DeFi by Design EP#83: Proof-of-Stake Network Design w Tenderize

Transcript

welcome to D5 by Design where we talk all things blockchain and cryptocurrency while striving to educate Empower and enrich it's your boy Andy and welcome back to the D5 site YouTube Channel smash the like button on this video that really helps us out and sit back and enjoy the content thank you very much what is going on D5 slate fam welcome back to the D5 slate YouTube channel with Nico from tenderize me uh we are going to talk about liquid staking in this podcast uh we'll we'll go through the current speaking environment obviously ethereum is transitioning to proof of stake and we'll we'll talk about what that means for the ethereum

blockchain and we'll get into what proof of stake means as a as a conceptual blockchain architecture uh and and how blockchains are currently putting them in practice uh proof of stake is obviously uh economically uh secured so these validators are putting up collateral uh to secure the network in their validator node and through uh this economic program of slashing they're able to cut out Bad actors and prevent malicious takeovers of the network uh and we'll we'll talk a bit about the censorship that that's happening in uh East now so I will pass it over to Nico um and let him introduce himself from

tenderize me and what uh what is liquid staking yeah nice to meet you everyone and thanks for having me here uh so my name is Nico I'm the founder of tenderize uh like like we said we we do liquid staking for uh web free infrastructure before finding tenderize I was a protocol engineer at Life beer for nearly two years where I worked on at their thinking and everything surrounding that and then from that experience I saw some need for maybe tokenizing my my own lpt uh Southern need and hurt and need from some other community members that wanted to do the same and that basically got turned into its own protocol over time after a

couple of hackathons uh getting some some iterations on on like an initial team on some feedback and and hence tender rice was born out of that awesome yeah and the the the current environment I I think I think the the best uh kind of jumping off point is what we've been hearing about a lot uh and and you know is in the news currently is this transition to proof of stake um on the ethereum blockchain and I'm I'm curious how T tokens which are the liquid staking derivatives on tenderize how how old are these kind of related to the collateral that's

actually state in the node um you know the the validator node has has these tokens locked up to help secure the network are T tokens kind of like are they representing uh the the Associated asset that's actually in the node uh or is there some sort of like hypothecation that takes place where it's uh it's it's like a call option or kind of like uh a redeem like a like a ticket to redeem uh the collateral that's in the note yeah so the sort of basic gist of liquid staking is that someone who wants to run

a validator he runs he locks up a stake in into a contract and helps secure the network um and the T tokens or or the or are liquid state tokenized assets um they represent that underlying stake in that protocol um so if a validator earns taking rewards for performing valuable services to the network um your key token balance will also increase um as as the node operator earns more tokens but it could also decrease if a node operator behaves or validate or behaves maliciously and get slashed so it's inherently tied to what is state for a node operator or a validator on a

network plus the the stake of of its delegators state that other participants that don't want to necessarily run their own validator um would would delegate towards a validator it's it doesn't have it is an E2 or also not have this but other networks have this often have this notion of Delegation of stake as well so it's a combination of people that choose a node operator to stick to get a portion of their rewards but also the node operator themselves uh yeah I think we saw that in Cosmos quite a bit where there was kind of like professional stakers um and it was common to delegate an individ an individual could delegate

their state to one of these staking hubs and they is it that when a stake is delegated what's really going on there are they delegating uh like the uh blocks uh that are put together and kind of the The Hub is choosing the blocks that are that are put into the chain and then the Del if you if you delegate to that uh node operator then you just kind of go along with their vote and and act in the same uh way yeah pretty much it's just really picking I believe this validator or node

operator will do a good job on the network and I'm willing to economically back that decision or that vote with my own tokens and in return get a portion of the revenue of that validator or node operator in return um if you if you do a good job by picking good nodes and you make more than if you would pick bad notes so there is a responsibility to do kind of a little bit of curation um that way uh but it's just saying hey I economically put my skin in the game that I trust is validator to do a good job and I get a little piece of the rewards in return that's that's the basic gist of it got it what have you seen in terms of

