. Stay tuned!
Ticket Price: General admission tickets are priced at $100 USD. This is your investment in an enriching experience and the chance to connect with like-minded Ethereum enthusiasts.
Your Ticket: Once you've snagged your ticket, you'll be able to download it as a PDF complete with a QR code. Make sure to bring it with you during registration. You'll also find it conveniently linked in your order confirmation email.
Live Schedule and Speaker Opportunities: We're thrilled to announce that our event schedule is now live! While most of our speakers are confirmed, keep in mind that we may still make some tweaks and additions as we get closer to the event. Interested in speaking at the event? You can still apply for a talk, but please note that new applications are likely to be placed on our waitlist unless we experience cancellations.
Sched App: We're using Sched as our scheduling application, available on the web and as a mobile app. We highly recommend creating your own schedule and tagging the talks you're eager to attend. It provides an intuitive experience for both attendees and speakers.
Don't miss out on this incredible opportunity to be part of the Ethereum staking revolution! Get your tickets now, and mark your calendars for November 13th and 14th, 2023, in Istanbul.
Join us for two days of knowledge sharing, networking, and community building. We can't wait to see you at the Staking Gathering event as part of the Devconnect conference. Let's make history together!
Stay connected with us on our social channels for all the latest updates and announcements. It's going to be an epic Ethereum gathering!
","author":"ethstaker@newsletter.paragraph.xyz (Rémy Roy)","enclosure":{"@url":"https://storage.googleapis.com/papyrus_images/fbc22138ab72e7bd0af07780c953b1f1.png","@length":"0","@type":"image/png"}},{"title":"clientdiversity.org execution diversity data","link":"https://paragraph.xyz/@ethstaker/new-clientdiversity-data","guid":"bPlLCiDBpOTn86ev4jUq","pubDate":"Thu, 31 Aug 2023 00:00:00 GMT","description":"tl;dr: clientdiversity.org has removed ethernodes data and now only shows execution-diversity.info data. This is because the two datasets are not compa...","content:encoded":"tl;dr:
clientdiversity.org has removed ethernodes data and now only shows execution-diversity.info data. This is because the two datasets are not comparable and don’t answer the same question.
ethernodes scrapes the network and answers “how many peers might run each client?”, which is a reasonably accurate count of number of nodes, but says nothing about number of validators on those nodes. For Ethereum, it matters that a client does not have a supermajority of validators. Whether it has a supermajority of individual nodes is not concerning to the health of the network.
execution-diversity.info better answers the question of “What is the state of client diversity on the Ethereum network?”, which is what matters for safety from a supermajority bug.
Note: ethernodes and execution-diversity.info data are both Bitfly-affiliated projects. Thank you to Butta for letting me interrogate him about both
There was recently an update to the data published on clientdiversity.org. The data that was shown before is from ethernodes.org and showed that execution layer client diversity had improved to the majority client being only ~48% of the network. This seemed to be a huge improvement over the ~70-80% range we had been seeing in months previous. However, the data source was changed to execution-diversity.info and what’s displayed now shows that the supermajority client is ~84% of the network. So why the change? Was the improvement we witnessed a phantom? Which dataset is correct?
execution-diversity.info methodology is simple to understand: Large operators were simply asked what clients they run. It’s assumed that these operators are honest and they have no incentive to misrepresent their setups. Only a portion of the network is covered by this manual survey (estimated 57%). This data is likely similar to other large operators on the network that aren’t covered. It may not be representative of home stakers, who likely represent a majority of nodes but a very small minority of validators.
It’s important to note that the number we’re after is client diversity across validators. So while this means that execution-diversity.info may underrepresent home stakers, it wouldn’t have a very large impact on how accurate the data is overall.
Ethernodes uses a node scraper that connects to a node that has a free peer, collects some data, and then disconnects. This means that if a node doesn’t have any free peers, it will be invisible to the scraper. There are a number of things that can influence whether a node has free peers and those factors might be more or less relevant to certain clients, which would influence how ‘visible’ they are to the scraper. For example, if a client’s default peer count is set very high, it has more available slots and may therefore be more likely to have a free peer for the scraper to connect to. In this case, that client would be overrepresented in the data.
As is noted in a paper published in 2022, available peer slots are scarce resources, so the ethernodes data, like the execution-diversity.info data, is only representative of a portion of the network. What portion of the network is unclear.
Are professional operations less likely to have available peer slots and thus be invisible to a scraper? That would mean that home operators would be overrepresented in the data. Home operators have a lower barrier for switching clients (less complicated setups, answering to no one for some missed attestations) and are likely to be engaged with the community and conscious of the need for client diversity, so an overrepresentation of home stakers would make client diversity look healthier than its actual state.
Maybe the node scraper gets an abundance of data when a setup is coming online from 0 - are home operators more likely to be these setups? A professional operator will add or subtract validators from an existing setup and run thousands of keys with a low number of nodes, whereas a home operator may be bringing on a node for a single validator. They’re also more likely to do something silly, like allow their hard drive to become full and need to resync the database.
So while execution-diversity.info may underrepresent home stakers, ethernodes may overrepresent home stakers, who account for a much smaller portion of the overall number of validators.
Ethernodes data doesn’t answer the question “what is the client diversity of the overall network” but rather “what clients have the most free peers”, with client diversity being only one variable in this equation.
For this reason, clientdiversity.org has removed the ethernodes data in favor of the execution-diversity.info data. Neither is perfect, and the latter will require manual check-ins to receive updates to the data but, without knowing how exactly ethernodes data correlates to overall diversity, we believe that execution-diversity.info data better highlights the state of execution layer client diversity than ethernodes data.
","author":"ethstaker@newsletter.paragraph.xyz (nixo)","category":["staking","client diversity","ethernodes","validators","ethereum"]},{"title":"EthStaker Staking Gathering 2023 in Istanbul","link":"https://paragraph.xyz/@ethstaker/ethstaker-staking-gathering-2023-in-istanbul","guid":"HteAZ6C8ZWPVcGDT6DWr","pubDate":"Tue, 22 Aug 2023 15:34:18 GMT","description":"Are you passionate about Ethereum staking and looking to immerse yourself in the latest developments and discussions? Look no further! We are thrilled...","content:encoded":"Are you passionate about Ethereum staking and looking to immerse yourself in the latest developments and discussions? Look no further! We are thrilled to announce that EthStaker is once again hosting the Staking Gathering event at Devconnect in Istanbul, and we can't wait to welcome you on November 13 and 14, 2023.
Devconnect is a unique week-long gathering of independent Ethereum events, providing an incredible platform for learning, sharing insights, and advancing the Ethereum ecosystem as a community. This year, EthStaker's Staking Gathering is set to be a standout event within the Devconnect lineup.
After a successful debut in Amsterdam, where we saw an enthusiastic turnout of around 450 attendees, we are excited to bring the Staking Gathering back for its second iteration. Our previous event in April 2022 was a resounding success, and we're confident that this year's gathering will be even more impactful.
This two-day event is all set to take place at the Hilton Istanbul Bosphorus, just a quick 3-minute stroll away from the Devconnect co-working space. We've lined up an impressive lineup of speakers, including Danny Ryan, Core Researcher at the Ethereum Foundation, Sreeram Kannan, founder and CEO at EigenLayer, and Collin Myers and Oisín Kyne, co-founders at Obol. These thought leaders are sure to provide unique insights and perspectives on Ethereum staking and related technologies.
Our event promises to deliver deep-dives into a range of topics, from protocol design and distributed validator technology (DVT) to discussions on liquid staking token (LST) protocols, restaking strategies, and more. With two stages dedicated to talks, panels, workshops, and discussions, you're guaranteed to find sessions that align with your interests.
We're still on the lookout for passionate individuals to join us as speakers, volunteers, and sponsors. If you're eager to contribute to the event's success and share your expertise with the community, we'd love to hear from you.
In addition to the rich lineup of sessions, the venue offers opportunities to connect with sponsors, visit booths, and unwind in a designated chill-out area. And don't worry, food and beverages will be provided throughout the event to keep you fueled and energized.
