Lido Community Staking Module - Dmitry Chernukhin

no no I think it's okay yeah okay good check 42 awesome okay uh hello everyone and today we will talk about how to make ethereum validation more accessible with light the community staking module and yes it's me Dimitri and and I'm making lier more permissionless with contributing to lier Community thinking modu but first let's start about uh how to actually validate if raise your hand if you do know how to run your validator a little too much hand so I think the rest information will be really helpful for you for for the rest of us and ethereum is an really evolving uh technology and it is one of the few project that made a transition from proof of stake or proof of work sorry to proof of stake and that's why today we speak actually about the validation and not about the mining and because of that after the merge that happened in September 2022 if I remember correctly there are now two blockchain on ethereum actually so the first one is the execution layer that's where all the troduction lies so that's where um smart contacts deployed so when you interact with some m M to make a swap or make an if transfer or mean to your nft you actually interact with the execution layer and there additional one it is a cons layer and that's actually where um validators operate they reach consensus on the state of the network and they propose a blocks to be actually included into the execution layer but validator itself is is not a self-sufficient part of software it actually requires a connection to ethereum node and ethereum node itself turns uh communicate with the rest of the network and typical setup looks like this because as you know ethereum consist of two blockchains and validators has to be connected to the cons layer client client cons Slayer client itself requires connection to an exec layer clients and these two clients interact with their corresponding networks so execution layer networks and the con layer networks respectively and validator client itself can have additional connection to like additional parts of software for example to blog Builders such as M boost uh client which is primarily responsible like int main intent of this part of software is to make more if from a Blog proposal so to get more rewards but about a little bit later in fact I will say that validator is like really confusing term in etherum because from the ethereum glossery validator is just like um a virtual entity on the cons layer Network and it is just described by its public key and its balance so it does not validate anything in fact and here is like the actual um like speed of the responsibilities between cancer layer nod and the validator so can layer node actually responsible for validating blogs and interacting with a network it actually select the like current Fork it uh like proposed not proposed but um share the information with the rest of the network the rest of the piece and so on so forth and validator is just proposed blocks it actually share its Vision about the network State and it reports sling and the thing is that consensus layer and validators is validator clients I will say is just a piece of software so you can actually just run it right and by running in can layer node you will be able to get your own copy independent copy of the consensus layer State and you will be able to contribute to the overall eum resiliency and data availability just by running your uh can slay not software you will listen for the messages from the network and you will propagate it uh next to other PS and so on um so it is already something to do with ethereum right but to actually propose a new block to be actually included to the execution layer you have to run your validator and the thing is that for running a consus layer the all you need is just hardware and software and that's it but to create a validator to actually propose new blocks you need at least T2 if eer per single validator and this brings to us the first ethereum validating ethereum validation issue it is expensive it is expensive by Design right but validator gets rewards because even it provide a lot of um if as a stake it gets something from it and these rewards come from AIDS duties so there are three main types of duties of validator it is blog proposal attestation and sync committee participation let's break down it a little bit so uh can blockchain timeline is splitted into the regular intervals called slots and validators all the validators on the etherum uh Network are being like randomly selected to be proposer for a given slot and a validated responsibility is to construct a valid blog to be included in the predefined slot and it it uh has to do it in just in time to be actually included into the network another responsibility another duty of a validator is to share its Vision about the chain state so for the it is pretty uh often responsibility and it contributes to the overall uh like propagating of the correct view of the chain at the very moment and the last uh responsibility is um sync committee participation so syn committee is uh pretty interesting concept so because on etherum network there are a lot of validators and it's not possible to just it's not easy I would say to collect all of them uh get all the public keys and uh verify the data so instead the network um splits uh the valid dator the whole valid data set into the syn Committees it is that's really small compared to the whole uh set um subset of validators that is responsible for signing beon block routs and light clients available to easily download the list of this uh validators which participate in this uh syn committee and to verify uh where every uh beon block route without the need of having access to the full blockchain State and if you take a look into that longterm breakdown on rewards of a validator uh on ethereum you will get that about 70% of the rewards comes from cancer Slayer rewards so it's reward for the duties I've described it just uh before so it's just blog proposals arations and Sy committed participations and these rewards are pretty stable so if your validator does perform well you will get most of these rewards and it will be 70% of your rewards in the long term but another part is execution layer rewards so it is the the rewards that come from block proposal but uh in terms of uh fees for including transaction and so on but your validator has about like just a few times year an opportunity to actually propose a block it hardly depends but in General on average just a few times and in these two time few times there is no guarantee that you will get a lot of rewards from blog proposal because it highly depends on the state of the network at the moment of your proposal so it can be another Bull Run and a lot of transaction High guess fees and you will get I no money from the fees or otherwise it can be almost nothing just because uh Network p is tarent and you have one way guess and and so on so just because on in the long term it takes about 30% of your rewards and these rewards are really really volatile and it mostly not depend on you your overall rewards also volatile and it is the second ethereum validation issue for today okay um validator gets rewards but it also get penalties validator has to provide uh some if as it St so 32 if um but if validator doesn't perform well and it misses its duties it not only don't get any it also being penalized so validator balance are actually decreasing over time if the validator perform bad and there are like three main types of penalties the most severe one is slashing indeed is because it means that your validator made a real like VI violated rules of the network and it went will be kicked off the network and it won't participate in conses anymore so it just