The 'State of Staking' Panel: Decentralization, Security, and UX | Freddy Zwanzger | Raul Sanchez

hi everyone uh we're very excited to chat about the state of staking today we have a panel full of the experts in our industry about staking I'm Dylan Olivia huner I'm the founder of a company called apparatus but today what we're going to do is host a lively discussion and potentially a lively debate about certain aspects of the staking business and industry in crypto as a whole and specifically within the ethereum ecosystem but potentially more broadly as well okay we're going to have each attendee and speaker introduce themselves I'm Raul I'm one of the co-founders of Diva sing protocol we are look a Sig protocol um based on DBT and uh we we should be hitting mained in one month and a half or so we are now going through the audits of our smart contracts and actually the whole architecture and yeah basically it's that theing protocol based on DVT our own DVT our own solution and yep that is pretty much it hi everybody I'm Darren Langley uh I'm from rocket pool I'm the general manager of the core team um so uh rocket pool is a decentralized liquid staking protocol uh we're actually the second largest liquid staking protocol um just behind uh Lio and uh we've been around for a long time in the staking space um and uh we we have two we have a liquid staking token called AR and we also allow people to do node staking as well uh kind of permissionless Le uh from on the other side so to kind of match that um yeah that's that's me hi everyone I'm Kenan bich from chain security so what we do is basically we audit smart contracts uh we're here for the security we're try to contribute to the ecosystem system by reviewing smart contracts and yeah we have some experience also with um liquid staking we have reviewed protocols so yeah that's about it hi I'm Freddy I'm the ethereum ecosystem lead at block demon and block demon is an Institutional web 3 service provider uh we cover a wide range of products uh for our institutional customers which is staking um we have an Institutional wallet we provide data in RPC um yeah and really our institutional customers range from tread five banks to foundations and more web 3 native kind of uh entities and yeah happy to discuss it all with you yep so the first question that I want to ask is what everyone has been talking about actually at this conference and I want to talk about the launch of Igan Lair and I want to talk about reaking and um what some critiques potentially are um but then also what are some benefits and what um Igan Lay's launch actually does both to the staking industry as a whole but then also how it fares for your for your businesses and um just kind of a deep dive into that part of the ecosystem well H regarding leer I I mean my my point of view here is okay is on the positive side it is an innovation most probably everyone within the ecosystem will end up integrating somehow with hi layer in one way or the other but on the other hand we've been asking for the whole industry for such a long time to diversify and to offer different solutions and now we are finding ourselves colluding within one single protocol which is at the end AAL layer yes because it offers a higher APR at the expense of actually potentially posing a higher risk for the Hol the ecosystem at large and my main take with I mean when I'm looking at e ler is why we were all kind of fighted against Lio because it was a centralization power and now everybody's kind of extremely happy to be fully dependent of one single protocol which at the end of the day I just know I just know what I read under under dogs but as far as I'm aware of everything is upgradeable by a committee they are launching under a BSL license which is totally fine but that implies that they are thinking more on a business model case not in making some kind of public good or something like that which again is totally fine but H I think I my perception of the kind of the whole community at large is like we are extremely AG aggressive and confrontational towards Lio and we have we have taken kind of the sounds along with the guy of Rocket pool and other people like okay we have to make a diversified industry and when a is kind of everybody is extremely happy yes to have by having one single actor kind of controlling the whole W and the whole vs osystem becoming a potential centralization factor and actually adding an increased risk within the whole Ean Network so yes I mean I think it be something positive because it has kind of drawn all the attention against to the sing ecosystem and actually has created its own ecosystem which is very sing ecosystem and we all will benefit one way or the other but on the other hand I think it will be kind of treated by the same stand as at the rest of the industry so uh from our perspective uh the decision isn't up to me because uh we're decentralized protocol so it's actually up to our 3 and a half th000 note operators to decide what we do with um with the IG layer um from the the the kind of chat within the the the community people are optimistically cautious um I would say is is the best way of putting it um on the positive side of things our node operators are in a good position to uh you know benefit from igon layer um uh they also kind of a permissionless set as well so on the flip side we're actually really good for IG layer as well um but uh so there's a lot of value on that side of things we do also see the value of expanding out ethereum's trust Network to be able to use in other applications and expanding the ecosystem to to create more decentralized uh you know products and services and applications I think on the downside there are a lot of open questions that we haven't really gotten answers to um we had an AMA with IG a little while ago and we're in constant you know talking to ig ler but there's some questions that still need to be addressed it's also the fact that uh you know they haven't necessarily launched yet uh and we're already seeing protocols built on top of IG layer sounding like they are launched right right uh when they're not which is confusing yeah that's that's very confusing for the market um so that element of it is not necessarily good um so from our perspective we