the other layer proof of stake layer ones that are out there now are they kind of like are they a platform for like experimentation of other proof-of-state networks um like do do you see these these uh other proof-of-state networks not mainnet ethereum um which which will get to proof of State eventually uh do you see these other other networks as kind of like an experimentation uh field for what eth is intending to do um good question maybe maybe initially like a few years ago that would have

been the case but I think prove a stake or and delegated proof of stake and the academic research around that that's like really grown since like let's say 2015 2016 um before that there was definitely an experimental phase I forgot like what the first proof of stake coin was but that had some some issues like the nothing at stake uh problem which is now widely um widely described in literature um so there was definitely an experimental phase like before and maybe even before ethereum or before ethereum even was talking about moving to prove a stake um I think I think it's definitely an interesting sandbox an interesting uh

real world maybe experiments is not not the right word here because we just said that they really aren't bad but but some really interesting things that are running in the wild that we can observe as the ethereum community of what works and what doesn't work there have been a couple in the past that that have come and gone like like for example EOS a couple years ago had this really radical approach to uh prove a stake whereby they had a select committee and there were a couple of different approaches and from that stance it was definitely an experiment but I think currently the change that our current life have really settled on a paradigm that that there's pretty much constances over

um not not on all fronts but on on some of the most integral parts of of the system of like you need to have flashing for example um or you need to have like an unbounding period or a waiting period to get your state back um those sort of things are like generally accepted these days cool yeah the the different variations of of these proof of stake networks have started to kind of take on more more specific approaches um have you seen any one proof of stake Network that catches your eye that's like you know they have an economically secure design compared to something like

EOS which failed to you know provide uh Economic Security for for its users for me with my background the most interesting distinction was kind of around aligning incentives in these in these networks so for a layer one or or like a blockchain protocol that has prove a stake to secure it that's really easy because like the the work you provide on the network is is block production and you get like like that's native to to the principle of of running running a blockchain but if you have let's say a

work protocol like Life beer or the graph whereby you don't create blocks and you don't process transactions but you you basically provide your computational capacity for someone else to do some work for you they are also secured by um by staking and so if you stake you get to run a node on these networks but in those networks the work you provide isn't necessarily tied to the underlying blockchain and then block production so it becomes much harder to align incentives in those networks and with with like purely staking and that's I think where most of the interesting things can can

still happen because improve a stake like the incentives are already pretty much aligned you have the block production but in those other networks it's much it's much harder to do so um to align those incentives of the the less Capital there is to work with um no it's it's not necessarily that there's less capital I think it's very much that um they are hard technical problems to to solve um and and most of it comes down to like verification of of work that's being done in in like a blockchain it's really

easy everyone agrees on the blocks that are getting produced but when I for example encode a piece of video or this podcast for you you also need to be able to verify that somehow independently and like in a trustless and then decentralized way uh but that becomes much harder to to do so um and and because of that it's much harder to align incentives in in these protocols because you can't pay out a reward with a piece of work that is being delivered you need to check the piece of work first but if you can't do that like within a few

milliseconds of the work being delivered like you would check a block that is be that you get propagated then that becomes like much harder to to do so um so it's much of a technical problem around verification how do you verify work and then how do you reward that um yeah got it and as far as the you know now now taking one step into kind of like the liquid staking derivative uh world where um the incentives you know are are there in the actual validators and the validators are

um are propagating blocks and and attesting to the to the longest chain and now those validators are earning some capital or they're or they're getting flashed if they're acting you know kind of out of order um but let's say they're they're earning Capital now you know the the T token is representative of kind of like one uh you know like one piece of that validator node that's earning capital is the T token uh earning the capital and then kind of reinvesting it right into another validator and and compounding uh or are kind of like these validated

