'Intro to Eth2 & Staking for Beginners' - Superphiz

all right everyone hello welcome back to eath online our future ethereum summit uh very pleased to introduce the next speaker uh superfiz who's a major part of the staking community that's growing around ethereum two i was going to give a talk uh intro to eth2 and staking for beginners so if you you know you're interested in staking you've heard about that you don't know a lot about exactly what it means or what to do about it this is the talk for you superfiz i'm going to hand it over to you now thanks josh hey there i'm superfiz or hank in the real world and today i'm going to be providing an overview of ethereum 2 and staking for beginners my talk is directed at normal people who are just curious about ethereum 2 and staking as superfiz i help to organize the eatstaker community and you can find us at reddit.com r eastaker or in our discord at invite.gg eatstaker our goal is to promote solo staking for the wider ethereum community and to support all forms of staking like pooled staking staking as a service and even custodial staking we're average users who have a deep interest in ethereum and we think that one of the best ways we can contribute to the success of ethereum is by staking ether and we're earning a reward for doing that and that's really what we do we reach out to the community we welcome people in and we help them train to be ready to stake every talk needs a takeaway and the takeaway from my talk ought to be that you're welcome in the eat staker community whether that's on reddit on our discord twitter or wherever we turn up next we actively welcome people of all ability levels from any background anywhere in the world i'd like to give you a heads up that i am offering a poep token to people who listen to this talk live i'll give the instructions for claiming that at the end of the talk you have to wait so the first question is what is ethereum 2 i believe some people think that ethereum 2 is some kind of clone of ethereum and that no one wants to hold a clone of ethereum they want the real thing ethereum 2 is ethereum ethereum 1 plus ethereum 2 make up the whole ethereum ecosystem ethereum 1 and ethereum 2 represent different layers of the ethereum stack and they're both the same platform the transition from ethereum one to ethereum two will likely be completely transparent to end users that is you won't have to change your workflow just experience the benefit from the changes to make that really really clear the changes are under the hood not in the user interface there's no such thing as eth1 ether and beacon chain ether beacon chain ether is ether for the rest of the talk i'll refer to ethereum 1 and ethereum two chains but remember that all ether is ether so what are the changes that make ethereum two so different from ethereum one there are two changes that will help anyone have a better understanding of how ethereum two is different and better than ethereum one the first change is the switch from proof of work to proof of stake when ethereum launched in 2015 it was based on proof-of-work mining which means you take either a processor or a graphics card or later what's called an asic miner and you solve a complex math problem over and over when you're the first person to show a result that's sufficiently complex you're awarded two ether along with whatever transaction fees were collected in that block solving these complex problems seals blocks that contain transactions and that block is added to the blockchain that's essentially how the network is secured the problem with proof of work is that it's very resource intensive it's basically an arms race to have the most powerful miner and these miners use a lot of electricity and as technology improves they quickly become obsolete and need to be replaced with more efficient miners ethereum 2 solves that problem with a system called proof of stake which allows users to post a bond or a stake of 32 ether that is a promise to the network that they will behave honestly or face penalties against their stake your staked ether allows you to perform the duties of a validator like proposing blocks attesting to the validity of new blocks and identifying dishonest validators on the network this stake is basically a credibility deposit that says i'm telling the truth so if you do a great job you'll get a small reward and if you're dishonest you'll get a penalty if you just decide to give up and go offline without exiting you can lose up to half of your staked ether and be ejected from the pool of validators but you really shouldn't worry in order to have a severe penalty you would have to do something on purpose we'll talk about an exception to that later but don't worry you're not going to accidentally lose your either so the first big difference between ethereum one and ethereum two is the switch from proof of work to proof of stake the second big change in ethereum two is the creation of 64 ethereum chains called shards one of the reasons we need to improve ethereum is that the network has become very popular and it's basically out of space to address that problem we're creating 64 ethereum chains and linking them together by doing that we have substantial capacity growth when these chains are deployed probably some time after 2021 they'll be linked together by a special chain called the beacon chain that coordinates progress of the 64 shards this beacon chain is really what we're talking about today it's the backbone for the improved ethereum network these two features the switch to proof of stake and the switch to sharding are massive improvements from ethereum one to ethereum two so that's the big change the next question is i want to be a staker but 32 ether is a lot of money it's more than i can