'A Layman's Look at Staking on Ethereum Six Months After Genesis' - Superphiz

um it's two people uh you can only see one on the side but it's actually two from the e-staker community that most of you will know and like um superfist the self-proclaimed beacon chain health coordinator and unvetica his emotional support human and graphics guru so welcome the two to the stage and they will present today a layman's look at staking on ethereum six months after genesis hey guys hi so yeah um i'm so glad to be here today it's it's kind of nerve-wracking to follow jim um i've been friends with jim for a long time well in you know cryptocurrency years it's it's been two weeks so that's equivalent to 20 years um but jim is a a thoughtful and insightful fellow so um yeah i'm glad to follow him and i'm looking forward to sharing what what little i know about uh staking on eth2 a little bit after um after genesis so i'd like to welcome everybody to the eighth global scaling conference i'm going to talk about the state of staking on ethereum six months after launch so i'm superfiz i'm from the east staker community and that's a loose knit of group of people who share a similar goal to improving staking you can find me at reddit reddit.comrslashestaker and on the east staker discord at invite dot gg slash eatstaker e eastaker also puts a lot of content on youtube because we find out that's one of the most consumable formats for people um and you can find us at youtube.com easttaker all of these sources are available at our main site eaststaker.cc so we really look forward to building a strong community and we would love for you to join us there the goal of this talk is to help you recognize features of healthy staking options so when you participate in staking you can make choices that benefit the health of the network as well as your own investment i'm going to begin by saying something that's going to seem a little controversial that now is the golden age for solo stakers and people who are interested in pooled staking or staking with an exchange should really consider waiting until after the merge is complete to deposit funds you should know that my suggestions are always based on making careful decisions and not based on making or knee-jerk actions i want you to be successful with staking for 50 years and not just for a few weeks so before we get into the details of what that means i want to tell you a little bit about the eat staker community at each staker we have two real goals to promote overall beacon chain health by advocating for open source trustless and decentralized staking and to lower the technical bar for anyone that wants to stake on the ethereum network by developing tools that can improve access to staking with any of the four genesis clients we pursue these goals through our steakhouse initiative which is a group of developers that work together to find pinch points in the user experience and develop solutions for those pinches and so i'm really proud of colfax and what he's brought to the steakhouse experience uh right now they are putting the finishing touches on a single click gui installer so people who wants a solo stake can really do that through about three mouse clicks which um which is a pretty interesting advance e-sticker core is currently composed of five members super fizz lamboshi buddha worth halter and envetica and anvedica helped me here with the slides and great wizard another friend helped me with organizing all of this content it's really important to me as one of the organizers of eatstaker that we're reaching out to as many people as we can to help them feel comfortable with staking i would like to say now we want east acre to be more inclusive we want to see better gender representation more nationalities and more cultures represented in east taker and i feel like just by opening the door and saying that we can begin to invite more people in we're really interested in having your participation whether you look like us or if you look different just come to our discord ask questions get involved because we'd love to have your participation we strive to be welcoming first and knowledgeable second hopefully we'll keep uh keep our egos in check as we become a part of the ethereum staking network so now that you know about eatstaker and how to get involved with the community for extra support let's get into the main points of today's discussions first i wanted to give to give an overall about who this talk is targeted to the people we really want to talk to are the people who are curious about staking on ethereum but don't know a whole lot about it in many ways this is going to be a follow-up from the talk i gave in october 2020 about the introduction to staking on the ethereum network but we're six months beyond that now and i want to give a new window for people who are interested but don't know where to start and one of the biggest changes has been the change in the price of ethereum in my last talk i focused on solo miners today i want to talk about principles for staking with pools and exchanges when we covered an introduction to staking six months ago 32 ether cost about ten thousand dollars we all thought wow that's that's just so astronomical but now 32 ether costs over sixty thousand dollars and it'll probably be a different picture the next time you listen to that i don't know whether it will go up or down but it will certainly be different the reason this matters is really about the accessibility to staking when solo staking started it was far more likely for someone to have 32 ether and be ready to set up a staking note now with the price being so different there are many more people that would like to participate in staking on ethereum but they don't have 32 ether to solo stake we're still very early in the process for stakers with less than 32 ether but i want to do my best to help you make good choices let's talk about how we got where we are today ethereum started in 2015 as a proof of work chain so anyone who wanted ethereum in 2015 could use a computer graphics card to mine and basically exchange the cost of the graphics card and the cost of electricity to receive some ethercoins that was a great system for distributing ether coins but even during launch vitalik knew the ethereum network would move toward a new system called proof of stake in the