Dima Gusakov - Home Staking Landscape With Lido CSM

Transcript

Hello. And while we're waiting for SL Oh, here we go. It's kind of extended. Okay. So, today I want to talk with you about a topic that might seem kind of obvious, especially for the audience of Eve Staker event. though the homestaking landscape might be slightly wider than you think or it might have changed since you last time checked and for sure one of the most noticeable changes over the last year was lighter CSM so let's get straight into it and before we will get there we need to agree on what homestaking means and I've been involved into multiple discussions on what's the

difference between solo staking home staking whatever other staking is and I think this picture by staker is the best way to describe different types and varieties of staking and we want to specifically focus on homestakers for one particular reason even though independent operators are definitely all important for the network. Homestakers combine two crucial aspects. First, they still control their validators at full scale. And second, they run validators exclusively from home or not exclusively from home, but mostly from home, which makes them kind of better than remote stakers who are using commercial

infrastructure and kind of better than solo stakers who are again using virtual machines or whatever else. By better, I mean from the point of view of Ethereum network. though most of the options that I'm going to be covering today are available both for solo and remote and whatever other else but I personally think that the more homestakers the better so I highly encourage you guys all to homestake uh yeah because I mean I I do homestaking personally and it's it's fun so now we need to look at what are the options for the homestaking and even although it is just a single line a definition that you run validator from home. Actually, there there are a lot of different options. And the first group

of options is the hardest path. It's what I call solo staking from home. Uh where the picture is mostly like that. It's you, you're homestaker, you take your 32 E or more, you put it into the protocol, run validator, boom, that's it. Uh maybe with a small addition of something in the middle. So, what are the benefits here? The benefits is that in most cases, it's just you and Ethereum and nothing more or not much in the middle. But on the downsides, you are basically not getting any cool things. You need still need at least 32 E. You get default staking APR and uneven rewards, which for me personally is not a great thing and you face a full

selection risk. So what are the options here? The most notable here from my perspective are these three options. Just solo staking from home, stake wise vault and light SD volta. Let's break them down. Solo staking from home, simple and easy. No protocols involved, no nothing. You take your 32 E, you stake it with the beon deposit contract, you run validators, you get rewards. Cool. And the best thing here is that again there is literally nothing in between you and Ethereum. On the other side, you are not benefiting from any other application layer or middleware that you might benefit from that we're going to cover later. The ne the next

option is involves uh a bit of a middleware though not like a lot of a middleware honestly which is stise vault. Here you still need your full 32 E or more because no one will bring you money. protocol will not allocate funds to you. But at the same time, you have the ability, and I'm pretty disappointed by how it's it's all turned out that I'm closing benefits. So, I would rather close cure code. Give it a second. You all know where to find that. So, the the main benefit here is that you can mint OS ETH, which is a liquid staking token, which you can then use to borrow ETH and do a bit of a leverage home staking, which might be

interesting. You also get native oxo2 support and you can attract stake from your friends or the others thanks to the architecture of stake wise vaults. What's on the downside here is for sure that again protocol will not allocate ETH and you are now bearing the even though small but protocol risk. The other option, the option that is kind of not live yet, but will be live soon and I it will be the case for a few more options that I'll be covering or other conditions or so because why why why shouldn't we talk about things that are going live like in January for example.

So with lighter ST volts you get almost similar things and benefits like with stake wise vaults with the difference being that with lighter ST volts you can mint ST instead of OS E which might be considered as a more integrated and more like a token with better liquidity but at the same time you have limited ability to attract third party stake because the default architecture of the vaults at least at the day one is less about attract racting stake from others. It's more about one deposit or one node operator.

Uh speaking of cool things, there would also be custom rates for operators that are willing to identify theirelves. So you will be able to mint more as teeth against your position. But again, it's it's it's a matter of choice. And I thought that if you have one option, why not to cover both? Next, this is the thing. This is the set of options that I personally like the most because in my personal opinion this is the most visible, interesting, rewarding, you name it way of homestaking which is homestaking with liquid staking protocol. Here instead of using your own money or money of your friends or your mom, you can use just a

part of your money and the rest will be allocated by the protocol. This weird scheme kind of describes that. So the benefits here is that you can now start with way less than 32 ETH which is important especially for those who haven't been in staking for ages and who are currently thinking about starting staking like imagine you have 10 ETH well the first set of options is not for you you will just not have enough E. This one is for because if you provide like only part of validator stake should slashing happened this part would be would be slashed first but at the same time you are running validators so you are the manager of this risks what are the most notable options here it's for sure rocketpole stator permissionless