For all the latest details about the EthStaker Staking Gathering 2023, including updates on speakers, schedule, and logistics, be sure to visit our official event page: https://ethstaker.cc/staking-gathering-2023 .
So mark your calendars for November 13 and 14, 2023, and get ready to be a part of an engaging, enlightening, and inspiring event. We can't wait to see you in Istanbul!
Authors: Nixo(a), Thorsten Behrens(a,b), Sam Coffey(a,c)
a. EthStaker, b. CryptoManufaktur, c. POAP
Contact: team@ethstaker.cc
Call to action: Node operators should diversify their execution clients away from a majority Geth setup. In the current supermajority execution client environment, there is a significant monetary risk present for operators running only Geth.
Ethereum is built to be a robust and resilient network with 100% uptime. In order to achieve this, any central point of failure is identified, addressed, researched, and mitigated. Decentralization of these points of failure is a multifaceted problem that requires active and ongoing attention at every layer of the stack, including but not limited to geography, software implementations, hardware in use, block building methods, staking pool protocol dominance, etc.
Ethereum client diversity is a focus of the staking community, especially among those who run nodes. Maximizing client diversity benefits the network as a whole, keeps an operator’s investment safe and robust, and minimizes the potential of a catastrophic event due to an error in a single client, which would impact every entity: individual and commercial operators alike.
This document summarizes the current state of execution clients, especially at scale, and asserts that this state is more than sufficient to begin to push for diversification into two minority execution clients, Nethermind and Besu, for larger operations. Large staking operations would be prudent to consider diversifying their validators into a mix of execution clients and away from a Geth majority.
EthStaker initiated a concerted effort in late 2021 to inform stakers and larger staking operations of the vulnerability that was created by the Prysm consensus client supermajority that existed at the time. Prysm was a robust first-mover in the consensus client software arena but, by that time, Lighthouse, Teku, and Nimbus were on par with Prysm performance, and the supermajority represented an urgent threat to the beaconchain.
Solo stakers, who are generally very engaged, quickly began switching to minority clients, and many larger staking operations followed, committing to diversification. Data and testimonials from the EthStaker community that reported their experiences with these minority clients helped enormously. Prysm soon lost its supermajority while the presence of minority clients, especially Lighthouse, began to climb. Today we are at a much healthier, though not perfectly ideal, mix of consensus clients. With five viable and robust consensus clients, we would ideally see each at an equal 20% marketshare.
An incident in May of 2023 illuminated the potential vulnerability of unpredictable software bugs. An exceptional scenario caused many nodes to struggle to follow the chain and led to a delay in finality for four epochs on May 11th and for nine epochs on May 12th. The issue was assessed, diagnosed, and fixed by patches to the Prysm and Teku clients the following day. The full post-mortem can be found here.
During these issues of delayed finality, transactions continued to be processed on the network with no effects felt by the end user. This was possible because Lighthouse had a different design approach and dealt with the situation in a way that Prysm did not (Lighthouse and Prysm currently represent ~75% of the network).
Had Prysm still been a supermajority, the effects of this bug would have been far more severe for both the network and stakers, who experienced an inactivity leak for the first time in Ethereum’s history - this penalty affects non-attesting validators and grows quadratically over time. Validators that continued to attest (Lighthouse users) did not experience this penalty.
Execution client diversity data is more difficult to assess than consensus client diversity data. The consensus client utilizes the execution client and publishes blocks, leaving fingerprints in the way that they order attestations, but the execution client doesn’t leave identifiable traces on-chain.
There is currently an effort by execution-diversity.info to gather self-reported data from staking providers about the execution clients that they use. Some protocols (e.g. Lido) conduct quarterly surveys where this data can be found, some (e.g. Rocket Pool) make theirs visible through graffiti, and some have reported privately.
With 44.5% of the network self-reporting, Geth comes in at 86.8%, a worrying supermajority. Until now, EthStaker has made an intentional decision to not push for execution client diversity because of the state of the other execution clients - they simply weren’t robust or reliable enough to replace Geth, especially in commercial staking operations.
Geth is a safe execution client to run until there’s a bug either in a Geth release or an exceptional scenario similar to the one that affected consensus clients in May of 2023 arises on the execution layer. The likelihood of this arising is very small, but with Geth at an estimated 86.8% share of the network, this scenario would be catastrophic.
These recommendations are based on extensive testing on mainnet and testnets, within the community and reported by Cryptomanufaktur and Ethpool.
Cryptomanufaktur is a commercial node operator running thousands of keys for various entities and has been testing minority clients at scale for robustness and reliance in an effort to identify an appropriate time to push for execution client diversity and has shared findings with EthStaker. Ethpool by bitfly was known for running the largest Ethereum mining pool, Ethermine. Since genesis, they relied on Geth and Parity clients. However, after extensive testing and the recent shift of block building to relays, Ethpool has switched to running Nethermind for their thousands of keys.
EthStaker is confident recommending minority clients Nethermind and Besu for at-scale operation. While all three minority clients (Nethermind, Besu, Erigon) are being used in production with at-scale validation, Nethermind and Besu currently present the lowest risk.
Geth
The main advantage of running Geth is that it is reliable and battle-tested and has been shown to be robust under normal circumstances. It prunes offline and is working toward path-based state storage (PBSS), which will remove the need to prune entirely.
At its current supermajority status, the use of Geth presents a risk to both Ethereum as a whole and to the individual operator running it. This risk is discussed in the next section.
Nethermind
A recent release by Nethermind (v1.8) allows an operator to start attesting to blocks in ~1 hour, and download old bodies and receipts with better attestation in 4 hours. Nethermind can online prune and is also working towards PBSS.
Nodes running Nethermind were seeing an issue where the client would resource-starve a machine during prune, but this has been addressed and fixed in recent released by Nethermind and nodes running Nethermind are no longer experiencing this issue.
Besu
After the merge, there were reports that Besu was slow in processing blocks, causing missed attestations. This issue has been addressed and fixed by their latest releases. A current potential point of concern is that when it runs out of space, it needs to be resynced, which results in downtime while resyncing for that CL-EL pair.
Erigon
Erigon is stable and robust with efficient syncing but is not yet recommended for commercial stakers or larger operations.
Erigon has a history of changing command line parameters in a breaking manner without warning. Additionally, when Erigon moves to their V3 and V4, the versions will require operators using their software to complete full resyncs from scratch. These are the primary reasons for not recommending their use in larger operations at this time.
The primary focus of this memo is the risk associated with Geth, specifically the vulnerability it introduces through a supermajority. Should an extraordinary situation occur in a supermajority environment where validators using Geth are left isolated and operating on a separate chain, there is a significant monetary risk to the node operator running Geth.
In a blog post in February of 2022, developer Jonathan Cook (jmcook.eth) addressed the risk of execution client diversity in the context of consensus client diversity:
a bug affecting the execution clients can also propagate through to the consensus layer since, after the merge, the two will be coupled together with the execution payload generated by the execution clients being a core component of Beacon Blocks.
There are two significant numbers to look for here when evaluating the risk of a client’s dominance to the chain: 33% and 66%.*
33%
33% of the network experiencing failure can prevent finalization of the chain - it is not catastrophic, but it does present a potential monetary loss for validators unable to attest correctly. This is the scenario that occurred on the consensus layer where affected clients represented more than 33% of the network.
In order to encourage adoption of the multi-client architecture that Ethereum utilizes to maximize its robustness, penalties are dynamic and are highest for highly correlated errors. If one validator goes offline, penalties are minor. In the case of a non-finalizing chain, where between 33 and 66% of the network are unable to attest and Ethereum fails to finalize for some number of epochs, the chain enters a “inactivity leak” mode, where non-attesting validators are penalized a quadratically increasing amount each epoch until they have leaked enough for the attesting validators to finalize the network or until client developers are able to diagnose the issue and release a patch for the affected clients.
This penalty is 1% of the validator’s balance at ~4.5 days, 5% at ~10 days, and 20% after three weeks, as outlined in a March 2022 blog post by Dankrad Feist, a researcher at the Ethereum Foundation.
66%
There are three types of bugs to consider for a failure by a client that is being run on >66% of validators on the network, outlined in Dankrad’s above-mentioned blog post:
a bug that creates a double-signing event
a bug that causes validators running that client to be offline
a bug where validators running that client produce an invalid block.