future vitalik called this progression serenity proof of stake is a system where you put up a bond and use your computer to verify the state of the network and receive a small payout for doing that proof of stake has a lot of benefits over proof of work and we're very confident that it will allow ethereum to scale far into the future in an environmentally friendly way and also to enhance the user experience the beacon chain launched on december 2nd 2020 almost six months ago since then nearly 4 million either have been deposited to the deposit contract representing almost 125 000 in individual validators which have proposed almost a million blocks in over 32 000 epochs if you were a validator that deposited during the genesis block you'd have attested swell since then you would have earned more than 1.3 ether which in today's terms is around three thousand dollars the beacon chain is still separate from the main ethereum network and it doesn't process any transactions or smart contracts at this time people who deposit funds for staking cannot withdraw them though it's likely that withdrawals will be possible by early 2022 and maybe even sooner than we expect since the launch of the beacon chain there have been about 135 slashings and the vast major majority of those slashings are attributed to staking pools that were misconfigured or not ready to handle user funds this is one of the main reasons that i encourage users to wait before participating with a pool it's important to know that going offline isn't the same as being slashed the goal of this talk is to teach you to recognize the features of healthy staking so when you participate you can make choices that benefit the health of the network as well as your own investment i believe these two goals are closely linked and i want to help you make the connection so if we're moving to proof of stake how does the ethereum network function today ether is the native token of the ethereum network the current way of producing ether is through a system called proof-of-work mining some people are under the impression the ether will change when the network shifts to proof of stake but either will always be the same coin you hold now people who want to earn either through proof of work you mining use either a graphics card in their computer or something called an asic which is an application specific computer using a graphics card to mine you can usually earn about a dollar or two of either per day or even more while the price of ether is really high and then a miner can either add that to the stash or sell it some high-end miners will use an asic which is optimized to do one job very well in this case mining ether in a proof-of-work network the downsides of mining with asic are that they're very expensive and they have a very short shelf life because they're only good for mining one type of hash proof of work mining uses a lot of electricity and generates a lot of heat the ethereum community recognizes that these are unhealthy byproducts for the environment and we as a community have a moral obligation to correct these for humanity if we can proof of work has been a successful system and from a technological perspective it's not flawed but from a moral and humanistic perspective it's an arms race where minors must continue to upgrade hardware very frequently causing waste consuming electricity and producing heat the good news is that we no longer need this energy intensive mining system because proof of stake allows us to reach our goals more efficiently and in a more environmentally friendly way proof of work obviously takes a lot of energy and as interest in cryptocurrency increases it's only going to take more resources even though chip fabrication improvements make it more efficient the energy required to be competitive with other miners will continue to increase on the other hand proof of stake will consume 1 10 000th i want to say that again 1 10 000th of the energy of proof of work mining and low power use will come will secure the network for the foreseeable future as computer hardware improves and becomes more efficient that power usage will remain stable or even decrease because we'll no longer be in a mining arms race i'd like to give an example of that and i don't encourage you to go out and spend money with a belief this will work perfectly or for the long term but the nimbus client runs very well on a raspberry pi computer so we're going for peop from people using warehouses of 50 000 gpus to proof of stake where you could essentially secure the network as efficiently by using a raspberry pi computer and a good hard drive which today costs about two hundred dollars the important thing to know here is that proof of stake can secure the ethereum chain for about one ten thousandth of the energy that's required for proof of work and it will actually improve the consistency of network timing which benefits the end user as a person that wants to get more involved in staking or maybe you're already doing solo validating and you want to have a strategy for explaining the options to your friends and colleagues how does this impact you as we begin to talk about the ways that you can stake your ether i want to talk about the need for the ethereum network to increase decentralization it's important that i say we increase decentralization because if we do things the easiest way possible we'll tend towards centralization this is when people say to me fizz i'm just here to make money i don't care about all of that network stuff i don't care about centralization i'm an investor and i just want to make a good return on my investment and i understand that and so let me respond by saying that your investment is ether and for ether to appreciate in value as an investment it needs to be as healthy as it can be and the way for you to improve the health of your ether is by letting your ether work to improve decentralization of the network so everyone says i don't care about the platform i'm just an investor and they in way they invest in ways that centralize the network then they're actually undermining the value proposition of their own investment it doesn't make sense so let's get into three types of staking options centralized distributed and decentralized by design the ethereum proof of stake network is decentralized anyone who wants to start a validator