rewards paid directly to uh the T token holders in in the native token so it is it is a combination of of both when you do liquid staking right I think I think one of the things liquid staking protocols do is one new compound any of the rewards that that you you would get that are not automatically compounded because you want to encapsulate all of the revenue generated by that protocol into your T token into your tokenized um asset and then because it's the stake is tokenized you actually get access to those resources that are now how to

automatically compounding as well so it's a bit of a bit of both worlds well it and are you are you guys similar to Lido in that sense or does Lino kind of have a a different formula for uh paying out uh the liquid stickers no I think our model currently is similar to Lido when we're talking about t tokens for example versus State Eve um where we where we do differ is I think in in how well in in the assets that we support like we at tenderize we don't really support each taking at the moment about other networks uh but the other main thing where we differ is in our

approach how we um select validators or node operators to where where stake is allocated towards um all liquid staking protocols that currently exist they act pretty much as a pool or as an aggregator where I as a user come in with my East I deposit it in let's say Lido or stakewise or whatever [Music] um and that mainly that state gets distributed or staked well the the stake in Lido gets staked towards many different validators uh on the network I think they currently have like 19 or 20 and they have a sign up list whereby

node operators can sign up and then they can get added through governance proposal to receive each staking um for us we take a little bit of a of a different approach there um we currently also have liquid staking pools if you want to call them that whereby funds that you deposit are allocated to one or more node operators uh currently it's it's one that's what we initially launched with um but we have since expanded that ID that instead of stay coming in going to a lot of different node operators and being

allocated there we are of the ID that that should be entirely open and neutral so for us the ID is that every node operator are validator on a network should be able to have its own tokenized flavored sort of State assets so if you have a nerd operator like figment on a network you would have tlpt figment and tlpp block diamonds for example because the need that we've identified recently and that I of that I've also seen myself as a node operator is that I as a node operator would like to be able to

um collateralize my own stake or hatch my own State position which is as a node operator not possible if you go through something like Lido because one if I go through something like Lido and the stake is split towards let's say 10 different validators then my stake that I would put in as a as a validator is also split amongst those 10 but that's not really something you want to do as a validator because in a lot of these networks it to not being the case here but others they are work allocation is like stake weighted pretty often so it's your Prime resource of Revenue potential is your stake how the more

stake you have the more Revenue potential you have so it doesn't really make sense to go sharing this with other node operators on a network obviously some cooperation is healthy but competition is also very healthy um and so we believe that each node operator should be able to get to utility from liquid staking that um that regular token holders are are currently getting from something like stake if I really expand that to anyone so yeah instead of a pool we want to have each node have its own derivative and then anyone can really build a pool on top of that let's say I want to build a pool of different tlpt node operators

I can easily do that by holding various amounts of those specific flavored validator tokens so that's where we kind of differ from Lido in our vision and how we are approaching liquid staking going forward yeah do you expect there to be a heavy push of education on on who's operating nodes uh and kind of going into the the censorship uh resistance and kind of censorship of the protocol level conversation the node operators right now are kind of split some of them are saying those sensor transactions and only include

those which uh are are kind of legal in a sense where like the ones that they aren't approving could have interacted with uh sanctioned um ethereum address and blocking transactions that are associated with that address sensors ethereum and they're they're talking about doing this kind of at the validator level or they're talking about doing this at a few levels right one just kind of eliminating it at the protocol level um and I've heard about soft censorship and then kind of hard censorship where it creates a possibility of a 51 attack but kind of putting those aside and talking about the the censorship that

could occur at the validator level do you expect to see a bit more education on on who the individual is is delegating to and it sounds like in t tokens uh user is actually selecting not just the currency that they want to stake in but also the the actual validator who their state is delegated to is that right yeah that's right it's pretty much the same process if you were to go to like let's say the live pure protocol Explorer right now you'd also have to pick a validator the only difference is with Denver eyes you get a tokenized version of that in return that you can use uh anywhere and and coming back to your question I do think there's a lot more