afford well the reason you have to put up a bond of 32 ether is that you're accepting a lot of responsibility and the only way the network can guarantee that you're taking that responsibility seriously is to have something to hold over your head to say if you want to earn money you have to do the job correctly if you don't do the job correctly we're going to take some of your money away it turns out this incentive really encourages people to do the right thing a lot of thought was given to the correct number of ether for a stake if the bond is too low there could be millions of validators on the ethereum 2 network causing congestion that would make it difficult for the network to communicate but with a bond that's too high it becomes prohibitive for solo stakers to participate right now as the beacon chain is preparing to launch one validator or 32 ether costs about 10 thousand dollars on one hand that's a lot of money for anyone on the other hand it's still reasonable for someone who is deeply committed to participating in ethereum 2. with the stake of 32 ether the network can support every ether being staked and still run stably and securely so let's say you don't have 32 ether that's okay i feel like you shouldn't even consider staking unless you can stake happily with half of your ether if you have 32 ether as your friend i'm going to encourage you to just hold it don't stake with it just hold those 32 ether if you have 64 ether you might be in a good position to run one stake with 32 ether if you don't have 32 either it's a good idea to just wait wait until the network has been through a trial by fire and just continue to accumulate or do whatever is right for your financial situation right now staking on ethereum is in its infancy for the last several months we've been running test nets and client implementers have been preparing to onboard stakers onto the network and things look great but for the first five months of phase zero the bugs and kinks will be getting worked out and your staking node will likely require a lot of attention if you don't have the time or the commitment to monitor your staking client every day it's best if you stake on a test net and wait until the main network is stable a checkpoint is planned for five months after the beacon chain launch and this would be a great time for someone who is interested in running a validator without having to monitor it daily if you don't have 32 ether or if you don't have enough either that it's a good idea for you to stake there will be alternatives available in the future i don't personally endorse any of these alternatives and that's because as a community e-staker believes that solo staking is the most secure way to stake but a few months after launch you're going to see things like staking pools where you can hold less than 32 ether and pull with other people to stake and get a share of their reward that looks really appealing and i think it's a good idea i'm actually going to try it myself a little bit but it comes with the added risk of dealing with third parties who may be using vulnerable contracts or centralized servers or maybe they're giving you a reward as a token that's something other than ether in the worst case scenario someone could take your ether and convince you that they're staking it on your behalf but they've taken and disappeared if they're really crafty you may not even know this has actually happened until transactions are enabled over a year later these trade-offs mean that you could end up losing value that you wouldn't have lost if you either did solo staking or if you just held your ether without staking i don't want to tell anyone not to use staking pools or other services but i do want to tell you that you should be very careful when you get involved with these services in the longer term we're going to see exchanges who will be involved with staking ether you'll be able to make deposits and earn a small return off of those that comes with a trade-off you're going to earn a small return from depositing your ether with them and they're going to stake it from a decentralization perspective this is a concern for the network we don't know how those exchanges are staking we don't know what systems they're using and they may be centralizing large numbers of validators it's actually okay because if they mishandle your stake and lose it the network will recover the consequence will be that you as an individual could lose your stake even with these trusted exchanges i would say it's better to solo stake than to trust them with your funds so let's say that you're interested in staking but you're not really sure if it's right for you i would absolutely encourage anyone who's interested in staking to spend at least a month staking on a test net so that you can see what it's like up to what it's like to keep up an e-staking server and so you can see what the reward system looks like even though those rewards won't be really realistic on the test net to begin the process of staking on the beacon chain of ethereum 2 you're going to send 32 ether to a contract on the ethereum 1 network in exchange and in exchange for sending 32 ether you're going to get a digital receipt that you'll claim using a validator client that tells the beacon chain network hi i'm a validator and i'm ready to do work as soon as i'm inducted on the beacon chain from that point you'll wait anywhere from a few hours to a few weeks to be inducted as a validator depending on the length of the validator queue as soon as you're inducted as a validator your staking client will begin doing the job of validating for you every six minutes you'll get a payout you'll get a small reward for doing your job if you go offline you'll lose about as much as you would have gained if you