lighter CSM and puffer though puffer permissionless is currently disabled so we would not cover it in details let's start with rocket pole the most well-known and by far the largest permissionless protocol. What you can do here and what's cool here is you can start with just four E again as same as with lighter SD volts. You cannot do it like today but you will be able to do it in January and why not to mention that uh you can get APR multiplier of 1.335 given that you're not uh touching RPL which means that you will get 1.35 times more rewards on your bond provided. You can choose between individual or partially socialized rewards which gives

you a cool optionality. Rocketpool is a definitely a battle tested protocol and you get access to such a cool thing as rocketpool smart node. On the downsides I would also start with rocketpool smart node because even though it's a very cool thing at the same time uh crucial interactions with the protocol are mostly done through rocketpool smart node and if you are not a console guy well it might also be a downside for you. you will for sure share protocol risk and it's worth mentioning that options that involve governance token or RPL staking are ex like are facing RPL price risk but we all know about that luckily it's no longer mandatory so you can just avoid that and remove it from

the slide the next option light CSM uh probably the most recent homestaking protocol at least in my overview I am not aware about any others popping up So here you can start with as low as 2.4 ETH or even 1.5 if you get identified as a independent community staker. You can get APR multiplier of two up to 2.38 which is absolutely insane. You get fully socialized rewards. No options here. Uh though the rewards are socialized not just over CSM but over the whole IDO protocol. So kind of good.

The protocol is also performed uh battle tested. You have this concept of a performance threshold where if you're kind of dropping like a little bit in performance, no effect on your rewards. If you're dropping below the threshold, well, you will skip the reward distribution period. Might be good for someone. For me personally, it's very cool. And like Spanish blackout that we saw at the I mean a couple months ago, right? Uh I still got rewards and IC system. Probably the best thing and the most unique thing about CSM is the system where you as a homestaker can apply without disclosing your identity, without doing KYC, uh just by onchain data and a bunch of like stakers lists

or data available offchain proof that you have enough experience in Ethereum validation and you are indeed an independent person and get special conditions. On the downsides, protocol risks and notable competition for stake because stake allocation queue in CSM has been pretty long for a while. Now it's just 500 keys, but again, who knows how long would it take for it to go bigger and when it will be allocated. Next up, stator permissionless. uh here would be kind of faster because stator is let's say rocketpool inspired or a rocketpool forkl like protocol which means that stator shares most of the stuff with rocketpool at least early stuff uh with the difference being that here you can already start with fore and

you will you were able to do it with 4E for a long time but you need to use mandatory uh governance token stake but at the same time you have SD utility pool that allows you to mitigate this risk and so on. The main thing worth mentioning about stator and what worries me the most on the downsides is that there has been no no updates on the permissionless road map and on the protocol development in general. So maybe I missed that. Uh but for me it looks like that there's not much activity there though the protocol is still live and you can still register a node and apparently they are depositing validators. So why not cool option.

Next thing and this is the thing that is not that frequently considered as an option for homestaking is homestaking with decentralized validators. So instead of getting in touch with protocols or doing all on your own well you can have a decentralized cluster or squat uh with your friends. The benefits here is that you can first of all reduce ETH requirement and secondly get better slashing protection and offline protection which is important which makes a lot of people anxious about what they're going to do if my validator will go offline. Well with DVS you are less likely both to go offline and to get slashed. On the downsides, you are now sharing DVT

technology risks and you get default staking APR and in some cases in some cases mandatory in some cases optional. You have to pay DVT provider fees. What are the options here? Mostly three of them, SSV and safe stake. I haven't heard of any other technologies available on the currently on mainet. So let's cover these three. Let's start with Oel here. You can start with something like 8 ETH. Assuming that you have a cluster of four 32 divided by four, you start with eight ETH. Cool.

You get improved slashing and offline protection. You are definitely using a battle tested protocol. And the thing that I like the most is that OBO is a DKG native protocol. So by default, you will be asked to generate validator keys for your decentralized validators. Not in a way that you had a key and then you've split it, but in a way that the keys originally generated as key shares so that the original key never existed. That's that's really cool. On the downsides, again, technology risk, no capital multiplier if you're just using decentralized validators.

The probably the main downside is that with Obel, you really need to have friends to run cluster. I mean, you cannot just find them anywhere. You need to have some friends unless you want to run cluster on your own and you will have to payable collective fee in case you want to get incentives and if you don't want you can emit this thing. Next SV here the main difference would be that you can form a cluster without friends. You can even form a cluster without even being a homestaker just selecting operators at their explorer.

though you will have to pay SSV fee no matter what. It's not an option. It's just a mandatory thing. Uh and the cool thing here and that the thing that Alan is going to tell just just in a few minutes I believe is more about based applications that can be a kind of additional vehicle for getting additional APR just by running SSV. The last notable mention safe stake and here somewhat similar to stator. Uh safe stake is kind of early SSV fork.