increased efforts going on in like education but also creating tools to be able to see what good validators are and and I know for example um people are working on reputation for valid errors based on uh metrics that people on a network find consensus over and what's important to them for example on live feeder that would be content of the of the video you encode and decode and also this the latest scene which you're able to return videos back to um The Source um and then it's actually been a lot of my work at life there is to surface some

of this data and make it more accessible towards the community to be able to identify who is performing well and who is performing poorly and based on those metrics like people would be able to make better reform decisions on for example delegating their state towards a good validator so I think there's definitely increased efforts going on um in that and I know for example in life their day recently had a big update whereby they not only try to surface what a good validator or a good node operator all there is on their network but also where good profitable opportunities might apply it might not always be with the biggest delegator

smaller delegators or smaller node operators that you delegate to might actually be more profitable than some of the institutional ones uh so yeah there is a lot of work going on in in the community to surface more data on on validators and node operators and uh allow people to make more informed decisions and do you think yes validators or kind of give like certain statistics of like okay you know this validator um it you know has like 95 uptime or you know has a has a uh block propagation rate you know of 95 plus

um you know like are you are you giving the user any recommendations that might steer them in the right direction of which validator to choose um and yeah that's kind of my first question and then I'm also curious kind of what separates a good validator from a from a bad validator so there's definitely things we would like to do in the next version of the product when this feature becomes available that you can pick your own validator to service like what is a good one or what might be a good profitable opportunity because one of the things we really want to avoid is centralization of stake so one of the things we've been thinking of is hey for example showing

in our dashboard hey there's this smaller node operator it doesn't really really have a lot of delegations but it seems to have good performance statistics and good uh profitability maybe you should consider delegating towards that node instead of this big institutional one that you are planning on delegating to so those are things that we can definitely do on on the client side um to surface a lot a lot of that and and my hope is that as tenderized grows the community grows as well and also has third-party tools and dashboards available that can help people or apis even available that can help people and maybe things like on-chain reputation even going forward that that could help make informed

decisions yeah and there there's um you know kind of this idea that ethereum 2.0 and liquid staking derivatives unlock this interest rate Market where eth actually has like kind of a risk-free rate now or at least some sort of you know uh interest rate that's based on the activity and the usage of the of the platform um and liquid staking derivatives could provide a liquid ability to trade on on the interest rate um and now there is a lot of like fixed rate

platforms and variable rate platforms where uh someone can say can Arbitrage uh those interest rates I'm curious kind of like what what the I guess like how liquid is liquid staking you know is can Arbitrage occur at the protocol level and can the Army charge occur like cross chain if there's a validator with a certain rate on you know one token and then another validator with another rate on maybe that same token and there's Arbitrage opportunities uh on that rate between the same token and

then maybe you know there's like there's there's a there's a realm where like validators can like these liquid validator tokens are available to trade kind of like cross chain where like you can trade the TLP token of of one network with a TLP token of another Network and we're we kind of get into this economy of productive assets where you know like you you choose the underlying asset that that you're staked in But whichever Network you choose and all the time those those tokens are generating valuator rewards as income

dude is that kind of like how it works right now or you know how it how it might work in the future or is there kind of like another uh path that you see liquid state and going down um good question I think I think there's definitely like a whole range of use cases that are still to be explored with with liquid state assets uh one could definitely be um markets for various interest rates and like having having Arbitrage around that um I think I think the base would be um like like one of the most interesting

ones to me for personally would be Auto repairable loads whereby you have this maybe not fixed percentage income stream but you have this collateral put for a loan and your Revenue stream basically pays back the loan by itself without you having to pay back the the collateral um I think there's definitely a whole lot of use cases that can Sprout from this like that um and it will definitely need things like efficient markets like uh market makers that do Arbitrage in case something is trading cross chain um or arbitraging different interest rates um especially when when it comes to