anywhere in the world can start solo validating and they will essentially be a part of the decentralized network by contrast centralized centralization happens when a lot of people send their deposits to an exchange and have the exchange stake on their behalf the exchange is really doing all of the staking and they're concentrating a lot of either in one place and that begins to descent to threaten the decentralization of the network a distributed model is somewhere in the middle an example of a distributed model might be staking pools that take ether from you and hold it on your behalf and stake at a smaller scale that exchanges that represents a centralized model so with the distributive model we're essentially looking at hundreds of smaller pools that hold your ether and stake it for you it's better than being centralized in an exchange but it's still not the ultimate goal of decentralized staking decentralized staking is the gold standard decentralized staking is when you have a lot of people running validators in their homes and the world is covered in a thin layer of staking nodes rather than finding them all in one place responsible investors need to take these concepts into account when determining how to stake either while solo validating is the gold standard of decentralized staking there are software solutions that can promote a decentralized pool staking they're coming very soon but the point of this slide is as a community we need to demand decentralized staking solutions and we shouldn't fall into the trap of centralized staking just to make money because focusing on short-term profit can be a recipe for long-term loss at this point i'd like to introduce the scalability trilemma as a potential staker you may be most interested in finding out where you can send your funds to make the highest return but as a reminder the goal of this talk is to teach you to recognize the feature of healthy staking so that when you participate you can make choices that benefit the health of the network as well as your own investment the scalability scalability triluma is a triangle with three points security decentralization and scalability these points represent three features of an optimal blockchain and it's actually difficult to balance these three things we found that sacrificing one can give you a tremendous boost on the other two but at the cost of a healthy chain and the proof-of-stake network on ethereum is the premier block shade because it balances this trilemma most effectively let's dive deeper into one of these points decentralization in a decentralized network nodes validate all over the world and they're managed by independent operators and a decentralized network taking any number of these nodes down wouldn't fatally damage the network the decentralized nodes are interconnected and spread out fairly evenly over a large geographic area this is important for people with less than 32 ether who want to be involved with a proof-of-stake network in order to maintain decentralization people who want to participate by staking shouldn't give all of their funds to the same entity i'm not even suggesting that we don't want to maintain the current decentralized decentralization of ethereum we want to make the network even stronger by increasing the current decentralization as someone that wants to participate in staking without running their own node and as a community we should be looking for solutions that are trustless open source and decentralized we want to ensure that pool or exchange operators don't have control over your coins at any time so they can't disappear with your coins or worse yet cast votes that harm the network or get captured by a government we want to make sure their code is open source and that is reviewed by the community and we want to make sure that the solutions maintain and promote decentralization of the network rather than centralizing it further i acknowledge this is a high standard but it's one that we as a community need to strive for if we believe that ethereum will continue to grow and develop into a world-changing idea okay so now that we've outlined the features to look for in a staking solution i want to suggest three general ways that you could run a of proof-of-stake validator these three methods are solo staking tooled staking and pooled staking solo staking is when you have 32 ether and you stake it by yourself using one of the four client implementations nimbus teku lighthouse and prism in solo staking you run one of these clients on your own hardware and this is generally what i consider the gold standard of staking if you can solo stake that's fantastic you should do it a lot of people are doing that now although solo staking provides excellent decentralization for the network it's important to acknowledge that it's not right for everyone it requires technical ability hardware and 32 ether after solo staking the next option would be tool staking tool staking might be something like running an installer that sets up the staking node for you it might be using a remote signer to help you manage the chain data or using a third-party data stream to run the node and so picking up these third-party tools to make staking easier is fine when it's the right solution for you it's not the gold standard but it's very acceptable when the tools are community vetted and known to work the third option would be pool staking or exchange space taking and that generally generally represents people who have ether less than 32 ether or they have more than 32 ether and they don't want to deal with any of the technical complexities or don't have access to the hardware or network requirements the option that you pick will depend on your own personal situation so i'm hoping this information will give you the right background to make a more informed decision which will provide benefit both for you and the ethereum network as a whole i want to highlight the four staking four solos taking clients nimbus lighthouse teku and prism each of these is staking clients is working very well and they're all running on the network today one thing i should encourage anyone to do is promote is promote client decentralization by using the client that you believe is least used in the network the reason this is important is if all four clients have 25 percent of the client share and one of