Building Ethereum 2.0, we have summarized 5 experiences in staking

Source: slipfish (WeChat id: Stakefish)

Original title: Building Ethereum 2.0, we have summarized 5 experiences

Author: Written by stake.fish compiled from its operations manager JK Devcon5 speech in the General Assembly.

Ethereum 2.0 will bring more new components such as sharding, PoS consensus, new virtual machine (eWASM) and more. Its development is independent of Ethereum 1.x based on the PoW consensus and is implemented in steps. During Devcon5, we have learned about the various aspects of Ethereum 2.0's various technology implementations and community developments. The continuous optimization of fragmentation and community coordination is also expected to accelerate the arrival of “quiet serenity”.

Compared with the PoS network that has already been launched, Ethereum 2.0 is not only the value switching between the old and new main networks, but also the goal of decentralization, resilience, simplicity and durability in the staking economic design, and therefore with the previous staking mode. The difference is produced, which in turn leads to an adjustment of the business model of the verification node.

Ethereum 2.0 has attracted attention for many years because of its extensive developer base in the encryption world and the size of the second largest cryptocurrency. The “World Computer” turned to a new consensus, which attracted the attention of developers, investors, and regulators. This also required the value network to be as prepared as possible and take many forward-looking measures.

Fortunately, there are already many PoS networks that "test the water" before the arrival of Ethereum 2.0. As a verification node, Stake.fish can share some of the points we have learned from staking and provide some suggestions for Ethereum 2.0.


Stake.fish is not only a validator on multiple PoS blockchains, but also a node operator that takes a staking mechanism project. We are looking forward to the arrival of Ethereum 2.0 and hope to showcase our new Ethereum based on PoS.

During the period of “waiting” for Ethereum 2.0, there have been many other PoS projects running for about 1 year and producing data points worthy of reference. We also summarized many experiences in the process of running the nodes. By sharing, you can avoid the “pits” that the participants have already stepped on, and provide some inspiration for Ethereum 2.0 staking.

It is said that as long as 32 ETHs are locked, "everyone can do nodes", but the fact is not so simple .

On the device side, we can't assume that everyone is running a personal computer at home from time to time, and we can't be sure that everyone has the technical skills to read the GitHub code , or can use the command line to actually run a verification node.

So we think that in Ethereum 2.0, you still need the services provided by the professional verification node. We want to make the staking on Ethereum 2.0 more friendly to retail investors by lowering the staking threshold to increase overall participation.

Before discussing the differences, let's review the two staking services of infrastructure providers in the past:

In the case of Validator-as-a-Service, since the node does not perform the "custody" of the user asset, the holder has delegated the token to the verification node in the case of ownership, through a special The transaction gives the verification node network power.

Note: To be clear, we usually say that the “hosted custody” method manages the user's assets in a centralized way, while the “delegation” in staking is to temporarily assign the network power to the node through the agreement. The most obvious difference between the two. The former is actually the “private key” that manages the user's assets, while the “private key” of the latter is still controlled by the holder.

In the case of Node-as-a-Service, the service provider helps to set up and run nodes, and the role is a bit like AWS. The business of Blockdaemon and Bison Trails is an example.

However, in Ethereum 2.0, there is no “delegation”. People don’t have the option of taking tokens to a verification node. At that time, unless they can host other people’s funds, “Verification as a Service” will be on Ethereum 2.0. Not a viable business model. And "node as a service" will inevitably become a commercial field for verification service providers.

Losing an important traditional business line, why are service providers still looking for opportunities in Ethereum?

Market value is a "temptation." The staking encryption assets currently available for staking are $ 5 billion . We expect its market value to reach $ 30 billion in about a year or so, and Ethereum 2.0 assets will account for about $ 8 billion , which is a major contributor to growth. Focusing on potential benefits and hoping for continued contributions are two reasons for participation.

So how do you better contribute to Ethereum 2.0? We summarize the following five aspects that are worthy of attention from participants on other PoS networks.

1, pay attention to user operations, optimize the staking experience first of all to make the staking interface easier to operate.