With the first (very unlikely) type of bug, all validators running the supermajority client would be slashed and penalized the entire value of their validator’s balance. With the second type of bug, they would experience the inactivity leak until validators running other clients are able to finalize with their increasing portion of the network.
With the third type of bug, validators running the supermajority client would finalize an invalid chain. At this point, the majority of the network would be following this invalid chain. This would throw the network into chaos because it would require an intervention from the social layer to decide whether to recover the valid chain or continue with the invalid chain because the majority of validators followed it. Such a bug is illustrated in an example on the Kintsugi testnet in early 2022, where a missing check in two clients resulted in an invalid block being declared valid and, even after the fix was deployed, an additional related error caused validators on another client to fail to join the valid fork.
This would not only affect validators, but every application built on top of Ethereum that continues to operate during this period. A social layer intervention could choose to slash and severely penalize the affected validators, simply exit them from the network, or choose to follow a chain that isn’t valid. Any available choice here would shake faith in the immutability and reliability of Ethereum.
Geth is currently run by an estimated 86.8% of validators on the network.
*There is an additional disruptive scenario between 50 and 66% of the network, where buggy validators would still build a second chain, and it would be subject to the same inactivity leak. You can read about it in Dankrad’s blog post.
Low. Client developers test their implementations and compatibilities on testnets under a variety of circumstances and, with a number of clients in active development, it is likely that at least one will catch most bugs and work together to avoid errors on mainnet. But just as we did not anticipate the non-malicious bug that occurred on the consensus layer recently, there will always be unpredictable bugs that are caused by exceptional circumstances and we should be prepared for that scenario. In our current state of execution client diversity, such a bug would require social intervention, likely causing a monetary loss to a majority of validators, and be catastrophic for Ethereum’s reputation.
For commercial operators EthStaker recommends avoiding a monoculture client setup and instead running a mix of EL and CL clients. In a mix of clients, any client pair presenting an issue can be taken out of operation without issue.
For small scale or individual operators If switching to a new execution client results in a worst case scenario, the operator will be offline for 1-2 days while they switch to another client. Offline penalties are minor and should not be a major concern for small operators.
An execution client supermajority represents an urgent threat to the network and the state of execution clients has now reached a point where at least two minority clients, Nethermind and Besu, can be confidently recommended by EthStaker for use in large staking operations. It is in every operator’s best interest to diversify their execution clients or move to minority clients entirely to minimize their risk.
Client Diversity Initiative. (https: /clientdiversity.org/)
Offchain Labs. \"Post-Mortem Report: Ethereum Mainnet Finality - 05/11/2023.\" (https: /offchain.medium.com/post-mortem-report-ethereum-mainnet-finality-05-11-2023-95e271dfd8b2)
Edgington, Benjamin. \"Inactivity Leaks.\" Eth2.0 Book. (https: /eth2book.info/capella/part2/incentives/inactivity/)
Execution Diversity. (https: /execution-diversity.info/)
Cook, JM. \"The Importance of Client Diversity in Ethereum.\" (https: /mirror.xyz/jmcook.eth/S7ONEka_0RgtKTZ3-dakPmAHQNPvuj15nh0YGKPFriA)
Feist, Dankrad. \"Run the Majority Client at Your Own Peril.\" (https: /dankradfeist.de/ethereum/2022/03/24/run-the-majority-client-at-your-own-peril.html)
Parithosh. \"Eth2 Merge Call Notes.\" (https: /notes.ethereum.org/@parithosh/BkkdHWXTY)
For people who have been in crypto for a few cycles, it’s not hard to separate out the most obvious scams and gambling from projects that aim to create real-world value. To identify projects whose developers and community and enthusiasts are there for the tech, and not for a get-rich-quick scheme. For people new to the space, it can be a bit harder to distinguish without the context to understand what the root causes of these scams and catastrophic events have been.
So if you’ve recently heard about staking and you’re wondering if it’s just another thing that could rug people of their life-savings with one founder-exit or exploit, I’m here to help you understand what happened in the biggest catastrophic crypto events you’ve heard in the news and also how to avoid them in the future.
Let’s split these events into three categories: traditional banks, centralized platforms, and crypto itself. These three categories will be about what kind of asset was involved (e.g. dollars or crypto?) and who had custody of those assets.
These events had nothing to do with and no impact on how crypto fundamentally works. They do have implications on and are symptoms of how crypto is treated by the government and financial sectors, but these events posed no risk at all to people who hold crypto themselves. Their biggest impact on crypto projects was de-banking them. No matter how much we believe in crypto, banks are the current reality, and one needs a bank account to be able to operate a business in order to pay for real-life services that don’t yet accept crypto. Bank mismanagement and subsequent government intervention will make other US banks think twice about providing bank accounts to businesses whose core product centers around crypto. This will play out in courts and you’ll see a lot of campaign material on supporting or fighting crypto in the next election. If the US wages a war on crypto, the outcome will be that tech innovation in that sector will move overseas and continue building there.
This is an illustration of the importance of self-custody. FTX was a centralized exchange (CEX) and functioned as a bank… but without the oversight and regulation of a bank. They were able to do that because the US government hasn’t provided any clarification on what crypto ‘banks’ need to be doing to be compliant with laws that are designed to protect investors. We desperately need these clarifications and new laws that will govern how these custodial entities operate.
In order to use FTX, you sent them your assets. Sending your assets to FTX meant that you no longer held the keys to those assets, you just trusted that they were keeping good records of the assets that you had sent them, were taking good care of them, and would send them back to you when requested. This is the opposite of onchain activity. It is antithetical to the ideals that created crypto.
These were also centralized entities - they weren’t made for trading (not a CEX), but they were entities that took custody of your assets and promised to hold onto them for you. They were marketed as ways for people uncomfortable with crypto to engage with it in a more recognizable way. They prioritized ease of use so that your grandma could figure out how to deposit money and get yield from crypto.
In reality, these entities were far more dangerous than investing in crypto yourself. Imagine the most risk-seeking person you can - that person is essentially who was generating the yield that BlockFi and Celsius were promising you. They took these extremely risky traders, bundled them together, and packaged them up as a product that would generate yield on the assets that you deposited. This worked great… when the market was up-only. As soon as these traders started to lose money with their risky bets, the product no longer worked - and your grandma found out that she was considered an ‘unsecured creditor’ - a phrase she had never heard before she learned that she wasn’t getting any of her money back.
A note on CEXs
So why do entities like this exist?
CEXs function as a way to turn government currencies into crypto on a platform that requires you to show your identity. This is an anti-money laundering, anti-tax evasion measure. CEXs will typically have you upload your government-issued ID so that they can, if necessary, report your activities to tax revenue services (e.g. IRS) or law enforcement agencies (e.g. FBI). This is known in the traditional finance world as KYC - ‘know your customer’.
They also function as a place for people to save on gas while trading. Because you’re not actually transacting onchain, the CEX can just record on their internal ledger “Bob traded 15 XXX for 1 ETH, so deduct 15 XXX from his account and add 1 ETH.” No funds move when you do this - the CEX just changes their internal records on their centralized database. So traders can trade back and forth without needing to pay onchain gas fees, which can be high depending on chain activity and what network you’re using.
This is why CEXs should only be used to buy and sell cryptocurrency. You should not be using a CEX to store your assets long-term. If you’re not actively trading, you should move your assets to an onchain, self-custodied wallet.
Unfortunately, this is one on the list that actually was crypto. This is one of those ones that would have been difficult at the time for the untrained eye to identify for sure as a scam. Terra created a stablecoin, a coin whose value is pegged to the value of the US dollar, and called it UST. The stablecoins you might already be familiar with, like USDC and USDT (Tether) are backed by real-world assets that ensure their value. UST was an algorithmic stablecoin, which is to say that there was a complicated mechanism behind it that’s meant to ensure its value. UST maintained its peg by an algorithm tied to its cryptocurrency LUNA. An algorithmic stablecoin is very difficult to get right and risks a de-pegging event where it very quickly plummets to zero, as UST did.