So it shares most of the early features with SSV. The cool the like the downside here is that there's very few mainet validators with safe stake. But the cool thing here is that all like literally all of safe stake validators are currently in light of CSM which makes me personally proud. this whopping eight validators. Anyway, the final option and I specifically did this picture rather weird so that you will understand that this is a complicated option though maybe the most appealing is when you use DVs with liquid staking protocol and uh what are the benefits? Basically the benefits here are all the cool things.

So you get the best of all worlds. So from uh working with a bonded staking with protocol and GVS you combine it together boom you have a cool thing on the downsides you basically do the same but you're now com combining downsides why because you're now sharing two risks both DVT technology and a protocol and you should account for that that there's now a lot in between you and Ethereum uh in most cases you will have to pay DVT provider fees and I'm not going to lie and I'm not going to ignore this thing But ma support and maintenance of such a setup might be tricky for those who are not like super experienced. So keep it in mind.

Speaking of options here, well you can basically combine any bonded staking protocol with any DVT technology. So I will not cover all of them. I would just I'll highlight one because to my knowledge this is the most popular option or one of the most popular option among home stakers. those really running nodes from home which is light CSM plus OLE and here the things are getting insane you can start with 6 E or even point4 E per validator which is basically nothing to start your validation journey you can still get this crazy high APR multiplier socialized rewards use two battle tested protocols performance threshold slashing protection I can't speak about the

benefits very very very long but you should also consider downsides because again two protocols are now in between you and Ethereum which is Obel Dvt technology and lighter protocol. In most cases you will have to pay a collective fee if you want to get incentives and again it might take a while for you to get deposit while waiting in CSM deposit cube. So that was pretty much it about homestaking options. I hope it wasn't that boring and some of you discovered something new or whatever. But the one thing you should remember after this talk is that no matter what you are using, no matter which approach you are taking, if you are homestaking, you are

making Ethereum better. And homestaking landscape is waiting for you even better, even more flourish. So, if you haven't been homestaking before, right after this conference, go back home and start your homestaking journey. Thank you so much. [applause] >> Excellent presation there. We have about five minutes for questions. Uh, let me ask the audience here up here. Can I see a question?

And I'll have you stand up and pass the mic down here. Thank you for the talk. That was very comprehensive. But I think one like major thing missing that um I'm sure there's good reasons for this that that you didn't mention is like tax implications. And uh I know you're not an accountant. I know every jurisdiction is different, but like that's a major consideration for for people because it could be like, you know, 30% of your yield. So, uh I was wondering if you could maybe just touch on anything you could mention about that and like specifically like if you're going to be like a lido, uh CSM, like if you got appreciated ETH, like if you put it in there, it's a huge, you know, unknown whether or not you get t you like brought up your capital, you know, your cost basis, which could be a huge um

taxable event. Um like I know like specifically I know you like can't give definitive answers but if you could like say like if you kind of give us some kind of like plausible deniability that you're actually thinking about it or you understand that like we have to deal with that. >> Okay. So the question of taxes is also a question that is specifically tied to your specific jurisdiction to your way how you approach that. So I intentionally never mention that in any option because any option might be tricky here. Some say for example that this withdrawal sweep mechanism that we have on Ethereum network for oxo1 validators is great for tax applications while others saying that it's absolutely

terrible and they have to file like each and every increase in balance. Uh so the options are different. If we speak about CSM specifically, I again I'm not saying that it will work for a lot of jurisdictions, but the mental model that we had in mind while designing that is that technically speaking, when you put your ETH as a bond into both Lidos, CSM and I believe most of the bonded staking protocols, there are now two counterparties that are able to submit claims regarding this bond. It is you. So you can say, "Oh, I want to get my bond back." And it's the protocol and the rules of the protocol that might apply that will result in seizing the

bond. And since the rewards in CSM will never land automatically at your wallet, we thought that the best we can do here is allow you to choose the moment where and in which amount you claim rewards. Though again, in any jurisdiction, people might have different opinions on if it works like that or not. And again I would highly recommend you hiring a like a good tax consultant and what I can do I can help from the technical side to explain like why for example I think personally think that if your ETH is provided as a bond into CSM smart contracts you cannot be deemed as a unique owner of this uh ETH because

again this ETH is clearly a subject to a penalty should there be a violation or outage or whatever else from your side according to the protocol rules. So that's probably the best answer I can give regarding taxes. Any other questions, folks? >> All right, I don't think I see any other questions there, but Dei, thank you very much. >> Thank you.