are probably going to wait and see there's nothing for us to integrate into at this point in time anyway uh we are we'll we will kind of like cautiously see how things are going and we'll evaluate as we go um there's definitely some interest within the community we've got proposals within the community to integrate IG layer um and we will kind of like eval the community as a whole will evaluate that and and kind of like take it forward but yeah there's a lot of lot of kind of things to to think about so yeah I agree mostly with the others what with the others said so I layer from the discussions I had so far at the conference people are curious about it so there is a reason there is a discussion it's an interesting project it's Innovative but it poses some risks which I believe need to be addressed in the discussion for example right validators take on more tasks what impact does it have on the validator software right there is some extra tasks it requires extra time what effect does it have on consensus right so so I'm quite curious about iglay it offers cool opportunities like extra yield or bootstrapping basically this security aspect with the existing um liquid staking tokens that we restake and it offers cool opportunities but I believe as you said that there needs to be a discussion maybe also with other protocols uh to figure out or do research together to get to a good State and of course it's an additional component which offers again smart contract risks and then protocols that build an IG layer that is not yet deployed and then there is again smart contract risk and you use Smart contract so there is quite a lot of things involved that could break and yeah from the security perspective it's super interesting but also dangerous in that sense but interesting yeah so uh we at BL and we're we're super excited about IG layer and The Innovation it it's locking or will unlock I mean we do see a lot of interest uh obviously but yeah it is early days like in any you know sticking protocol it reminds me some of some of those you know L1 Wars or you know starting to launch everywhere and nobody knows what it can do how secure it is how long it going to live and uh so this is this is still early for us the most exciting part is to work with abss because like yeah they're they're they're going to need infrastructure and that's what block demon is all about obviously um and also I think there's those implications that you mentioned for for stakers and then what does it mean like do they understand the risks how transparent do we need to make that risk uh for example we we're currently sort of integrating IG layer in our staking flow but that would you know basically mean that the customers can with one click stake on E restake into igen layer and delegate to block demon running those avss for them as a not operator which obviously from the ux perspective which everyone is also talking that's like the second biggest topic I think this year on this conference but so that's great ux but abstracting this away those decisions away from the user is always sort of a trade-off in terms of security or in terms of uh even you know regulatory questions and things like that so that's something that that we're very actively um monitoring but in terms of what rul said is I think it actually could provide a a thing with this additional Innovation to for example mitigate some of those Lio risks right because if for example like puffer seems to be super successful in their vampire attack on on Lio If people really switch over from Stak e to to puffer e that would you know sort of reduce that risk and that in that sense I think because IG layer opens up the whole ecosystem to more Innovation and more things that's why I would agree with you D you know that it's like optimistically posit like what what do you say cautiously optimistic I think I like that so yeah that I think sums it up pretty good yeah so what are each of you most excited about with your businesses come again what what what are you excited about this year but what is the biggest risk to staking as a whole as well well I mean within the hly taking think we've seen uh ton of innovation as Freddy was mentioning I mean all the new Integrations with Ean ler I mean and with the whole V ecosystem is bring a ton of innovation to the to the whole ecosystem actually it's been extremely competitive and people are innovating one side of the other also I think this year is kind of the confirmation that the staking has become kind of one one of the key factors or key drivers drivers within the ER ether ecosystem or the blockchain ecosystem uh at large and yeah I mean what actually is kind of Mak me really excited about the whole sing ecosystem this year is that everybody know knows about a sing now it was like it was used kind of a lastek course for cous investors like okay I don't want to go really crazy into defy and to I don't know double down with uh derivatives trating protocol so I'm going to save some some part of my my Capital within a second and now it Tak has evolved that much that that same investor doesn't really need to go to the other defi area or whatever and just can keep the capital within the the second ecosystem which at the end of the day is really good because s is no more than securing the ethereum network so actually we're bringing Al more Capital to infrastructure so it sounds like you're also describing a situation where your users are changing or growing going and you're going from one user base to another or it's broadly kind of being accepted everybody is they are like my sons they are becoming more mature I will say okay uh yeah I can definitely Echo that point um we the conversations that we we've been having have been very very different to like a year ago um the the kind of players that are entering the market are much larger um you still got kind of um you know home stakers and all that sort of stuff kind of going on which is fantastic that's that's what rocket pool kind of supports then you've got kind of like larger players coming in as well um people like crypto hedge funds and and institutions and that sort of thing um are talking about staking quite regularly now so um so that that kind of like demand side is is definitely there uh in terms