The biggest red flags that personally kept me away from the Terra LUNA fiasco were its incredibly rapid growth, the high yields promised on its stablecoin, and the hubris of its founder. Stablecoins should be boring - they’re not meant to produce high yield, they’re meant to produce stability. And it’s a trope in crypto that, once a crypto founder becomes the ‘main character’, it’s doom from there. Arrogance, a god-like sense of self, and high social media engagement (instead of building) are signs that there might be just a bit more hubris in a project than there is actual product. These aren’t absolute, foolproof signs of a scam, but they certainly should make you wary.
Crypto is full of scams because there’s excitement about a tech disruption. Tech disruptions happen when everybody’s arguing about how to make some technology better while someone comes along and changes how that technology fundamentally functions in society. It happened to the telegraph when the telephone came along, to the radio when television came along, and to personal computing when the internet came along. We can see the disruption, but it takes a community of innovators to figure out what it makes possible, so people rush around trying to find which innovators are finding the best product-market fit for the new technology.
The problem is that the people running around with cash in their hands looking for the innovators don’t always know how to recognize those innovators. So grifters see the opportunity and LARP as an innovator while venture capital (VC) and retail pours money into their lap, hoping to get in on what’s fundamentally good tech - but the grifter isn’t actually building something innovative, they’re building whatever will keep money pouring into their laps. As long as VCs and retail have targets on their back by throwing money around without doing research, and as long as the government refuses to regulate who can hold assets for those VCs and retail investors, grifters gon grift.
The only reason the scams exist is because anybody who spends some time learning about it can sense that something very exciting is happening and that opportunity is lurking around somewhere, but not everybody has the time or resources to sift through the garbage.
It’s up to you to do your own research (DYOR), but staking on Ethereum is a sustainable yield generated by helping secure Ethereum. Yields are low, nobody custodies your assets, and everything is transparent. Staking is an agreement between you and a smart contract. Yield from this smart contract is dynamic to keep it sustainable - as more stakers enters, yield goes down. If stakers leave, yield goes up. This way, it finds an equilibrium based on what operators think is fair for their labor. Current yield is viewable on the Launchpad.
The deposit contract is audited, can be viewed here, and sits directly on the most decentralized network of node operators in the world. Meaning - no one can go in and unilaterally edit the contract or manipulate the validators. Every change to the protocol is proposed, meticulously discussed, debated, planned, tested, and implemented by hundreds of developers from different organizations - the entire process is transparent and you can even sit in on these meetings if you’d like.
Proposals are first drafted here: https://github.com/ethereum/EIPs/
They’re officially proposed here: https://eips.ethereum.org/
The EIP process is explained here: https://eips.ethereum.org/EIPS/eip-1
Discussion happens over months or years in the all core devs calls that you can watch live or even join in on: https://www.youtube.com/@EthereumProtocol/streams
It’s always safer to keep your funds in a cold wallet, but if you’re willing to put in a bit of research and effort, staking is, in my opinion, the best option if you want to put your assets to work in a sustainable way.
If a centralized entity is custodying your funds, they are at risk
If it feels like gambling, it probably is
If it feels too good to be true, be very wary: it probably is
If your trust in a product hinges on a famous influencer personality, be cautious
A cold wallet is always the safest place to keep your assets
Always DYOR: having context is key to understanding how a product works
As always, if you find any inaccuracies in these blog posts, please contact nixo and let her know so she can hastily correct them.
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Whether you’re looking to stake only your own assets or learning about staking to get your company involved or wanting to stake as a service for others, these are all important concepts that are relevant to you.
For the sake of clarity, let’s separate staking into four separate camps, from most recommended to least recommended:
Solo staking
Running a minipool
Staking with a decentralized service
Custodial Staking (centralized)
Think of these four options as a spectrum. Solo staking is on one end of the spectrum, custodial staking on the opposite. The space in between them is a range of options where a staking service could lie.
Our answer is 22%. The ideal is more like all entities controlling less than 10%, but EthStaker is comfortable with the idea that no operator should control more than 22% of the network.
\n \n \n \n \n 70\n \n 2:50 PM • Apr 3, 2023
\nSolo staking is operating a 32 ETH validator - you hold the keys for that validator, and there’s no smart contract between you and the Beaconchain. It’s the safest way to stake because the only risk is Ethereum itself imploding. Once you start adding contracts between you and the Beaconchain, you start adding risk.
As I’ve mentioned before, the number 32 was chosen for good reason, but it unfortunately prices out a large swath of the world from running their own validator. For this reason, there have been a ton of products and services that are seeing this need and working to create solutions. There are some that are far along in their development and many more that are running on testnets and / or very early in their development.
Solo staking is the most direct relationship between an operator and Ethereum and is the gold standard for staking. It’s securing the network with no middle man, no protocol, no extra risk. On the technical side, it’s a little complex at the moment. It was originally only possible by using command line interface (CLI), which can be a little intimidating to someone who’s never used it before. Now there are a host of tools available to make this process easier - some of which still use CLI, but automate some of the processes involved, and some remove the need for CLI entirely by creating a user interface (UI).
Requirements:
32 ETH
Stable internet (but you don’t need 100% uptime!)
A computer with a 2 TB hard drive & at least 16 GB RAM (Hardware guide)
Caveats:
None! This is the best way to stake. Go to the EthStaker discord or subreddit for help if you get stuck in the process.
Guides:
The EthStaker Knowledge Base list of guides
A minipool is a term specific to the decentralized staking service Rocket Pool. Rocket Pool will allow you to run a validator with less than 32 ETH. How does this work?
Rocket Pool allows people to stake with any amount of ETH - Ana, Elena & Muhammed can deposit their 0.02 ETH in order to stake it with Rocket Pool. But who is running the validator that uses Ana, Elena, & Muhammed’s ETH to stake?
The answer is… maybe you! Rocket Pool has a permissionless validator set. Each Rocket Pool validator needs to put down 8 ETH and then Rocket Pool pairs you with the rest of the ETH needed to make a validator. So you’re using Ana, Elena, & Muhammed’s ETH to run a validator. You don’t actually get custody of their ETH - there’s a smart contract that lets you use it for your validator but also ensures that it goes back to the rightful owner if the validator is exited.
So there are two ways to stake with Rocket Pool:
Run a minipool
Stake any amount of ETH, no hardware required
This second option is staking with a decentralized service, which is the next section in this post. Running a minipool is as close to solo staking as you can currently get without having the necessary 32 ETH. There’s still some smart contract risk, but you actually earn more as a Rocket Pool validator than you do as a solo staker. How?
When you take Ana, Elena, & Muhammed’s ETH in your validator, it’s a win / win. You get to run a validator and earn rewards even though you don’t have 32 ETH and those three folks get to stake and earn rewards even though they don’t have the 32 ETH and they don’t have to run hardware. Because you’re the one running the validator (the computer), you get a commission from their rewards (15%), but the initial amount they put down always belongs to them. So you earn 100% of the rewards on your 8 ETH, but also 15% of the rewards on Ana, Elena, & Muhammed rewards.
Requirements:
10.4 ETH (8 ETH + 2.4 ETH worth of RPL, you can look at the explanation for that here)
Stable internet (but you don’t need 100% uptime!)
A computer with a 2 TB hard drive & at least 16 GB RAM (Hardware guide)
Caveats:
Smart contract risk. If Rocket Pool has a bug, it could be exploited
Examples:
So far, Rocket Pool is the only decentralized staking service with a permissionless operator set with a lower-than-32-ETH bond requirement that EthStaker can heartily recommend. We are actively seeking to support new protocols that create permissionless operator sets - the more, the better!
Decentralized pooled staking is simply depositing your ETH to a pool, and then that pool is used to create validators. Someone else runs the validator and you’ll be charged a fee to use the service.
Requirements:
Any amount of ETH
Caveats:
Smart contract risk. If the service has a bug, it could be exploited. Reputable audits, time live on Ethereum, and low complexity decreases this risk.
Many services claim to be decentralized when they’re actually not. It’s your responsibility to do your research here and learn
What to consider when using a service
The variables that determine where that service is on the spectrum include:
Who holds the validator key? You, the service, or both?