Turning these things into like a fixed income yield product for example um but even like the the most important one we've seen um it's probably like like we've seen recently with State Ethan and East pool and curves that it got imbalanced um so one of the most important ways for Arbitrage and efficient markets for these assets to occur is being able to unstake actually um because what could what could like bring the current sdes thing curve pool back to Peg is like you would buy up the state either from market and be able to unstake it and then you have the eth again and the only real risk there is the time value of

money while you are unstaking the if and obviously also the market risk during that that unstaking period um and those are are things that aren't currently available for first take these which I think is is definitely um withholding a little bit on the liquidity it has or the market efficient efficiency it has um which isn't great if you want to build use cases on top of it like lending or um interest generating products or or whatever anything that that like can be liquidated based on a price point basically um

but with other networks and once obviously um E2 rolls around and in 2023 and we are able to unstake then this kind of resolve itself and I think that's when we'll see um a lot of new things pop up for First State Defense and other assets as well as well when the market gets a little bit more efficient okay and yeah what what's your take on like the institutional staking meme like it is that is that kind of uh also waiting on on withdrawals um

what do you mean by by the institutional staking meaning yeah like like uh I guess right right now a lot there's there's kind of professional staking groups that are out there um and you know this kind of wave of institutional Capital into ethereum and and blockchain applications as a whole uh you know that that's starting it doesn't quite seem like you know the the level of decentralization as maybe like running uh like even like Bitcoin um it seems like at least on these other layer one networks there's

only you know the validator set isn't isn't very decentralized and it's you know some professional staking groups and then and then other individuals that are pooling their stake into a a kind of centralized organization or entity which represents those individuals and the institutional kind of staking meme I guess is that um you know even even the uh the staking groups that are out there right now are kind of professional groups but there's not very many of them and I'm curious if you think there is kind of like a dam that is on those

those groups right now to prevent kind of like the floodgates you know from really opening and letting more people through do you think the the lack of withdrawals kind of plays a a prominent role or is there something else kind of holding up the general masses from staking good good question um what I experienced myself in in life here is that a lot of these institutional players they're really good at being early um but they're not necessarily good at operating a good valuable service um so we've seen this in life here

whereby initially a lot of them notes who are run by these institutional staking providers but as demand started coming onto the network we saw them actually underperformed tremendously to compared to some of like the home node operators that we were seeing like I was running a node from my home and it outperformed some of these institutional stickers because on life here you need to run gpus to be able to handle video efficiently and they weren't really doing that they were operating from cloud centers mostly [Music] um so I do think there is a possibility whereby if you or rather like there is a possibility to

outpace these institutional providers as smaller node operators um that that's a first thing um but it is it is a hard challenge because one of the like feedback we we've seen recurrently in life here was like yeah but they're already so big how do I compete with that um and so getting people to that stage of of believing that they can actually compete with these institutional providers is is really important and being able to prove that uh that's what we did in life peer and what we currently see is that most of the node operators on live peer they're not institutional operators there's still some there but it's really the minority

um and I think once we can prove this for other networks as well like for example for each state in one we can prove like hey um you can stake for your from your home with like a home connection and 32 East instead of like 3200 if let's say um you can make relatively the same amount of income or even more income than an Institutional node operator I think that's when more people will definitely be more interested in becoming this Indie node operator themselves I think the other thing is and and this I think this gets really dicey real quick because there's people that have different Visions on this uh but what's the ultimate vision of who do

we expect to be a validator or a node operator do we expect everyone to run a validator from its from his own home like everyone has like I don't know like a TV box for for television in their home is that what we want to go to or are we going towards a world whereby foreign businesses that need like settlement for example I don't know like your your local grocery chain or whatever where they become actually a validator for a smaller community of people but they carry out those responsibilities indirectly uh and and the validators that becomes like a bigger set of