of in the the exciting thing that I'm interested in is like the in on the Innovation side so uh ethereum's road map has some interesting features um coming that make decentralized staking protocols much uh much more efficient much more um uh much more able to scale so we're really interesting excited about that uh and that we'll be using that in our kind of right road map to to make sure that we can scale um and being a decentralized um platform we need node operators to actually spin up these these these uh validators so uh that's always been a bottleneck for us um but with these new features um and that sort of thing and you putting those to good use within our protocol um we can actually scale uh and compete with centralized providers okay so yeah for me as of course the Innovation brings more smart contracts which I'm excited about so that's obvious something new approaches like we have different kinds of protocols with different trust models with different guarantees with different smart contract so it's quite exciting in that scene but let me think I'm quite excited also about the upgrades the network upgrades for example EIP [Music] 4,788 introduces uh yeah that you have the beacon block rout so you reduce trust in that sense which is kind of cool so I'm excited about the changes that we're in or modifications that we're introducing to the protocol so that we can create more trust to the end users or that protocols can actually create a better trust model because Oracles of course often have failures or can be malicious or whatever so I'm looking forward to that mostly to reduce the trust assumptions or minimize the risk in that involved yeah right and uh I I think what I'm excited about is that we we see those improvements and it's sort of basically maturing the base layer staking and uh making you know better you know less stress assumptions for liquid saking protocols um or or you know execution layer withdrawals those kind of things just that make life easier both for us staking providers but also our customers the ultimate stakers um and yes I Echo that we obviously see a lot of Institutions coming in uh here uh and that's that's I think overall a great thing because it also helps mature in that sense I mean there's probably you know there two sides of a with any topic I guess but uh so that that's exciting to us in the maturity sense but then we also see those Innovations like let's say reaking or DVT or or other things that are sort of push the boundaries and and that excites me in terms of like I thought sort of you know after chaella like you know everything is done in E staking right because all the fundamentals are there but I I guess now I'm seeing this more as yeah that was sort of the the base stuff and now we're moving one layer on top and then we're having you know lrts instead of lsts and we have reaking instead of staking and we're going to have the l2s and which is which also excites me because it's all interconnected right we we we see those like with reaking and then using this security for pre-confirmation and that would enable maybe like base rollups or ethereum sequencing or whatever it's called These Days um right and that that's sort of another whole layer where we're going to see a lot of them probably accepting staking or getting security through reaking either way there's going to be a lot more new protocols out there which need infra which is great and probably a lot of them also um going to open up to staking uh at least in the midterm but that being said because it's early because that that sort of reminds me back a few years when we when we saw these other things and we're going to see all those you know security questions you know is this going to work are consumers really understanding what what they're getting into um so yeah it's uh it's both more maturity and the the crazy Innovation stuff which probably will be fueled in the bull market even more right what are some explicit benefits versus risks of DBT I know you were touching on them but I want to get extremely specific um so we're big fans of DVT because it eliminates the the the central point of failure basically in terms of the the the keys um that's great but I mean I guess particularly in ethereum space we're always looking for decentralization amongst a lot of different dimensions and DVT could be like not as Diversified as we wish to be much like what what rul said with the reaking thing if that's just one entity doing reaking then that is obviously a centralization if it attracts a lot of capital which to be seen I would say once the air drop is done maybe the capital goes away somewhere else but um and that but the same same with DVT right like all those DVT protocols at least we have a couple which is great um but if they for example have only one client or one implementation then we're losing this client diversity that we're you know finally well hopefully getting closer to on on the etherum layer one so it feels again on that side we will have to fight all the those fights or not fights but you know all these you know discussions and and Innovations and and work that has been going into that will have to come all on all these innovations that are building on top of the L1 do you have uh from our perspective uh there are kind of like two ways we we could use um DBT well sorry three ways the first way is to help our node operators with kind of like making their setup more robust uh so that's kind of one way um although DVT is quite heavyweight for that particular purpose there are other solutions that are probably a little bit more lightweight um then the other thing is kind of squad staking which is um a group of friends or group of people that actually know each other um that form a DBT kind of cluster together and then they operate uh rocket pool uh mini pools via that process and then the Third Way is actually integrating within the protocol itself um that that last one is we've kind of evaluated it and we've thrown that out almost uh for for a couple of reasons first reason the the main reason is that you it's very very difficult to apply DVT to a permissionless model so if you've got uh people uh you don't know uh sharing the same kind of like DVT cluster that's very very difficult to do in in a