Who holds the withdrawal key or what is the withdrawal address?
If the withdrawal address belongs to the service, is the contract upgradable
What percentage of all ETH staked on Ethereum are in validators operated by this service? Have they committed to self-limiting?
Examples:
Rocket Pool (fully decentralized, most recommended*)
StakeWise (semi decentralized, recommended*)
Lido (semi decentralized, not recommended*)
EthStaker’s recommendations take into account their network share, impact on Ethereum, security and audits, level of complexity and risk, and time that they’ve been live on the Ethereum mainnet.
This is absolutely the easiest way to stake but it’s also the least recommended. Custodial staking is handing your assets to someone and saying ‘can you please do this for me? I trust you to do it right and to give all my assets back to me’. It’s trust-based and it’s antithetical to the concept of crypto.
Banks are custodial. FTX was custodial. Coinbase staking is custodial. One of the basic tenets of crypto is that it is an asset that you can have complete self-sovereignty over. Meaning - when you hold decentralized assets in an onchain wallet and keep your key safe, there’s not a person in the world who could freeze or steal your funds. I could rant about this for a long time - I’ll write another section later that will help you understand the origin of the devastating crypto events you’ve likely seen a lot in the media and how keeping decentralized assets onchain and in your custody is the thing that keeps you safe from these events.
Requirements:
Any amount of ETH
Caveats:
You could get rugged at any point by the custodian who holds your ETH. There’s no guarantee that you get it back. You have to rely on the custodians reputation.
Examples:
Coinbase
This is the end of the A Beginner’s Guide to Staking series.
As always, if you find any inaccuracies in these blog posts, please contact nixo and let her know so she can hastily correct them.
","author":"ethstaker@newsletter.paragraph.xyz (nixo)","category":["web3","cryptocurrency","staking","blockchain","ethereum","beginner"],"enclosure":{"@url":"https://storage.googleapis.com/papyrus_images/865b5635a95591069a4e8fb554c75684.jpg","@length":"0","@type":"image/jpg"}},{"title":"Why stake?","link":"https://paragraph.xyz/@ethstaker/staking-beginners-p5","guid":"sq36rkPxZQ5a4XjB3TXR","pubDate":"Mon, 15 May 2023 00:00:00 GMT","description":"Why would I want to stake? I’ll approach this by telling you why I stake:","content:encoded":"This is Part 5 of a six part series called A Beginner’s Guide to Staking
I’ll approach this by telling you why I stake:
It decentralizes an extremely exciting piece of technology Being part of the validator set lessens the possibility that this tech will be captured by a single or a few entities. I have a lot of hope for Ethereum and the only way that Ethereum has a shot of succeeding at benefitting all kinds of humans rather than benefitting a very few is if we participate in its infancy. Systems are built to benefit the people who build those systems - maximally diversify the people who are engaged and invested Ethereum is maximally diversifying who Ethereum will benefit
It’s passive income Ethereum is young and it’s still kind of finicky to set up a validator. There are a ton of projects making it easier, but once you’re set up, it’s pretty hands-off. I personally have done maybe an hour of updating / maintenance / curious-poking-around on my validator in the past six months. And the EthStaker community is more than enthusiastic about helping you climb over any stumbling blocks that you might encounter.
It’s low-risk I’m a risk-averse person. Crypto, in general, is a high-risk industry. The price of bitcoin and ether fluctuate wildly and you constantly hear about people getting liquidated, losing their money, or getting hacked. A lot of these stories you hear are about degens, a colloquial term embraced by this group of people. It’s short for ‘degenerates’ and refers to people taking high-risk bets for high yields. It’s gambling. Staking is the opposite of gambling - you’re still exposed to the asset price of ether, but you’re gaining a stable, low-yield, low-risk APR on that investment. It’s not the sexiest thing to be doing and it’s not going to make you a millionaire overnight. But it is going to keep your investment safe and put it work generating passive income. The only way staking falls apart is if Ethereum itself falls apart - and if Ethereum falls apart, I can guarantee you that the entire crypto industry will be devastated for years.
It keeps me engaged When I was a kid in the early 2000s, I remember a year where my family did a competition on the virtual stock exchange. It was my dad’s way of trying to get us a leg up - once you’re invested, you started doing research and learn more about that thing. Because I have a validator, I like to keep up with what’s going on in Ethereum. And I’m now realized how much of an advantage I have in this world because I took the time to figure out how a wallet works, what ‘onchain’ means, and what kinds of new, unexpected tech is being built on top of Ethereum
It depends on how you stake.
If you’re using a decentralized staking protocol, it’s as easy as trading your ETH for another token, and then you hold onto the token that got traded. rETH is an example of one of these tokens, and the steps would be:
Trading your dollars / euros / pesos / lyra for ETH
This can either be done on a CEX like Coinbase, or on a mobile wallet app like Argent, Metamask, Rainbow, Guarda, or Coinbase Wallet (which is different from Coinbase, the CEX!)
Trade ETH for rETH
If you did this on a CEX, you’ll first have to move your ETH onchain into a wallet (yay self-custody!).
If you did it on a mobile wallet like the ones mentioned above, you’re already self-custodying and can trade it directly
This is a bit more work, but is absolutely the better option if you have at least 17.6 ETH. There are very detailed guides and communities to get you through the process
Research and buy hardware. You’ll need a computer with at least 2 TB NVMe hard drive & 16 GB RAM. Then you wait a couple days for this to arrive.
Using your guide of choice (Someresat, CoinCashew, Rocket Pool, DAppNode, etc), you set it up. I’d allocate at least a full day for this if you’re tech-savvy and maybe 2-3 days if you’re unfamiliar with command line.
Use the beaconcha.in mobile app or desktop app and tell it which validator is yours - it’ll monitor for you and notify you if anything’s wrong with it. There are also other, more involved, and self-hosted options to monitor your validator.
All in all, this could be 2-5 days of work, and then it’ll be maybe one hour every 3ish months unless a piece of your hardware starts failing and you have to replace it.
I’m not a technical person, I’ve never built a computer, and I’m able to run a validator. My hard drive failed last year and I just bought a new mini computer (~$600) and loaded my seed phrase in and re-setup my validator. It would have been cheaper (~$100) for me to replace the hard drive, but I’m lazy and taking apart a computer intimidates me. If it happened again, I’d probably make the smarter choice and figure out how to replace the hard drive.
There are generally two types of people who get slashed:
Super shadowy secret hacker coders trying to do something malicious
Very tech-savvy people who are trying to achieve 100% uptime by setting up two duplicate machines, and they mess it up and accidentally run both at the same time, resulting in the validator double-attesting.
A validator won’t get slashed for normal behavior. You’re not going to get slashed if your internet goes down. You’re not going to slashed for accidentally messing up an update.
Even if you did manage to get slashed by double-attesting, which is having your validator keys on two machines at once, both trying to attest, you’d lose 1 ETH. The slashing penalty depends on how many other validators are also slashed in that incident - this ensures that, if someone managed to start up a ton of validators in order to attack the network all at once, they’d be penalized more heavily than someone who just made a mistake.
If you’ve pooled your ETH and are relying on someone else to run the validator that stakes your ETH, you should be aware of how they handle slashing risks. If they try to get fancy and create a failover (a duplicate computer that is supposed to run if the first goes down) that gets their validators slashed, will they reimburse you? This is specific to the staking service you choose and you should ask them how they’d handle this.
If you plan on running a validator, you don’t need a calculator or a tool to see this. You can see how much each validator earns on beaconcha.in - you can look at random validators (e.g. beaconcha.in validator/222222) or use beaconscan’s Daily Validator Income page.
At the time of writing this, the official APR on the launchpad is 4.65% and each validator earns about $6/day, which doesn’t take into account the appreciation of the price of ETH. As ETH grows, the income will too, as rewards are denominated in ETH.
Anecdotally, we can look at one of the first validators to come online in December of 2020:
Value at start: $18,880 Value now: $69,700 - including rewards & appreciation of the value of ether
You can never guarantee an increase in the price of ether, so this should be understood anecdotally, but I personally believe that anything denominated in ether is a good long-term investment. I think a lot of the financial system we know now will be running on rails that are built with Ethereum in the next decade and we won’t even know because it’s all under the hood.
