Scaling ETH: Innovations Unlocking New Yield Opportunities for Stakers | Brian Crain - Chorus One

[Music] all right all right we are coming back from break next up we'll have Brian crane from Chorus one he'll be speaking on the topic of scaling ethereum the Innovations unlocking staking opport opportunity please give a warm welcome to Brian crane hey thanks so much thanks everyone for coming so I'm excited today to talk a little bit about ethereum staking and some of the key uh some of the key Innovations or Trends and that are affecting ethereum staking and also the kind of ethereum staking yield so briefly by myself uh I'm I've been in crypto for a long time I was and I've been invol in proof for stake for a long time so in 2017 know CE of tender Min the company started Cosmos ecosystem uh and so I've been involved uh in there for since the beginning and then started course one as one of the first staking companies about 7 years ago uh so just briefly about course one so again yeah we've been running for around seven years we support around 65 6 different networks and we work with you know individual delegators a lot of VC funds custodians wallets exchanges all kinds of different different parties to help them uh stake their assets and uh earn yield on it so you can see some of our partners here um now today I want to touch on three topics uh and I hope I get through all of them but first of all pre- confirmations uh so this has been you know one of the most uh hot areas of innovation and activity in ethereum space so I'm going to talk a little bit about that we going to talk about reaking and then finally touch on uh me and timing games so pre- confirmations so basically what's a pre-confirmation all right one of the challenges in ethereum is that you make a transaction it goes into the M Pool and then you wait and and then at some point it's like confirmed it's in the block so that delay between I make the transaction and it's actually in the Block it's pretty long and so one of the ideas that has been explored in ethereum is whether you can give a guarantee that the transaction is is going to be included in a future block like immediately and so that has a lot of uh you know potential upsides uh of course to be able to do that you need to have the the different actors that work in this ethereum supply chain like the proposers the relays and the block Builders somehow change some of these flows and cooperate with this um and the user then user could also be a rollup or a wallet or something but that would pay uh basically a fee for this transaction inclusion so here's basically how it work right the user and it should also mention there's different approaches to pre-confirmation there's one approach which leverages the the validators the proposer to give a guarantee and there's another approach which focuses on the Builder uh so Builder is kind of prime eff for a company focus on that proposer is like chainbound for example and commit boost focus on that so this is the proposal flow so as a user you know I make a transaction and I request the pre-confirmation and I pay some extra payment I send this to the proposer the proposer then basically tells the block Builder hey uh you know when you create the block you you have to include this transaction and then the Builder creates a block that includes that transaction sends it back to the proposer and then it goes into the blockchain so that's really how pre- confirmations work now what are the upsides of this well one potential is better user experience right like you don't have to wait so long anymore to have a confirmation uh but I think a lot of the interest around this is also around rollups and how it can power rollups especially based rollups that b use the ethereum validator set as a sequencer and um yeah so you know what are some of the potential upsides of this I mean uh potentially right if it improves the ethereum user experience it could help getting more usage of the network it may also have some impact on me rewards which uh is still complex to see what that would look like and but one of the big challenges is how do you price a pre-confirmation so as a proposer someone says like hey include this transaction and I pay you X like what is what is an appropriate amount for X you know because in the end this is also something that can then constrain the Builder in terms of how that block looks like so it can potentially decrease the value of the block to the Builder so you have to somehow weigh these two things and you know that's a hard problem that I think we don't have great answers for if someone's interested we have some website which is very technical but kind of goes into this a little bit so you can go check out preconc course. one uh we've been involved in this since the beginning so you can see uh we we were one of the did one of the first pre-confirmation transactions on the test net and uh yeah but it's still still very early with pre-confirmation I think it's going to take quite a while for this to roll out because it requires a lot of different parties they have to figure out how this whole thing works so I think realistically it's probably like two years away from having you know real scale adoption of pre- confirmations in ethereum so next thing reaking so reaking uh reaking of course is a very simple idea right like you're staking a token and then the token is often slash but if you look at the history of a the I think in the entire history of ethereum the amount of e that was slashed is like $4 million so it's a tiny tiny tiny amount compared to how much it's been staked so you can see that really like the thing that's at risk is actually very small and mostly it's just that capital is like locked up and sort of doing not much H and so of course the idea of like can I use that Capital to do something else has been around for a long time and it's a very promising idea in Cosmos there's been various efforts here uh in Solana now there's many although these came later uh but of course the space where we've seen the most development here has been ethereum uh especially with igen layer leading the charge here but more recently also symbiotic getting some good traction but the idea is really that you stake the token and now you use the stake token to secure some additional services and you get some additional yield from that so if you look at the market here so currently you have around 5 million e so that's uh well probably less than $4 billion now but uh uh hopefully soon 14 billion or more again but that's basically in uh reaking uh protocols right now so if you compare this to the overall staking Marketplace you can actually see it's quite a lot right so in in a relatively short time we managed to get you know around the seventh of the stake leave also