Currently, it is not easy to carry out staking. Even a relatively easy-to-operate network like Tezos, users often ask, "I have a Tezos network token in my Ledger wallet. Where do I go to commission, is there an available action page?" Google, you will find that the answer is varied and not quite clear. For example, at the beginning of Cosmos's launch, there was only one desktop and mobile wallet. People would ask "Is one or two options?" Many nodes would also recommend the command line interface (CLI, command line interface, text-based). User action) because it is the safest. People have many similar puzzles at the beginning of staking.

Non-technical people often hesitate to face the command line interface for a while, they need friendly options, simpler and more intuitive. Before Ethereum 2.0, some user interface should be fully prepared, otherwise this problem will shut out a considerable number of people.

Second, let staking be easier to trace.

This is not only for the convenience of the currency holders to check accounts and to view the benefits, but also related to “taxation”. Although the current tax requirements are still unclear, taxation is considered a trend in the future. People should prepare a Dashboard or other tool for Ethereum 2.0 with relevant features.

2. Provide a hedge for the risk of slashing

Our previous article on staking features has introduced the risk of slashing. The first "double signature" penalty on the Cosmos network this year not only caused a lot of damage to the assets of the verification node and the principal, but also likely ended the staking business of the penalty verification node.

Since then, whether it is a large investor or a small currency holder, when choosing a node, always ask how to be immune to network penalties. This emphasis on the community is necessary, and they also need to hedge against this risk.

One method is the form of Defi. For example, to establish an insurance market, design the corresponding Defi products before Ethereum 2.0.

Another way is to automatically diversify staking. Just as the portfolio is diversified, staking tokens on different nodes is also an effective form of diversifying risk. But people are not aware of the importance of this, most of them are "all in" on the same node. However, the inconvenience of diversified operations also partly contributed to the centralization of staking. Designing products that automatically staking at multiple nodes is also worth considering for Ethereum 2.0.

3. Focus on centralization issues

The article we shared earlier discussed the "Gini coefficient" problem on the Cosmos network. Because the tokens commissioned on each node show a big difference, the centralization is very obvious, and there has been relevant discussion.

On Ethereum 2.0, there is no such thing as entrusting tokens through a chain agreement, but large accounts will still exist. Similar situations include: 1) exchanges , because exchanges can host a large number of users' tokens; 2) service providers provide "node-as-a-service" service concentration. Imagine another form of "concentration" caused by a single service provider serving 50%-60% of tokens. In Ethereum 2.0, the two forms of centralization are actually another “single point of failure” risk that deserves attention, and an effective response strategy needs to be studied.

4. Exchange entry and staking derivatives

Here we also need to discuss the topic of the staking service provided by the exchange. We already know that exchanges such as Binance can provide staking services. The advantage is that it can host the user's tokens and bypass the two issues of liquidity loss and unbinding deadlines .

The exchange can distribute the staking reward directly to the corresponding holder's wallet, can issue alternative types of tokens, and can encourage staking on its platform through special exchange tokens.

This has also led many professional node operators to consider how to develop new products or derivatives in terms of liquidity , balance the location of verification nodes and hosted participants, and promote appropriate price discovery of encrypted assets.

5. Supervision and taxation

We may need to set up a working group to study the taxation aspects of PoS tokens. PoW tokens have existed for many years, and some frameworks for mining and their benefits have been established, but we are not sure whether the relevant framework can be copied into the staking and its benefits in the PoS mechanism.

For example, how is staking income classified in taxation? If at the end of the tax determination, at what time is the tax collection? When the reward falls into the wallet, is it still when the token is traded? Many issues remain to be resolved.

Previously, some well-known staking participants established an organization called “PoS Alliance”, suggesting that the Ethereum community can establish corresponding organizations, promote discussions with relevant rule makers and regulators, and conduct more forward-looking efforts to understand and Exchange related rules. The above is what Stake.fish as a staking professional verification node about Ethereum 2.0. We are also working on the above issues, and we hope that through the efforts of various builders, most of the above problems will be effective before the arrival of Ethereum 2.0. solve.