Basically… a decade. If your validator earns you $6/day while it’s online, it will lose you $6/day while you’re offline. If it’s offline for week, you’ll see your balance decrease by $6 x 7 days = $42 (based on current prices and APR). If it’s offline for a month, $6 x 30 days = $180. You’ll never be slashed for being offline. If you leak long enough for your balance to get down to 16 ETH, you’ll be kicked off the network (not slashed) but that would literally take nearly a decade of having an offline validator. And we’d hope, if you were offline for that long, you’d just come to the EthStaker discord and ask for help to exit your validator. You can exit your validator any time if you no longer want to take care of it. An exited validator doesn’t lose any money at all, and post-Shanghai, they can withdraw their entire balance at any point.
Offline penalities are not slashing. Slashing is a serious penalty and kicks you off the network. Offline penalties are minor and never kick you off the network.
The next post’s topic is “Finding your best way to stake”. It will cover the different categories of staking, where they lie on a spectrum of decentralization, the options within those categories, and what to consider when evaluating different services.
Ben Edgington: “Slashing” (highly technical article)
As always, if you find any inaccuracies in these blog posts, please contact nixo and let her know so she can hastily correct them.
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We can look at this from a few different perspectives: the issues that potential and individual stakers face, and the issues that the Ethereum network, as a whole, faces.
The technical barrier for running a validator is still quite high today. Staking on Ethereum is still in its infancy - it went live fewer than three years ago. There are projects who are making it easy to stake, but there are still a lot of things to build. Some projects are building graphical user interfaces (GUIs) that automate a lot of the commands that are needed to launch a validator, but the most mature options right now still require interaction with command line interface (CLI).
The problem
Staking software needs more user design people. A great example of a very good project lowering the bar for solo staking is DAppNode. But even DAppNode could use some more people who are experts are abstracting away from the user the scary technical words and steps that are a barrier to someone who didn’t grow up troubleshooting computers.
It’s also difficult for someone new to Ethereum to come in and read what’s a scam and what’s not. Transacting on Ethereum is new and it takes a while to get the hang out of what’s normal. Systems should dissuade people from making small mistakes that lead to an irrevocable loss of funds, signing fraudulent transactions, or generally being phished and scammed. This needs to be done at the user design level - wallets should eventually use publicly available data to identify known wallets associated with scams and warn users when they’re potentially interacting with bad actors.
What you can do
If you’re a user design person - you’re needed! Read through the resources on ethstaker.cc and on ethereum.org/en/staking. Get help in the ethstaker discord setting up a testnet validator. Use software like Stereum, wagyu, eth-wizard, and DAppNode to do it. Familiarize yourself with the process and find a project you’d like to help.
On the other side of things, you can write docs! Good protocol have good, visible, search-engine optimized docs. The nerds coding these protocols sometimes don’t have the time or skills to write accessible docs. Anyone can come in, familiarize themselves with these projects, and write docs. Many projects in this ecosystem are open source and can be worked on by anyone by creating pull requests on Github.
The problem
The single biggest complaint that the community sees is about the 32 ETH deposit threshold. This was chosen for good reason and chosen when that value was <$10,000. That 32 ETH guarantees that the validator won’t lie to the network because they stand to lose a portion of it if they act maliciously.
Regardless, this does disproportionately affect lower-income nation citizens and access to a validator should be more geography-agnostic. There are projects who aim to lower that barrier. One of many examples is Rocket Pool, who have lowered the barrier to 16 ETH and will lower it further to 8 ETH this year. Another set of projects are Distributed Validator Technology (DVT) protocols.
While these add a layer of smart contract risk, this risk can be mitigated with testing, audits, bug bounties, & time live on mainnet. The longer a protocol is live, the less the likelihood that it has critical bugs that could put your stake in jeopardy.
What you can do
Get involved in the communities of the projects who are aiming to lower that barrier! Stake using their liquid staking token. Help them test their product on testnets. Write or edit docs and guides for the project.
Ethereum is very young. It’s being built with an eye to the future - the entire reason why people are so excited for this new technology is because it opens doors to all sorts of things that aren’t currently possible. We can improve an individual’s ability to manage and have full control over their own data and assets.
The term ‘web3’ comes from the idea that a decentralized blockchain gives us to the ability to read-write-own. We want to be able to own our assets and data in a way that we never have been able to before. But to achieve these goals, we have to build a solid foundation for the Ethereum ecosystem to sit on. Validators are the material that is used to build that foundation.
A natural tendency
Centralization is a natural tendency in a free market. The biggest players find product-market fit, their capital enables them to build better products, they outcompete or squash any new products, they acquire any decent competitors, and they eventually corner the market. This is not inevitable. Anti-trust laws are the way we address this issue in the traditional world where the law is used to interfere with the market to maintain some balance.
Ethereum is a system that humans are building with code. While we build, we watch these market forces test the limits of the system and we build to accommodate the nature of how these operate, in order to build a system that operates optimally taking those forces into account. A decentralized Ethereum is an optimal Ethereum.
Centralization in Ethereum today
At the moment, there are a few places where stake is concentrating and it presents a risk to Ethereum’s credible neutrality. Credible neutrality refers to an entity’s inability to discriminate against or favor any person or group of people. Stake concentrated in the hands of a few operators, or in the hands of operators under one umbrella is a threat to that credible neutrality.
Lido is semi-decentralized, permissioned staking protocol that currently occupies this role. Permissioned means that validators need to apply to become an operator with Lido and, as of now, very few operators have been onboarded. When users deposit to Lido, they deposit to validators run by 29 operators running 32% of all staked ETH. In comparison, a comparable decentralized protocol, Rocket Pool, has over 2000 operators who control 2% of all staked ETH.
The argument that Lido espouses in favor of having a small, permissioned operator set is that the validators are professionally run and have a higher participation rate and higher uptime. However, EthStaker’s position is that this small operator set and the influence that Lido could exert over their operators represents a threat to Ethereum’s credible neutrality. This is why we currently discourage deposits to Lido.
*A more nuanced and technical explanation can be found here.
What is MEV?
MEV is ‘maximum extractable value’ and is created by the way that new transactions are incorporated into Ethereum. A very simple explanation is that transactions on Ethereum get put into a waiting room for seconds before they get picked up and put on the blockchain.
Very sophisticated bots responsible for giving these transactions to validators are able to quickly change the order in which they’re processed or add in their own transactions that change the price of something before or after someone else’s transaction in order to create opportunities for more value. These sophisticated bots pay validators a fee, usually proportional to the MEV opportunity, for the validator to accept that bot’s transactions instead of another bot’s.
What risks does MEV create?
The ethics of MEV are questionable, but it’s an unintended side effect that exists and researchers are trying to find the best way to mitigate the problem that it causes (or a way to get rid of it altogether). There are lots of solutions and mitigation techniques in the works, but that’s a whole area of research you can look into later. Some key terms if you’d like a research starting point: Proposer-builder separation (PBS), mev-boost, MEV Blocker
Part of the reason that Lido, a staking provider running an alarming percentage of all staked ETH, continues to get so many deposits is that their APR is currently higher. This is partially because MEV is random and operators like a lottery and represents another vector of centralization where larger entities get higher rewards. MEV rewards are a type of execution layer reward and execution layer rewards are pooled in Lido’s validator set. Meaning: the more validators, the higher the chance of winning lottery tickets, and those lottery tickets are split among all Lido stakers. This is compounding problem - the higher the APR at Lido, the more people will want to stake with Lido. The more people stake with Lido, the higher the APR. This is a centralizing force that becomes a concern very quickly and has been the subject of much discussion.
If we want the opportunity to be able to build Ethereum to be sustainable, we have to advocate for best practices until researchers can research, develop, test, and implement ways to inherently incentivize behavior that leads to a healthier Beaconchain.
This is, by no means, an exhaustive list of issues that directly affect the future of staking on Ethereum, but they encapsulate some of the big ideas that are open areas of research with no definitive answer at hand yet.