everyone that kind of settles larger values on on the network so somewhat to speak uh I think those are also two differences in in vision of like where we're going and the answer to your question also kind of depends on that I think um but I wouldn't say institutional node operators are bad or anything I think they they have really they they have been the ones bootstrapping a lot of these networks early and allowing people to come in after them and basically outperform them if you do a good job so there is a room for improving on them and how performing them and um does growing your own operation yourself

um and I think what is important there is make sure you you create a value-added service for the network and not just another node operator or another validator that does the same thing uh so what I did with live here to gain a competitive Advantage was yeah obviously I was part of the of the core team but outside of that I created the first and it's still the only fully automated uh video encoding and decoding pool similar to a Bitcoin mining pool where you just connect your GPU rig to our servers and you're able to encode video on live here and get paid even return that's what what I created for lifebeer and that ended up being of great value

added service that people wanted to use and hence that attract more delegations towards the node to node got more work uh and then you are kind of in a hockey stick route there from from that point on uh and and I think more people should realize that they are able to do this as well and compete with these institutions basically us as a home operator okay yeah that that's really cool could you explain the the journey you went on from from live peer uh and setting up that node to like what did that what did that teach you about speaking that you guys are now you know kind of exploring

and intenderizing um what is taught me about taking I I guess a lot of what I learned there is around how incentives on a network should be aligned where what we talked about earlier um I think the most important thing I learned there was actually how do you bootstrap these these networks uh because you always have like a bit of a chicken and an egg problem as well like well if there's no demand how do you get supply on board and if there is no Supply how do you get Demand on board these are kind of hard things to to solve um

and then like what what I learned there was really building a Grassroots community of people that that see an opportunity and that needs some fostering and some care um so what I did at lifebeer was I was like okay how can we get more node operators onto the network and like how profitable is it really so the thing I did was I ordered a cheap rig online for like I think I paid less than 2 200 for a rig with two gpus um and I let it run for like a month or two and um

it earned it was the second or third top earner on the network within like two weeks um and that kind of proved the tease is that hey it's possible to start a note from scratch on life to actually make money uh created a blog post being really transparent towards the community of like hey I created this note this was my setup this was exactly how much I made you can do this too but be aware if like there's more people joining your rewards will likely diminish a little bit uh but that's kind of what got a lot of people going and then from there from that point on it was a lot of support answering concerns and really

bootstrapping a community that way with with the whole life Fair team um but but yeah that's basically the approach we took is like let's just prove something and if people like it they can join as well um how that translates to to genderize uh I'm not not exactly sure but we've definitely learned a lot there uh when it comes to um well not only what are good node operators but can small node operators also be good for a network or can can they also be good delegation Targets in terms of profitability and I think the answer we've learned there was was

definitely definitely yes um and that institutional providers aren't the Holy Grail or the only option on those platforms yeah and decentralization um and kind of like you know that the level of um institutional activity it might depend on the network and the community and what they want to solve um and kind of those those basic principles could guide uh a network when they're setting up validators do they want to take the more individualized approach or

um you know are they kind of on a different place uh they're are they in a different place on that scalability trilemma where they're okay with taking some uh decentralization trade-offs you know for decentralization and to increase you know speed or uh uh cost or something like that um and you know those are decisions that uh are up to kind of the network itself and the community uh to decide you know as a consensus and like speaking to kind of communities you know all over the blockchain ecosystem uh what advice do you have for uh a

network or a community that's kind of just starting out and maybe doesn't have too many nodes or you know it's just kind of like defining these Baseline principles what what do you suggest for a community that's uh looking to to to launch a validator set yeah my biggest advice would be to keep your um yeah keep the cost of starting an validator as low as possible keep that entry barrier low um see whereby it it doesn't even become a concern for for anyone uh I think once you start