the clients has a catastrophic event then the network will still function just fine as long as 66 of the nodes are still running but if nodes are running a client that represents more than 33 percent of the network and that client has a catastrophic failure the network can't finalize until that client is corrected the chances of this happening in the real world are extremely low but it still makes good sense to plan for the possibility so the best way we can use this knowledge to keep the network healthy is by using a client that is least used to improve client diversity right now that client is nimbus but they're doing such a great job in implementing features that i'm not sure that they'll be the minority client for long tooled staking is another layer of support on top of solo staking and essentially that means using tools like avato dap node a single click installer developed by steakhouse or implementing a single share validator those tools are layers on top of the original implementation clients that can improve the staking experience i definitely encourage anyone who can benefit from these tools to check them out i would say that although they represent an additional layer or potential failure on top of the implementation clients in many cases they're going to provide additional protections and support that make the value proposition balance out so if you're planning to do tooled staking please do your research and get help from the community to make sure the tools you plan to use support a trustless open source and decentralized network i heartily encourage people to check out tool staking solutions if you have a good reason to to believe it will improve your staking experience the final thing i want to talk about in regard to decentralization are pooled exchange pooled and exchanged options these staking options on their own are on their own continuum in general pool staking that is custodial is more risky for you so if you're giving someone your ether you need to trust 100 that you're going to get it back from them if you send your ether to a pool that you don't know that maybe no one has ever heard of there's a fair chance you won't get it back at all if you stick with a pool that has a very strong reputation then you have a good likelihood of receiving your ether back people often tell me they're comfortable staking with a well-known exchange because they're confident that they'll be able to get their coins back but this logic fails to consider the risk of centralization moving down the continuum next would be a semi-custodial pool which for example would be where you share keys with different actors in the network to reduce the risk of losing access to your funds one example of how this work would work would be maybe you keep part of the key maybe they have another part of the key and it would take a collaboration of actors in order to risk your funds semi-custodial pools are better than a fully custodial solution but the real solution we're looking for would be to have a non-custodial solution where the pool operators have zero access to your staked ether this is generally something that's managed by a smart contract this kind of non-custodial offering means that malicious pool operators couldn't take your funds and disappear with them at this moment we don't have any non-custodial staking pools but i do believe that's something we'll look forward to seeing in the next few months and hopefully we'll see a lot of healthy competition in this space as a simple recap for decentralization the most important thing you can do as a person who wants to stake ether is to ensure that you're staking in a way that promotes network health and network decentralization as i said before just focusing on getting the most monetary reward for your ether isn't the best recipe for success for you or the ethereum network as a whole the best recipe for success is taking in a way that promotes just decentralization so that in 15 years when you're ready to reap the rewards they're maximized by the health of the network now is a great time to switch gears and talk about some common misconceptions about staking the first one is this concept that the switch to proof of stake will lead to a fee reduction for ethereum transactions proof of stake on ethereum will not reduce the fees charged for transactions but it will provide more consistent block times blocks or slots on the ethereum chain are exactly 12 seconds which is a contrast to the current block time that averages 13 seconds from the ex from the user experience perspective transactions will happen more quickly and more consistently when the eth1 and eth2 chains are merged the second thing i'd like to mention is a sensible misunderstanding about slashing many people are concerned that anytime their validator goes down or any time their staking node goes down they'll experience what's called a slashing a slashing is when you have to act is when you have actually done something to conflict with the network and you're penalized and literally removed from the validating responsibility resulting in the loss of funds a slashing doesn't happen by accident either you would have to program your validator client to do something nefarious or more likely you're running your validator keys in more than one place and that can result in slashing so far with 135 slashings on the beacon chain network over 90 percent of them have been caused by pools who misconfigured and ran their validator keys in more than one location the more common penalty is called leakage and that simply being offline is a validator with leakage you lose about as much ether as you would have gained had you been online during that time leaking is not a significant penalty it will happen to everyone at some point and it's really nothing to worry about so hopefully debunking these myths will help you understand a little more what you would most likely have to go out of your way to get slash as a validator and that leaking penalties are very small and a normal part of validating which shouldn't scare you so the reason you came to the talk today was to find out how you can stake effectively and what you should take into consideration when deciding how to stake let me recap some of the highlights two of the biggest benefits of proof of stake to every user are extreme energy savings chain security