Ethereum solo staking renaissance - Dmitry Gusakov

Transcript

okay so I was lucky enough to get the previous talk right before my talk so that you guys now have a bit more of an understanding of what solo staking is but I have definitely to tell you more and I have a bit more optimism here because the end of the last talk was about okay the recent eips and stuff like that might theoretically reduce the number of solo stickers well they do but now let's try to dig a bit deeper let's try to figure out why this talk should instead be called The ethereum haking Renaissance and what are the situation what is the situation what we can do about it first

of all let's yet again figure out who are the solo takers but with a more precise and detailed approach to do that we need to take a look at ethereum staking mechanism at its score so that for those of you who don't know you will have a clear understanding of how it works ethereum staking mechanism is a bit not like the other staking mechanisms the key difference here is that the validator size or the amount of stake at the base layer is fixed and it is 32 e yes we all know that with the recent EAP which will go live relatively soon this number would change would now

become variable from 32 to 2048 but still the validator is more or less Atomic and it has more or less fixed value of Eve that should be allocated with the minimum of 30 to Eve so user have to lock 30 to Eve to the network and in exchange get the ability to run a validator and secure the network make it better and get rewards fine that's the ethereum staking in a nutshell so from this scheme we can do a naive inclusion the more people stake the better the more decentralization the better for ethereum right well not actually because there's a lot of

additional questions that we do need to answer to figure out if it's so or not first of all the first question that we do need to answer is are these users independent so as you can see from the scheme there is no requirement for one user to have only one validator and there's no requirements for the user to be the same user who supplies the stake and who runs validator so the next question is who actually runs validators and there's more where the validators are located what clients are used and so on and so forth so even though the ethereum staking mechanism might seem simple and we might draw a conclusion that the more people stake the better for ethereum it is actually not that and

to tackle this issue and to answer these questions we need to come up with with a some sort of classification of a stakers and within a previous talk we saw the simplest classification which is solo stakers stakers with decentralized staking protocols and stakers with centralized exchanges however the picture is a bit more diverse here thanks to efforts of eaker who have made this uh wonderful classification about a year and a half ago we can do a deeper dive and a quicker look on what types of solo stakers do we have for some reason they have excluded stakers on centralized exchanges probably because they ignore such type of staking

and because they are uh about pure Eve but anyway uh we can include them at the bottom so the first type the first type of so of stakers that we have and the most important one for ethereum is definitely solo stakers and the gist of a solo Staker is that you have all of the eth all of the eth is yours you run validators on your own control configuration you choose the clients and stuff like that and there's no requirements on where you run them I mean you can run them at home you can run them using virtual machines but you should be the owner of the funds and the owner of the validator this is called solo staking wonderful and this is the most important thing and as we heard from the previous talk there's a high chances of uh solo staking a number of

solo stakers reducing uh and yeah we need to talk about it today a bit so the next type home stakers the main difference of a home Staker compared to a solo Staker is that there's no requirement that the whole capital of if validator is actually owned by the Home Staker and there's a more stricter requirement that home stakers should indeed run validators from home so not using virtual machines not using public clouds but from home however presumably not with the whole Capital provided by them then we have remote stakers which is basically the same as home stakers but they are using some virtual machines or some commercial Hardware our software and then we have three types at the

bottom which is manage stakers where you still provide some part of the validator bond but you not do not have control over the how the validators are operated the good example here is all nodes where you can join and say Hey I want to run a rocket pool validator wonderful uh but you will have no control over which clients are used and over how your validator is operated you will only Supply the collateral and knows will do all this for you and this is called manage Staker so professional operators this is the typical one uh figment kill P2P many many many many more uh the key thing for them is they do not upgrade their own funds they simply upgrade the whole delegated stake and they do it in in any way they want and the last here

in the table liquid stakers which is the largest category of stakers is those who stake with liquid staking protocols no matter centralized or decentralized and uh in this case they they do not have control over the validators they do not have control over location the only thing they can do is they can select liquid staking provider and indirectly affect the situation on the network okay so what we've learned today we have three types of independent sakers and the solo sakers are the best and the most desirable for here but are there enough solo sters and again as you've seen on the previous talk the estimation was like 2.5% of the network but the thing is we don't know there's bunch of

different researchers and some say that there's like 20K home home and Solo stakers or 20K solo stakers some say that is five of them the problem is that ethereum network is designed in a way that you cannot know for sure from the network data what is what who is the actual operator of this or that validator and uh the next thing here is that this number is getting lower so according to estimations if we look at the early researches at ethereum Genesis the number of solo takers was higher now it's getting reduced and it's also very inaccurate so what's the problem here the problem here is that it is hard to