like terminal point some kind and it will re receive you will get like a massive penalty it's currently uh like immediately one if penalty and after that after some time it will eventually lose some part of the balance and it in fact can lose all of this sub2 if but in practice it's not the case but in general you can lose whatever balance validator has and there are two another types of penalties it is for missed attestations and Miss s committe participations they are pretty low compared to sleding indeed but at the same time they can be not depend on your validator performance directly so for example um if you validator I mean your setup in general has a problems with the connection for some time and it it has no ability to propagate the attestation or you have just have a small power aage and your validator goes offline because of that or basically this also can be the case that the not Network itself has had no ability to include the attestation into the network because of the a lot of Miss slots you will get penalties as well so this is another issue of validation that you have penalties even for small outages okay and the final problem for today it is that an etherium network is no such thing as a native stake delegation so you need s to if to create a validator but you have no built-in mechanism to actually like get this if from another if folders to create validator of the network you have to make some kind of external agreement offchain or onchain and actually light protocol is one of these short parties that actually allows you to make such kind of agreement and make it on chain so there are if holders who can who like who want to uh they if to be staked and we're not operators and staking protocol just connect these two parties and make it secure right so this is uh as I said the last issue for today about the eum validation is lack of the ethereum or lack of the Native delegation of the eum network and the question is how to make it really like better simpler and so on and we have an an answer to it it is a lighter Community staking module it is the lighter eum protocol first module with a permissionless entry allowing an parator to join light validator set just by providing a relatively small Bond so to create a validator instead of 32 if you have to provide just a small amount of as a bond so around two if and the rest of this if will be provided to your validator by the protocol itself so from the another if holders right so this actually solves two e validation issue at once so first it get out of the picture expensive nature of theum validation and the second it allows to get um if if from um delegators right another thing uh as I said um validat rewards are actually really volatile because of the nature of execution layer rewards and by default ethereum protocol uh distribute rewards uh independent for the every validator in the set and it depends on its performance and on its luck basically that's that's the whole point point but light the protocol as the sing protocol acts a little different it collects all the rewards that uh distributed by etherum protocol in one place and then distribute pretty evenly between validators so it basically means that your validators get a smooth reward so average rewards so in this case by participating in the lighter Val set you actually participate one of the largest smoothing PS on and this effectively solved other problems so there are no more vol rewards they're pretty smooth rewards because of the protocol and uh here is the question so for example if I run a multiple validators on the really good is really good performance but imagine that there are more multiple Val that just went offline after its creation why the protocol should share the part of the rewards with this validators as well it shouldn't be the case right and that's why um in CSM there is a notion of the performance threshold and if your validator runs U like pretty like with a decent performance it is able to get the socialized like Smooth rewards but otherwise if your valid performance drops below this threshold it doesn't rece rewards for the delegated part of the stake so it means that this validators get out of the picture as well so like distribution uh is being more fair in this case and by this we solve the issue with the small ales now you have a liia for them so let's like go to this one more time by joining CSM you have to provide just two if to create a validator in the network you will be get you will get the rest of the etherum from the delegators so from another E holders you will get the smooth rewards because of the uh participating in the ligher um M set and finally you have a leway for small orages and with all of this I'm really happy to say that light the community staking is community staking modu is really your best friend in ethereum validation and I really encourage to give it a shot thank you thank you very much maybe we have room for one of two questions yes I see over here here can I have a mic please thank you very much so let's start over here here we go hi um I'm curious uh how does APR compare between just holding SD against running a validator with Community taking model um a is higher this is a short answer right so what expect yeah it highly depends so I will say that currently the APR of just holding SF is roughly 2.7 2.9% right right it depends on the network conditions but uh you will get your a taking APR on your bond just you have two e Bond provided and you will get rewards on it but Al you will get rewards from the ethereum validation so it just St how you say it on top of that you will get additional rewards so on top of just holding to if as a bond you will get this rewards anyway you will get extra from the validation itself so your a APR will be higher and I wouldn't say about the correct numbers exact numbers uh but I think it is about 1.5 1.7x multiplier on your provided Capital so in some in some cases may be a twox it depends on the bond amount but in general it is much High okay thank you thank you very much I so we had another question over here go yeah hello please to meet my name is Carlo actually that was my question as well but I have another one for you so if you can go through the reward structure and is it like the two e bond is it fixed so it's either two e or 32 or can we adjust the you know the contribution according to our needs as well as is this live or is just on paper Okay um just life or on paper it is live on testet and it will be live on mayet I saying before Q4 so in a few months uh yes and about the bond amount itself so communic model has a notion of the bond curve it means that for every single validator you create your bond requirements can be changed so it can be higher can be it can be lower but in general um it every like subsequent validator will cost in terms of bond a little bit lower and for early adopters it actually um the model um offers the lower amount of bond so I don't know the correct amount but it probably will be like 1.

5 1.7 if for the first validator for early adopters yeah I think that's it so if I want to contribute 20 okay can I do that of course of course so it just you can do whatever amount of Val you you want to create so it just like if you want to 10 validators they will just show you for example 20 right so you have to provide the 20 there is still you can provide any amount you want just because uh like you need provide at least minimum requirement required amount of onth per validator right but in general it's uh pretty like scalable so you can provide whatever you want actually thousand and whatever awesome thank you great thank you very much do we have any other question no perfect then thank you very much Dimitri let's make another Applause for him please thank you