The next post’s topic is “Factors that should play into your decision to stake or not”. It will cover potential motivations to stake, the amount of work involved in staking, slashing risks, how much you can earn, and offline penalties.
ethereum.org: “MEV”
Bankless: “What is MEV and why is it important?” (video)
Danny Ryan: “MEV, pandora’s box” (article)
As always, if you find any inaccuracies in these blog posts, please contact nixo and let her know so she can hastily correct them.
","author":"ethstaker@newsletter.paragraph.xyz (nixo)","category":["web3","cryptocurrency","staking","blockchain","ethereum","beginner"],"enclosure":{"@url":"https://storage.googleapis.com/papyrus_images/ed958fbe6a51445d206aad21c9b7bc83.jpg","@length":"0","@type":"image/jpg"}},{"title":"How staking stays healthy long-term","link":"https://paragraph.xyz/@ethstaker/staking-beginners-p3","guid":"9pfjIYU0CoZyrdQYCspj","pubDate":"Mon, 08 May 2023 00:00:00 GMT","description":"Why you care: because if you’re investing in ETH, you want Ethereum to remain sustainable. The better your choice of staking provider, the more you contribute to the effort to make your investment robust","content:encoded":"This is Part 3 of a six part series called A Beginner’s Guide to Staking
Why you care: because if you’re investing in ETH, you want Ethereum to remain sustainable. The better your choice of staking provider, the more you contribute to the effort to make your investment robust long-term.
Becoming a validator on Ethereum is permissionless. Permissionlessness refers to anyone’s ability to be a part of the system without being gated by anyone. There will always be some kind of barrier to joining (for example, electricity in proof of work, a capital bond in proof of stake) because this creates sybil resistance.
A sybil attack is when a people attack or exploit a network by pretending to have a lot of different identities. An example of this is setting up a network of bots to spam a service. Sybil resistance is the a quality of being able to lessen these attacks to some degree. If you have to invest a dollar, have account history, or do a small amount of work in order to use a service, you’re less likely to spam it using a lot of new accounts.
Ideally, however, barriers that increase sybil resistance don’t disproportionately affect any one group. An ideal permissionless protocol creates a disincentive to spam, but equal access to all real humans.
Permissionlessness is important to Ethereum’s values of being universally accessible and resistant to capture by interest groups. If all the Ethereum validators were owned by Google, Google could write anything it wanted to the blockchain. Similarly, if the creators of a blockchain controlled who was allowed to validate, they could choose the validators based on who would comply with their requests to edit the chain to their advantage. This would mean that the creators of the chain had captured the chain to potentially advantage themselves.
For example, some blockchains are run by a very low number of validators and, for that reason, are known as centralized chains. If the number of validators is very low, it could be easy to influence them to write false information to the chain.
The likelihood of false information being published to the chain goes down as the number of validators go up, especially if these validators are very dissimilar: different geographic locations, run by people of different cultures, speaking different languages. Decentralization is something that disrupts the potential for collusion. A decentralized blockchain is a capture-resistant blockchain.
Decentralization also makes a blockchain resilient. A chain that runs on validators running different hardware, different software, on different networks, under different jurisdictions is less likely to have downtime. A decentralized blockchain is a resilient blockchain.
Geographic locations
Who owns the validators?
What software are they using?
What hardware are they using?
This would be difficult-to-impossible to tell :)
Geography
Most Ethereum validators are concentrated in North America and Europe. These are places with the highest median income and have the most ease in getting the hardware that’s needed. This isn’t ideal and is being addressed in a number of ways, including a lower financial barrier (e.g. minipools, which we’ll discuss later), better guides, tools for more platforms (Windows & Mac since Ethereum largely runs on Linux machines at the moment), and more focus on good user experience.
Entities (who owns the validators)
You’ll notice that the top two entities operate >40% of the network. However, these two entities represent more than 2 operators - Lido is a semi-decentralized protocol with 29 operators and Coinbase is a centralized company that utilizes a number of different operators (but primarily Coinbase Cloud). EthStaker aims to educate new individuals or organizations coming into staking today on who to stake with in order to alleviate these concentrations.
Software
The software that runs on Ethereum validators is called a client. Ethereum is unique in its emphasis on using multiple client software implementations - there are five consensus layer clients and four execution layer clients (don’t worry about what those specifically mean right now).
Why would we want them using different software? Because there’s no one point of failure for Ethereum validators. If one pushes a bad update, the others will keep on going. They’re all written in different coding languages, so if one dependency in a language pushes a bad update, the others will keep going.
For these reasons, Ethereum doesn’t have downtime. Even when it pushes major upgrades (EIP 1559, the Merge, Shanghai), there’s no ‘maintenance’ time or time when you can’t count on your transactions being processed.
When you’re deciding how to stake, it’s important to understand the foundations of staking and what permissionlessness and decentralization are. If you want your stake to be a good long-term investment, you’ll want to choose the most decentralized way to stake and want to support the protocols that keep staking permissionless. When we go over ways to stake, the metrics above should help inform your decision on how you choose to stake.
The next post’s topic is “Broad issues in Ethereum staking today”. It will cover issues that stakers and the Ethereum protocol are facing today, including UX deficiencies, financial barriers, centralization risks, & Miner Extractable Value (MEV).
Gemini: “What does permissionlessness mean?” (article)
Ben DiFrancesco via Bankless: \"The power of permissionless platforms” (article)
Who are the people behind these computers running Ethereum?
People with computers download copies of the Ethereum blockchain to make their computer a node. If a person running a node also wants their computer to be one that the other computers check in with to make sure their copy is okay, and get paid to do this, they have to take an extra step to become a validator.
A validator is created by making a deposit to a specific smart contract that says “I will tell other computers what I see on the chain. If I lie about what I see, you can take $100 from my deposit. If I tell the truth, you pay me $1. If I don’t tell you anything at all, you can take $1.”* This is called staking because your assets are at stake.
*Absolute numbers are random for clarity. The actual numbers are denominated in ETH and the value depends on a variety of factors.
These validators are simply computer running code. There’s an operator (a person) behind the computer, but they install the software and keep the computer plugged in. They’re not doing any manual calculations and shouldn’t be doing anything involved at all. For the solo staker, this is 2-4 hours of work to set up, and subsequently 15 minutes of maintenance every 2-5 months. Most operators have their validator running quietly on a bookshelf without touching it for months at a time.
The draw of this is that, after set-up, it largely becomes passive income. The electricity costs are equal to keeping your laptop plugged in 24/7. The occasional maintenance, every few months, is logging in and telling the computer to look for updates and installing those updates. Sometimes the hard drive or RAM dies (just like in any normal personal computer) and that has to be replaced, but that should be a once-every-two-or-three-years issue.
The Ethereum network is in a very early stage of its development. Proof of stake launched in a beta mode in December of 2020 and has been the official and only consensus mechanism of Ethereum since September of 2022. A consensus mechanism is the method by which the blockchain validates the authenticity of transactions. Validators replaced miners in September of 2022, who served a similar function, but for a very energy-intensive consensus mechanism. Mining on Ethereum isn’t a thing anymore - you can still mine for Bitcoin and some smaller blockchains, but Ethereum has completely moved to using validators instead of miners.
Anyone with a computer, stable internet, and 32 ETH can become a validator. A validator is a staker. A staker isn’t necessarily a validator.
Not everyone has a computer, stable internet, and 32 ETH, so there are lots of staking products who have built ways for you to use someone else’s computer and internet to stake any amount of ETH. They do this by pooling your ETH with other people’s ETH until you get to the full 32 ETH to run a validator. But then who operates the node?
There are many staking products to pool ETH - who operates the actual node, the computer with the validator on it, will differ for each of these services. And products will be somewhere on a spectrum of trustlessness, with one end of the spectrum being trusted providers and the other end being trustless providers.
TRUSTED: I tell you that I’m starting a staking operation and I’m really good at this stuff. I have a track record of doing a good job staking people’s ETH for them. You send me your ETH and I stake it for you on my validator and give you the passive income it generates (minus a fee). I promise to return your staked ETH to you if you request it.
TRUSTLESS: I deploy a smart contract that says “If Julia deposits 1 ETH into my contract, send that to my validator. Take 90% of the passive income that it generates and send it back to her. If she wants the staked ETH back, let her send a message that says so and automatically send it back to her.”