with DBT in a in a safe way so we we kind of decided not to go that approach because it many complicates things um but at the same time we're looking at using DVT for that Squad staking use case because that way um you know you can definitely get some advantages um from that um but yeah from a protocol perspective uh We've not we decided not to do that to reduce our collateral requirement we've done it in a different way and to be able to kind of like uh you know get that benefit for us does anyone have anything else um yeah maybe I like I agree very much with the computation heaviness it takes again time it's similar discussion to the IG layer points I wrote up it's again another component right where you have to spend computation time which can be always dangerous and I also agree with the decentralization part and yeah regarding diversity can also be interesting like you can split up your validator on multiple like continents uh you can it's it ensures liveness it ensures like safety from I don't know natural disasters or I don't know weird politics where you get rocked by the government so I find DVT quite interesting and I also enjoys as the approach that no not everybody needs to start using every new fancy thing right like it's also part of diversity where people decide to go different ways and that's why I appreciate actually having multiple also liquid staking protocols that offer different things and then you as an end user if you're interested if the description is somewhat uh under understandable you can decide for yourself so that's maybe my take I will just add that that I pretty much love the way that you guys are approaching kind of the whole thing in case of Roo because is at the end of the day we have consider kind of the same problems or the same issues we are approaching them from a different point of view with different solutions and at the end of the day that hopefully that will provide uh the whole network kind of a more resilient infrastructure which is at the end of the day what I think everybody wants so I pretty much love that okay we have evaluated it was this was kind of too complicated to be kind of fully integrated within the whole rocket protocol itself so we decided okay we are kind of adapting on our own way because I think that is kind of the best approach because you are doing kind of your stuff and on a better way we are doing our own we are taking a higher risk maybe kind of doing things a little bit more complicated but at the end of the day everything goes towards EV fit to the the protocol which is is fine at the day and on the other hand it also speaks to the benefit of this ler one of infrastructure of a second infrastructure and it speaks a little bit against having just one single actor as I mentioned before in terms of a ler H kind of controlling the layer to over the side so please if everybody's building another aan layer let me know let let us know because we we really looking forward to it okay I have to Convent something R I know the other firms but I don't know Diva very well and so could we talk a little bit about like just high level how it's differentiated from the other providers on stage and I know we've been touching on it the whole time but I just want to make sure that you get that message out sure um well first thanks a lot for that yes of course I mean h you haven't heard about us that much or you don't know about us that much first because we are not live so makes sense you you could give some points to people right actually we we were too old fashioned because we didn't go for points and we just use old fashion tokens yeah I mean kind of we weren't that creative I guess and I mean in terms of the the main difference is that we did exactly what they discarded I mean we kind of integrated the DBT we have develop our um DBT infrastructure and is the I believe the first vertically integrated DBT liing protocol um that is the the main core difference there is no and there's no way to interact with Diva without using DVT so that makes a way more permissionless Network at the end of the day I always like to speak about Diva like a network validation ER and yes that is kind of the the main difference uh the main thing that we are bringing to the market like our main goal is to everybody's kind of focusing on the shy side how can we increase the APR to the seers how can we attract more seers our main goal was to make validation extremely easy so everybody kind of become a validator without needing that much of resources in terms of resources of economic resour es and of computational resources so that was kind of a little bit our cor value proposition great okay so now I want to kind of throw it back to everyone what do you see as the biggest challenge to your respective businesses not to the industry as a whole but I know and I know that each of you are going to have very different answers because there's definitely different critiques of each of your businesses but yeah Freddy you go first okay um so the biggest challenge for for us I guess will be um deciding which of those new chains to support like you know we have l2s we have l3s we have avss we have so that was actually going to be part of my question is obviously ethereum comes first and is King obviously we're at ethereum Denver but what other protocols would you prioritize as well in the following kind of Cal year yeah to be seen actually I mean we we we're we're multiprotocol we're already supporting 60 different protocols right but you know I would just take a wild guess there's going to be a 100 protocols launching this year oh for sure so you know which one can we support and which one do we want to support and who which of them are are serious and and will gain traction and maybe maybe even the non-serious one will gain traction because they have a great meme or something right so so for us that is you know an an aall challenge in terms of you know setting this all up and running it as reliable as we've do with all our other protocols so that that's like one Challenge and then the other part is those Integrations just like you know rul said they went for full integration of of liquid staking with DBT and I think that's that's great because it like all those Innovations allow for new Innovations