and predictable block times i said two and then i gave three we also highlighted the need to maintain network decentralization by staking responsibly and make sure whatever staking solution you choose is trustless decentralized and open source for people with less than 32 ether the next steps are a little new for all of us because pooled staking hasn't quite reached a point where i'm comfortable recommending solutions but we're very close if you look around now you'll find a lot of exchanges offering staking products and a lot of pools offering staking and it's not my place to say those options are wrong but if you're unable to solo validate i'd encourage you to hold your funds until staking solutions are available that are open source decentralized and trustless these solutions will give you peace of mind knowing that you're supporting network health and it will reduce your likelihood of loss in the future i know there's at least one provider near launch but i'm really looking forward to more providers to enter the space and for those who have had time to mature on the network it's very important for me to say that when a provider who meets these criteria does launch you would be very wise to watch cautiously for three to six months after launch before depositing funds smart ethereums are here to build a long-term stash not to yolo into the first opportunity they can find if you're still here i'd like to encourage you to claim a proof of attendance protocol poep for this talk to get that you can hop onto the east stake or discord or message the poet bot wherever you can find it you'll send that bot a private message that that says eth global all one word it's lowercase uh if you don't know how to find the poet bot you can go to the east stake or discord and lots of people will be there to help you find it the staking network is still in its infancy now and it's the prime time for solo stakers as a staker with less than 32 ether or a not technically inclined sticker the best thing that i believe you can do is probably wait three to six months to see what other solutions become available and ensure that your choice is open source trustless and decentralized i know many people feel antsy like they need to do something to earn returns on their ether now but i want to remind you that holding your ether is often the smartest chance choice you can make what you might do during that time is reach out to pool operators make connections in the community to encourage providers to develop solutions that are open source trustless and decentralized these are solutions that promote the health of the overall network and not just the pool operator if you're not sure how to get started with a community e-staker would love to have you please join us on discord or reddit at reddit.

comesticker with that i hope you have a great rest of your day and thanks for joining to learn more about what you should do or keep in mind as you consider staking your ether thank you wow uh thanks so much that was an incredibly comprehensive overview of everything uh and i love how you always make this like so easy to understand and use language that should be familiar with also people that are new to the ethereum ecosystem so yeah well done congrats on uh making it so easy to understand we have a couple of questions but before i ask them also i love how like the last two talks were both kind of like pep talks for clyde diversity um trustlessness and decentralized safety so yeah that both hit basically the same note i speak my heart we do have a couple of questions let me go back in the chat and find them first of all um you mentioned the slashings do we have some insights of what was the cause of the latest slashings um this person says it would be nice to have an overview of the slashing courses for each individual slashing yeah that's great i actually um i spent a lot of time tracking the early slashings because it was very important to know if it was something that we could coordinate to protect the community from and like i said 90 of those slashings were perpetrated by um staking pools and i work really hard to as much as i can only say positive things about people or organizations and so i don't want to identify the pools that that were slashed but there were about uh three major slashing events one of them was a large pool that was slashed and then subsequently a smaller pool was slashed twice or three times in a row um and the lesson that i took away from that is home validators are pretty safe um but pools are trying to get up to speed as quickly as possible and it can be challenging because they want to provide the highest returns and what we found is that they're they're willing to try a lot of different configurations so they can say they have the highest returns and while they're testing those they often make mistakes that lead to being slashed the good news is in the past 60 days i think we've only seen two individual slashings which sort of gives us a hint that pools have a better grasp on that now and then secondly oh my goodness people are typing a lot in the chat uh the power word make everybody go crazy and the second no worries the second question i also remember it by heart i guess was around the fact that we see an increasing share of validators now being or like staking being done via exchanges how can we prevent this i i don't think the ultimate goal is to prevent uh exchanges from staking they are their goal is to make money and they're going to do that in any way they can um our role is to to educate the community and help educated ethereans recognize that exchanges are not the best way to stake but at the end of the day when it's a grandma um and no offense to grandma's and when it's someone who who has so little interest um i want them to have that opportunity available it's just that anyone who we can educate if you can educate your grandmother to find a better staking solution then by all means do that but as a final backstop it's great if some people if very few people choose to rely on exchanges for staking i'm happy that they're providing the service i just hope that educated aetherians will make better choices that makes sense thank you so much for like doing your part in educating everybody um we are running a bit late but thank you so much for joining and uh glad to be here yeah thanks bye