be solo Staker and again as you've heard from the previous talk I'm I'm super happy that we had it to be a solo Staker you basically need to face all the complexity of ethereum staking and with like no benefits at all except for the fact that you own your funds you need 32 e for each validator so if you have 40 eeve you will not be able to spin up 1 point one validator no you will still have only one validator and you need to have additional 32 e for the other one you need to have Hardware you need to face the reality where you get penalized for like every seven minutes being offline because every seven minutes your validator have to submit a single attestation and if you miss the

attestation you get penalized you also get uneven rewards you do not get any additional benefits so being solo Staker it's like being Pablo in this picture can ethereum help here because we learned that solo sckers are super important for ethereum why would not ethereum jump in and help well because it cannot because ethereum had chosen a very complicated path of neutrality when the Network itself as a base layer is neutral for all for users for stakers no matter who they are no matter where they are it means that even though they are a bunch of

researchers uh that say that okay there is a possibility that this or that thing might be improved for solo stakers all of them are either very tiny or not feasible at all so now we are fully depressed we know that the number of of solo sters is decreasing we know that it is hard to be solo Staker and at the same time we know that solo stakers is probably one of the most important categories for E the however as we learned from the picture uh provided by Eve Staker there's another category called home stakers which is right below solo stakers with two main differences the first one not the whole capital is

owned by a home Staker which is slightly worse than solo Staker but the second one is better because home stakers they do you have to run validators from home and this is why the Renaissance in ethereum Solo staking is actually not the Renaissance in ethereum home solo staking but in home staking in the second best category of stakers for ethereum and it all comes from the protocols because staking protocols unlike base layer of ethereum unlike underlying Network they are not required to be neutral they can and should be opinionated they can identify for for example independent stakers maybe home stakers maybe just independent persons and offer them some specific benefits

unlike the Bas Network because Bas Network cannot give you specific benefits on the opinionated decision of your identification no but protocols can what protocols can do as well they can ease the process overall because again staking with ethereum Native staking as you all know there's no blaming UI to do the interactions with Native staking you should you should use the CLI tool to do Native staking which is crazy uh because with liquid staking protocols you simply go you connect your wallet go to UI and do all the staking wonderful so protocols can do the same but for home staking they can offer this smooth and pulled rewards because again as we know

from the mechanics of how ethereum rewards work the only duty that you do on a day-by-day basis is attestations and even though attestations is a significant portion of the rewards they are meaningfully lower than for example rewards for the block proposals or for syn commit participation and both block proposers and syn committee participants are selected using randow so you never know beforehand would you produce blocks or not and with staking protocols where you have multiple stakers working together multiple home stakers working together you can even you can smooth in this pool and there's much more cool things that staking product can offer on top and the best thing here is that there's only one ethereum base layer

only one but there can be tons of protocols on top of it and we already know that there are many staking protocols and given that each and every protocol can and should be opinionated they can and should be opin opinionated in a different ways meaning that hakers will now have the ability to choose between which protocol they are willing to use which protocol they think is better for them and so on one of the great examples of Home staking and why I believe we are entering the Renaissance stage is community staking module for sure developed by Lia and uh myself as well because before Community staking

module and before the the end of year 20124 there has been only few home staking Solutions on the market with the most famous one being rocket pool however still not super accessible and uh with the introduction of the community staking module Lia as the largest staking provider steps into the home staking the territory allowing people to become home steers and I I believe that the other protocols should follow and we should have more options to give you the gist of why Community staking module is important and why it is some form of a revolution here is first of all since its launch 3 months ago more than 150 new home sakers people

who have never been validating ethereum who had never been running validators for ethereum before had joined ethereum and lighter as well you only need 1.3 e to spin up a validator it means that the reduction from 32 to 1.3 is like extremely significant which makes home staking way more accessible you you no longer have this entry barrier and even if we take a look at the rocket pool which is the main competitor of community staking module you will see that right now you still need 8 eth to participate in rocket pool they are actively working on reduction of this number to four eth and then maybe even lower which is amazing for home stakers and I hope that they will do it soon but so far 1.3 the best thing and there's

also a potential for increased rewards and this is the topic that has been mentioned in the previous talk that if you are if you are Solo staking you do not have access to smooth rewards and you do not have access to rewards that are somehow higher than with liquid staking so what community staking module offers is the potential for up to 2.4 times more rewards because you get full rewards on your principal on your 1.3 eth and then you get a share of rewards on the delegated part which really makes home staking reasonable and appeal because you need to do extra Duty you need to run a validator unlike with liquid staking but at the same time you