doing things early on in your life cycle as a protocol or a network like you need to have this minimum amount of stake or something that already proposes a high barrier of Entry to some people um whereby I might have when we've seen this in life here over and over people that had mining Farms from mining Bitcoin or mining Ethan they had to gpus but acquiring the lpt tokens for them to run a note at times was sometimes a big concern um that's why we always had to stress in life like the the cost of Entry is actually really low it's like now now it's fairly it's a bit higher because there's like a dynamic mechanic attached to it

but like a year ago or something was like literally maybe five dollars or something you needed a stake to to bootstrap that but for other networks like the graph whereby you need 100K GRT to run an indexer that becomes a big barrier of Entry because trt over the last year or so was trading above 50 cents or above a dollar so that then becomes like fifty thousand dollars or one hundred thousand dollars just for the stake to bootstrap your node let alone like acquiring the hardware or the part of bandwidth you need to to run it so I would say yeah keep keep the entry costs as low as possible is is the biggest thing

um and make it really clear to your community as well that on the hardware side as long as there is no demand um You probably don't need as much compute as if there were demand so they can get away with like a little bit less Hardware early on but have to scale that up as the network grows uh because I think what what a lot of projects do is they list Hardware requirements to run a node and it's based on like if we had X block propagation or if like this amount of video was flowing through the live peer Network but is that really needed at like the point of inception um and like yeah communicate really well about what the cost of Entry is try to

keep it as low as possible that's my best advice for protocols trying to bootstrap kind of similar similar Networks got it and it's interesting to to to see kind of like the the level at which a Staker might enter the system like um you know like 32 each you know what do you do you agree with their decision to kind of like set it at you know 32 each do you think they should have I guess it's the ethereum core devs that are kind of making this decision do you think they should have set it lower um kind of based on you know like

bootstrapping the initial proof of State Network good question the initial ID was that you could run both authority to eat validator or a 322e validator but for the 328th validator you had to pull 10 amounts 10 times the amount of compute that was the initial ID so that state your stake would need to scale with the compute you can have because if you had a lot of stake and you would stay there but not enough compute to back it up you would lose out but if you would have like too much compute and not enough stake you would also lose out so that was the ID that it would scale but I think we're stuck with the 32 East increments right now

um I'm not really a big fan of that because one you need chunks of 32 East and if you have more than 30 degrees you need to spin up an additional note um but like what is your note that you already run what if you just could increase the computational capacity of that that it like would perform the same as if you would like run two notes uh and also like having to split the capital having to manage two different validators that becomes like a process that needs automated devops really quickly and then you get back to institutional providers or like bigger players in the market

um so I don't really fully agree with the 32 East decision uh and and I like there are other networks that tried something similar like pocket Network which is like the decentralized infuria they used to have you need you needed like increments of 15 000 Pockets to run a validator but they have now passed a proposal whereby they have removed that and you can run whatever amount of stake you want on your validator higher than 15 000 or in increments of fifteen thousand so you could do 60 000 for example and receive potentially Forex the amount of work from a validator that only has 15 000 staked uh so pretty much like what do you kind of intended with the 32 heat

chunks um yeah I think I think we're we're seeing actually networks move away from that Paradigm um not much evidence to back that except for for pocket Network and maybe some others that I am not aware of but yeah generally not a fan of the concept I would have rather seen um just regular delegation and and staking uh but it is what it is at this point yeah yeah it does seem that like there have been a lot of experiments you know in the past of these layer one networks setting up proof of State networks um and you know it's there's still a work in progress like they're still not

perfect and it's in the sense that they're not as decentralized or not as robust a validator said as these networks might might intend um but they're getting there um and it's kind of like uh it's a it's a it's a learning process every step of the way where um you know what works for one network doesn't necessarily work for another Network and the network kind of has to learn that on its own um and I think youth is you know really learning that and they're probably learning a lot from other networks as well and I'm curious if you've seen any of I'm thinking of Ethier but I'm curious if

you've seen other networks achieve the the critical velocity where you know like they kind of have enough stake like you know at a certain point does it does it become kind of uh redundant or just kind of excessive you know is having 80 of the network State uh is that so much to your more secure uh than like 30 to 50 you know like is there a level where if it crosses that like it's kind of like uh just it's secure enough and then anything past that is just kind