being restake um so and and if you see the the distribution here you can see that IG layer is very dominant with something like 85% of all the e being restake to igen layer you have symbiotic in number two with 10% and then car 4% [Music] um now this is another thing that's interesting so if you look at Lio right you have around 9.4 million eeve Stak I layer 4.4 million what's also worth noting here is that actually a lot of the steak is native steak so it's not liquid Stak tokens now the reason for this is that um is this this one here right because most of the Eve that is being Stak through reaking protocol actually uses these lrts so it's basically like another liquid staking asset that's being issued and these lrts they don't want to pay the extra fee to Lio right so they basically say hey we are going to stake it directly to basically save cost and increase revenues so um that's why you have um that's why out of the igen layer thing um most of it doesn't come through liquid staking asset like um statey for something like that um but we can also see I mean I ler has had a tremendous success in attracting a lot of stake uh to the platform uh you can see see here the kind of growth of uh igen layer you know it grew very quickly but it has been going down a little bit for a while and you can also see it it had some uh some negative impact on for example lios tvl where some of lios tvl moved over to igen layer now uh I think this is a very important thing uh to wrap your head around is actually the economics of reaking so the basic staking yield let's say we put 3.5% there you know it varies of of course but like it's something like that now if you do restake then you can earn some additional yield now where does this additional yield come from I mean one is the native token of the reaking protocols like igen uh that was pretty high in the past but it has dropped and today it's it's around 1% or even a little bit less then you have LRT incentives now those also used to be pretty substantial but they have basically stopped at this point so they've used a lot of these incentives the bootstrap adoption and now they kind of run out so that only contributes a little bit to the APR and then finally we have the rewards coming from the abss I wrote 0.

2% there but that's actually probably overestimating it like right now they're close to zero so now that means that the the reaking APR has been going down and down and um and I think that's going to actually pose quite a challenge for for for restating protocol calls and especially IG ler probably because what you can see is there's actually a tremendous amount of Leverage in reaking so people restate the token and then what a lot of them do is uh so they put it into something like eify or Renzo they get their LRT tokens or The Ether e Easy E from Renzo or kelp beef and then they put this into a they borrow e and then they Loop this so you can see here the the amount of Leverage here you can see that for all of these protocols a majority of tokens in the case of kelp it's almost almost 3/4s are actually deposited in a and they being used to um yeah to basically leverages up now of course the challenge here is that if the staking APR uh for reaking uh keeps going down then you're probably going to see a lot of this stuff unwind so I think what we can see see from this is that it's really essential for restating for platforms like IG layer and symbiotic that we're going to have like real yield from the avss because that's the only thing that's like sustainable and long term and uh and I think what we're probably going to see is that we're going to see a kind of unwinding of a lot of this leverage um and the decrease in the tvl uh and then I think we really need to see the ABS yields come up for this to kind of revert and for or like if wanting to to probably you know stay in restating protocols um so that's kind of like the reaking now of course restating has a lot of uh nice properties right because it it means you can use those assets to secure layer tws you can secure other types of infrastructure like Bridges oracles data availability networks like IG da um and and it uh you know it improves the capital efficiency and of course for the stakers even today right it still provides you know additional yield so that's reaking and I think it's a yeah it's it's kind of a a nice it is something that's very promising think for the future of ethereum where ethereum can be used to really secure a lot of additional services and generate additional revenues so I wanted to touch a last topic very briefly which is around me and timing games so this is one area where we were quite active in in the past uh but basically it has to do with the following right if a validator creates a block then the later in the slot that block comes the more valuable it becomes the reason for that is that you have more transaction and they have more fees and me a lot of the me comes from the Divergence of the prices on dexes from uh the prices on like binance or like and so as as that Divergence goes up um the me goes up so you basically have some kind of curve where you know the value of a block goes up as time goes on and and and it's not a linear increase it goes up uh it goes up kind of um you know more simply than that so if you can be if you can delay when you create the block you can uh generate more value and capture more value so um be uh so this is one thing uh we have been working or we were working on very early on so we were the first ones to really systematically experiment with this and we created a modified client called a doo that basically changed the latency parameters and try to measure how late can we uh propagate this block and to increase and to generate additional uh me revenues so you know we generated quite a lot of additional we RAR news of this for a while um but then what actually happened is that the relays so ultrasound and others they said well we should also in include that right we should start holding back the block and do it a little bit later to increase the value of the block so that has um also meant that our particular you know ethereum Fork uh or we were running has become kind of less useful because the whole network started adopting um started adopting this approach to increase the value of ethereum blocks um so yeah so now of course there are always going to be new things around latency optimization and uh and generating more me returns and so you know we we are exploring some of those new things now so yeah if someone's interested there's some kind of academic paper we wrote uh on this topic uh in the past so yeah that's all for my and if you want to reach out feel free to email me or check out course. one uh or get in touch and thanks so much thank you thank you Brian crane for