get more rewards and there's much many more things and the coolest thing about CSM is uh literally today in like four or six hours I'm not quite sure at 3 p.m. today uh 4 p.m. today Community staking module will exit its early adoption phase and will finally become fully permissionless so before that right now not all of you can join because it's still in the main net beta but the transition from the main net beta from the early adoption stage would happen today at 4 p.m. so stay tuned and maybe on the weekend you will decide to become homak but my idea here was not to show you CSM but to give you the overview of

the space of ethereum staking of the types of ethereum stakers and to introduce home staking to you as the great alternative to solo staking which is which as we learned solo staking would inevitably decrease and is not like super attractive unless you really want to own your e while haking is also a great alternative here and I believe that home staking first of all is fun I'm personally a homester I do have this wonderful machine at home under my TV and I spent absolutely amazing uh couple weeks playing with the configuration

selecting the best clients optimizing connection and stuff like that I'm I'm I'm a bit of a technical person for sure but even for non-technical persons it might be super fun especially when you chat with people when you try to figure out like what's what would be the best configuration how can I improve here but at the same time there's no need to do like absolutely best because of the way how the home staking Solutions are designed because they allow for performance leeway and stuff like that so they offer alternative panel to system but anyway it's fun it is super easy because if you don't want to dive into particular settings like I do you can just plug in your dap node uh do a couple clicks on a UI which is very

human readable and easy to use and then you have your setup ready you just need to wait for the nodes to synchronize with the network and then you can start participating and then you can become home steaker with within like 10 Clicks in total so it's super simple home staking is definitely rewarding I mean 2.4 times multiplier on ethereum staking APR is definitely not a joke there are solutions on the market for sure somewhere at the Far Far Away corners of l2s where you can get ethereum APR of like 15% or stuff like that but you should keep in mind that the further you go the more Protocols are involved into this wonderful scheme

the more risk you are taking and with home staking the only risk you are taking is the same risk as with any liquid staking protocol as with the liquid staking protocol you are interacting with plus slashing risk but slashing risk is fully controlled by you because you are the one who runs validators and for sure home staking is good for ethereum because it makes ethereum way more decentralized it uh makes ethereum secure and overall home staking is cool so my go to action for you today guys is double-sided if you are just in ethereum space and you just want ethereum to be cooler and better uh go and become hom scker I mean I'm

serious if you have 1.3 e or I mean let's say five E to make it more or less viable in terms of rewards go and become homaker if you're a developer and and you are working or you you know someone who is working with staking protocols and there's no Home staking in their protocol go and tell them to add H home staking lier did it it means that each and every protocol can do it and should do it if they are ethereum aligned and the final thought as I've mentioned before protocols can identify people and can be opinionated and one of the ways to say that this or that address belongs to an individual is proof of attendance

so if you ever like to get benefits for identified individuals go scan the Cure code and mint a simple odd which will be your proof of attendance which will further be used to classify you as an individual which will be one of the factors that can be used to classify you as individual and that's it go home stake go build home staking let's make a theum more decentralized thank [Applause] you thank you if if you guys have any question yeah h two questions be be quick thank you I adore this microphone um how does

Lio make money from me being a homaker and what's the cut roughly uh yeah so the scheme how Li as a protocol makes Revenue no matter from home Seekers or for professional operators is uh essentially the same so there is a 10% uh Revenue decrease or like staking reward cut that is taking by Lia and then this 10% are split between professional operators and laa between home stakers and laa for professional operators the split is 55 for home stakers the split is for uh 64 six goes to home stakers another one H

undershot thanks I was wondering about the penalties of a home Staker when you have outages are they exactly the same or is there any let's say smoothing softening here yes yes that's a great question as I've mentioned the native system of ethereum is uh pretty rough I would say in terms of penalties and because it does not include the pooling aspect so you can use pooling aspect for two things you can use pooling aspect to distribute rewards but at the same time you can use the pulling aspect to somehow distribute penalties right so within Community staking module the approach that has been taken is uh radically different from what ethereum network does so what community staking

module does is it measures the performance relative to the network average performance at the moment only in terms of attestations not including block proposals and sync committee but it will be changed soon and then if your performance is above the network average minus performance leeway which is currently 5% which is enormous you get full socialized rewards meaning that not only your rewards but also your penalties are socialized with the others but if you drop below this threshold which means that you did significantly bad you've been offline for let's say 3 days in a month or you haven't been online at all you get zero and even if your validator actually acquired some

rewards they will be socialized among well performers so this is the gist of how the reward system and penalty system works okay thank you [Music]