and more you know everyone Finds Its Niche and its own approach to certain things and I think that you know let's say different approaches is what makes the whole ecosystem more resilient right and and and gives everyone and it's like of any industry that is maturing you know I think it's a healthy sign because that in all major developed Industries we see those specialization of labors very specific positioning for various players there's always various players for each different topic or something and so so in that sense I'm I'm very bullish about it and you know those those questions that we face in terms of what to support and how how integrated do we want to see this um is a is a luxury problem right uh because we're not talking about ethereum Killers anymore it's all happening on ethereum basically so that's great yeah for us yeah we're not building right like we're not the Builder so we don't face those challenges we're not providing the infrastructure so we're not facing those challenges but for us I would say the challenges are also related to multi-chain right like there's different mechanisms there's different protocols on different chains they have to adapt to the chain so this overhead of course of information you have to process that always whenever you review something and then you have those protocols right like um Diva for example which integrate then also with the clients and there you have additional components which are now maybe not smart contracts right and then you have to familiarize yourself with other things and I would say that's the biggest challenge there difference in approaches um not be biased by some other protocol and yeah the experience we have is that it typically works but it's always this learning curve you have and working right uh for us in terms of challenges um we've got a huge demand for AR which is our liquid staking token uh and we need to kind of like satisfy that demand with supply for node operators so it's kind of how we scale our protocol um to take on to to be able to um essentially mint more our e and for and stake more um and kind of stay decentralized and and kind of safe and all that sort of thing we've got two major releases coming up in the next kind of year and a year and a half um that kind of address the these these problems so um it's going to be a really exciting year for us to kind of be able to address those and and scale um kind of much larger up to the point where we've said that we will we will stop um and uh and so yeah that's that's that's that's um going to be fantastic for us uh Houston and sat are two releases that we're we're we're releasing um in terms of what chains we support our liquid staking token can be on any chain and it and it operates the same way so it doesn't really matter uh what what chains we support um from a liquid staking perspective But ultimately we choose l2s uh because they build off of ethereum uh we like that that security model um and so that's that's why we've kind of chosen that particularly rollups um we like prefer that um security model so we tend to the community tends to favor those uh us as a team uh in terms of staking on other chains and that sort of thing we are an ethereum based team really uh we are a very very small team so uh we don't have the capacity really to to go into other other chains and and to be honest the engineering uplift to go into other chains just isn't economically and to the amount of economic gain that we would get out of it is much less so um ethereum is much larger from an economic perspective uh and so you know the the engineering effort isn't worth it for us that that's us well our biggest challenge obviously is getting this team to main it first and no I mean and after that I think the the whole ecosystem I will say kind of the biggest challenge not just for us but for all of us I mean Rock Po and any any actor any layer one of a second is kind of get away a little bit of the noise that the leg res is making and focus on making something really solid and technically viable H in terms of all the chains and from the liid inside pretty much the same as a rocket pool we are integrating with o chains on the liing inside attracting value from from other chains we have really good contacts with the guys of base and the z h polygon Z knowledge CVM sorry and um but we are also speaking with the guys of scroll and with h especially I mean l twos keeping an eye on the rollups of course and um yeah but as from the validation point of view we are really e theum focused and I think it's exactly the same and the demand of engineering capacity that you need just to be alive and to keep Pace with ethereum it makes you I mean it's at least from in our case it's impossible to reach out to the to the chance in the short term at least okay so we have less than a minute left if anyone has any closing remarks um I just want to thank all of our amazing speakers but if anyone has one last thing before one last plug everyone plug what they're doing again uh once again if somebody's building the I mean how going to frame it Unis swap needed shy swap somehow Lio needed rocket pool aan leer needs someone so if you are building it please let me know uh yeah y so um in terms of uh the rocket pool um stuff so uh the community are going through this big uh research phase for the next kind of uh next year they're actually um laying out our road map and disc ing our road map and coming up with new ideas incubating ideas um so now is a really great time to be part of the rocket pool community and contribute to the future of Rocket okay I have like three seconds yeah keep building it's I'm curious about your projects I want to learn about them it's super fun and yeah enjoy building I I would hope that we see some new use cases that are bringing mainstream adoption because I feel we we see all those trains all those reaking all those Innovations we're going to have a lot of empty blobs block space blob space uh whatever um because I mean all this great infrastructure and Innovation it's all like self-referencing and we need to make a difference in the world basically and for that we need some more use cases so that's why keeping my fingers crossed this year okay thank you yeah thank you very much you I and