Despite the intuition that the word ‘trusted’ sounds like a good thing, this is actually the least ideal option. Trusted means that you have to trust the person you’re sending it to. Trustless means that there’s no degree of trust needed because you can verify that the contract automatically does all the things that you want and that the person who’s validating for you has no possible way to steal your deposit. A trusted operator could theoretically steal your deposit (though it’s unlikely if they have a good reputation). Staking products are on a spectrum from trusted to trustless and you should know where there are on this spectrum before you stake with them.
In my opinion, if you use one of these staking products to pool your ETH and stake it on someone else’s validator, you’re not a validator, but you are a staker. I asked the crypto twitter community if they agreed with this and the opinion was split:
\n 7\n \n 3:13 PM • Apr 3, 2023
\n(We haven’t talked about them yet, but an “LST” is the token that someone gets as a kind of receipt for the ETH that they’ve deposited to a pooled staking service)
If you can’t read or interpret a contract, you have to rely on things like security audits, community trust, and time that the protocol has been live. A project should have security audits from reputable auditing companies that have gone through their contracts with a fine-toothed comb and they should post these findings publicly.
re: community trust - look at the discussion that a community has. Are there there people there discussing the technical aspects of the protocol? Are they talking about potential attack vectors? Theorizing on how the product can be made better? Or is it a bunch of hype people saying ‘gm’ and creating memes? A good product will have highly engaged, highly intelligent, highly technical people involved. A product that’s relying on hype to attract investors is going to have a lot of people asking about price and strings of people leaving valueless messages like “gm”.
The next post’s topic is “How staking stays healthy long-term (and how your choices help)”. It will cover permissionlessness, decentralization, and current analytics of Ethereum’s decentralization metrics.
Ethereum’s Launchpad: “Validator FAQ”
As always, if you find any inaccuracies in these blog posts, please contact nixo and let her know so she can hastily correct them.
","author":"ethstaker@newsletter.paragraph.xyz (nixo)","category":["web3","cryptocurrency","staking","blockchain","ethereum","beginner"],"enclosure":{"@url":"https://storage.googleapis.com/papyrus_images/bc789763ff00644e0e0bcdef78d58cb1.png","@length":"0","@type":"image/png"}},{"title":"What is Ethereum?","link":"https://paragraph.xyz/@ethstaker/staking-beginners-p1","guid":"bEHKrFglIjP2GT9gjpGF","pubDate":"Mon, 01 May 2023 00:00:00 GMT","description":"This is Part 1 of a six-part series called A Beginner’s Guide to Staking. Ethereum is a place where people can upload smart contracts and others can use...","content:encoded":"This is Part 1 of a six part series called A Beginner’s Guide to Staking
Ethereum is a place where people can upload smart contracts and others can use those smart contracts. A smart contract is like a regular, in-real-life contract: I tell you I’m going to give you $10k if you give me the deed to a car I chose. We sign a contract that’s legally binding. I have to check to make sure I received the deed and you have to check to make sure that you received the $10k and if one of those things didn’t happen, we have to take it to court. A smart contract makes these processes automatic and removes the intermediate parties required to check if conditions have been satisfied.
A smart contract is a way to make a contract that automatically executes when certain conditions are met.
An example: You and I use a smart contract on Ethereum. We tell it that the conditions are “$10k” and “a deed to this car” and that we’re going to trade these things. I send $10k to the contract, you send the car’s deed to the contract (imagine the deed is a signed digital copy), the contract checks that it received both, and trades them when the conditions are met. The smart contract somewhat functioned as an escrow*. This all happens in seconds, with a piece of a code, and you can see everything happen on a publicly-viewable blockchain.
That cuts out the bank, the lawyer, the notary if you needed one, extra fees, etc. It’s just you, the seller, and a way to guarantee the success of the trade with code.
*note that an escrow actually holds your assets whereas a contract can be granted permission to an asset that you’re holding under specified circumstances
When we say someone can ‘upload their smart contract to Ethereum’, where are they uploading it? ‘Uploading’ a contract to Ethereum is called ‘deploying’. A person broadcasts their contract and that broadcast gets picked up by all the computers that have a copy of the Ethereum blockchain. The computers all talk to each other, verify that they got the same thing, propose to each other that new things get added to the chain, and then do a series of actions that results in the contract being part of the chain that every computer on the network has a copy of.
This means that the person who deploys it no longer controls it… unless they added a piece of code to the contract that says “if I do X, change Y in the contract”. This is called a mutable smart contract, and anyone can see if a contract is mutable (changeable) or immutable (unchangeable). The person who deployed the contract doesn’t have the ability to delete the contract from the chain. They don’t have the ability to edit it beyond what the code allows. The contract, at that point, belongs to Ethereum and every computer that runs a node for Ethereum.
I basically just described to you the engine of Ethereum. I don’t have to know how Ethereum works to use it, just as I don’t have to know how a car engine works to be able to ride in it or even drive it. Smart contracts are deployed by developers and they’re audited by cybersecurity experts. Using those smart contracts is the part that normal users will do.
If someone in 1995 had told me that there was a really cool new technology where a mail user agent could use the world wide web to create message content that is sent to another using the Simple Mail Transfer Protocol, using port 25 to send and receive, I would never have assumed that it was something I’d be using every day. I probably would have blinked and told them “just tell me what I can do with it” - and here I am, sending emails every day. It’s hard to envision how a new technology will be used and described when it’s ubiquitous, but it seems really obvious in retrospect.
As a user, this will look like using the internet. Building on a blockchain is like replacing the engine of the car with a more efficient, smarter engine. Right now, it can be tricky to use because it’s all still in beta and processes like creating and using a wallet are still awkward processes that have no web2 equivalent, but the end result shouldn’t look too different from using the internet today.
The most major difference is that you should feel more confident about where your data, your assets, and your activity are stored and what they’re used for. Why? Because this info isn’t all locked in a company’s database in its basement - it’s stored on a publicly available, distributed computer. The way that they use your data or store your assets is verifiable in a way it’s never been with a traditional, web2, centralized database (but that doesn’t necessarily mean that your data is all public - we can address that later).
Ethereum is software running on thousands of computers. It’s still new, so it’s sort of hard to use, but the user experience of Ethereum will eventually be like the difference between driving a gas-powered car and an electric car: you won’t have to relearn how to drive, but there will be some differences and you’ll have a lot more automated features.
The next post’s topic is “What is a validator?”. It will cover nodes, validators, miners, stakers, and staking pools.
ethereum.org: “What is Ethereum?” (article)
ethereum.org: “Intro to smart contracts” (article)
Finematics: “Code is law? Smart contracts explained” (video)
Coinbase: “What is Ethereum?” (article)
Finematics: “Ethereum 2.0” (video)
Vitalik Buterin explains Ethereum (video)
The EthStaker community is creating better ways for everyone to more easily find the discussions, resources, and latest updates they need to get started staking and keep up with essential research and news in a space that’s moving oh-so-quickly and can be hard to keep up with. It’s also essential that it’s as simple as possible for new stakers to come in and easily evaluate the staking option that’s going to be best for both their specific situation and for the Ethereum network.
EthStaker is resource-rich with how active our community’s been helping one another, providing resources, building dashboards, creating newsletters, keeping up on current research, and asking and answering questions - for nearly four years now. That information has been dispersed across platforms and is somewhat difficult to sort through - this website is an effort to organize this wealth of information.
The website was spearheaded by a very active community member, hanniabu of Ether Alpha and is open source. If you built something that you want included in our resource list, or maybe you just recognize an omission, please feel free to make a pull request on the website’s github repo.
If you have an idea of something you’d like to build for stakers, contact nixo for resources on how to apply for small grants.
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How staking stays healthy long-term (and how your choices help)
Broad overview of some issues that Ethereum staking faces today
Each section should take 15 minutes or less to read and will be accompanied by some links to learn more. This is meant to make you feel culturally oriented in the staking community before you dive into a technical guide.
If you find any technical inaccuracies in these posts, please DM me on twitter and let me know before I get roasted by the entire internet: twitter.com/nixorokish
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