of like you know yeah good good question because we also had this arbitrary mechanism in life here whereby we decided if more than 50 of the tokens in circulation our stake inflation will go down otherwise it will go up to incentivize more people to stake is that 50 like the Holy Grail number no that was arbitrarily set during Network Genesis it worked kind of for us other networks like you said have have chosen different parameters um so I think this is this is pretty much a lot of this is arbitrary and I I don't

think it really matters that much um I would even say that there can also be like too much staked if you don't like if you also need to provide a secondary market for a token and that needs liquidity but everything is staked and you don't have like a liquid market so I definitely think there's like a balance between the two because like if you don't have a liquid market then it becomes harder for Outsiders to acquire the stake and then start a new service themselves which hurts decentralization because like you can't get new entrances because again cost of Entry is too high because I slippage on the liquidity pools

I think I think then it becomes problematic obviously when there's too little State that's that's also not good so I think maybe a better way to look at it is like not in terms of nominal amount how much percent of the supply is staked but how much dollar value is staked versus how much dollar value is being transacted or settled over on a network um rather than try and compare it in in like nominal token amounts um but even then who says like uh a mechanic of like should X percent of tokens be staked is that is that like a good mechanic to have uh those things are very much debatable still yeah

interesting we will see how how uh the beacon chain you know I I think they're they're at like maybe five percent maybe like eight percent of steak I think they saw like a good amount of uh a stake enter the beacon chain and start to set up validator nodes with the 32 each um and yeah I think you know like projections seem to be on track as far as like the relative amount that that state to how much volume is going through the network at you know any given time um I know there's been you know plenty of uh hiccups along the way with other other networks like Harmony

um Solana just you know the proof of State networks uh that have seen some issues and and they've had some trouble just like uh securing the chain uh maybe due to to like not enough decentralization it seems like eth has achieved kind of uh a two-pronged approach of decentralization as well as uh enough capital in each of those nodes to make a significant economic impact on particular networking yeah we kind of look to wrap up you know like uh what are your overall expectations for for the the trajectory

of of uh like virtual State networks and um yeah just uh it includes the thoughts you got you got one yeah I think I think like we like we kicked off this this kind of call um they're all there will still definitely be Evolutions in the mechanics of these protocols I think some of the things we have set in stone already like slashing and unbonding periods and and whatever but other things like how much of a network stupid should be staked um like how much security should be a good Baseline things like that are are still things that we are determining as a community and as like for example

ethereum or Cosmos grows as a project as well like how much security do they need um I think it's it's definitely a very interesting design space going forward especially with not only layer ones adopting proof stake mechanisms but also work or utility tokens like Life beer and the graph and what that means for for them to have like these staking mechanisms and what that means for incentives and mechanics on on their networks and then yeah definitely building on top of that like what we are doing with uh with tenderized building on top of those proof of stake networks with liquid staking and what use cases that can unlock uh and how that can like

even um help decentralization and and help people compete with some of these larger institutional uh node operators that that have been early but not necessarily uh create the most value for for a network got it awesome it was a pleasure having you all Nico um we'll we'll drop the link to tenderize and uh you know everyone can go get their T tokens on these existing proof of State networks um and you know we're all we're all uh hoping on a successful Verge so Nico it was a pleasure where can our audience

find you and uh is Twitter uh the best best way to get it uh get in contact yeah you can you can find me on on Twitter um I think my usernames I am nico.ed but I'm not sure what my handle is um tenderize you can find it at tenderize.me um we support lpt GRT audio and polygon at the moment for liquid staking um yeah you can also hop into our Discord follow us there and and be part of our mission to decentralize web free to True liquid staking and creating more opportunities for stakeholders in these Networks awesome cheers Nico

cheers great talking to you see ya