had been online you do not have to have perfect uptime to be an ethereum staker but the better your uptime the higher your potential profit will be real rewards will be measured in several decimal places of ether every six minutes and you can see these in real time on your validator client logs you're probably wondering what rewards look like on ethereum two will it be worth the effort i have to tell you that the purpose of ethereum 2 is not to make validators rich the rewards on ethereum 2 are designed to be the minimum reward that will encourage people to continue running validator clients this reward is variable based on the number of ether that are deposited for example if one million ether are deposited the annual rate of reward will be 18 and so what's going to happen then is that people are going to say oh wow it's really valuable to stake on ethereum so they'll add deposits and it's going to push the deposits up to 3 million then because it's a sliding scale the rewards will be 10 percent and people will continue to be excited and send deposits in the magic happens when there are between 10 million and 30 million ether state and the rewards will be between three and five percent people will seriously question whether it's worth having their ether locked up in phase zero when they're only earning three percent interest the good news is that when transactions are enabled people will be able to add or remove staking deposits more easily and the value of staking will easily find its own equilibrium if you're staking in phase zero you're not going to get that deposit back until after ethereum one is integrated as a shard onto ethereum two and that's probably going to be more than a year down the road this isn't a deterrent to staking in phase zero but it's a caution that you should carefully consider how you will fare with your ether locked up in the network for an unspecified period of time most commonly cited is about two years so you've heard enough you know that ethereum two is a major upgrade to the ethereum one network you know that the validator deposits are 32 ether and you know that if you send a deposit to become a validator during the first phase of ethereum 2 those funds will be locked up for around 2 years and you're still committed to doing it what's next let's talk about hardware there are a wide range of hardware configurations that will work and there are also some best practices for choosing hardware i'm going to describe a few common hardware scenarios for homestakers the most common scenario is to run an ethereum staking note on some kind of desktop computer at home regardless of whether you build it yourself or buy a pre-built desktop you want a processor that has a pass mark score above 6000 on cpubenchmark.net these processors are powerful enough to continue seeking the beaking chain when the network is under stress and they'll continue to support the network in later phases you'll want a minimum of 16 gigs of ram though i like 32 gigs of ram especially if you plan to run any kind of node monitoring software on this system and you'll need at least one terabyte of ssd storage it's important that you use some form of ssd storage and not an old rotational or platter drive for staking rotational drives are only useful for long-term storage now and they just can't keep up with the data requirements of staking in 2020 prices you can buy this kind of desktop setup for about six hundred dollars but remember that in the computer hardware market you pretty much get what you pay for so how about intel nooks or mini pcs i like these and they're a fun little thing that you can put in an out of the way space to do the job you can buy them pre-configured so that you know the hardware is compatible i think this is a good option just make sure you buy a device that is powerful enough to handle the load and you should be set to go to be honest for the money value and space requirements i would seriously consider staking on an eighth generation or higher intel nok that was outfitted with 16 or 32 gigs of ram and a one or two terabyte ssd drive that brings me to laptops there's nothing inherently wrong with staking on a laptop and i'm sure lots of people will be just fine doing it but if you're buying a machine just for staking i probably wouldn't choose a laptop you're paying a premium price for a screen you don't need and a small form factor that reduces heat dissipation on top of that laptop simply aren't designed to run 24 7.

a lot of people are fascinated by trying to stick with raspberry pies and i'm going to suggest that that's just not a great idea on a perfectly running network in phase 0 the first phase of ethereum 2 a raspberry pi 4 will do fine but if anything goes wrong with the network if there's any difficulty with finalization or if there's any reason for the network to be congested with traffic a raspberry pi will quickly become overwhelmed and not be able to do the job of a validator for comparison the raspberry pi 4 has an estimated pass mark score around 900 and i'm suggesting a cpu that has a pass mark score above 6 000. one other option to consider is staking on used server hardware you can buy you servers online for a pretty fair price and they have a lot of redundancy built in which increases your odds of being online continuously and they were designed to run 24 7 forever that makes them a great choice for staking and you can get everything you need for less than a thousand dollars this is in fact the rose the route i chose when i began getting involved with staking but it's one that i'd rethink now because i have a large noisy machine to keep somewhere in my home i also suggest that you run hardware locally if you choose to run a cloud service provider things are going to work really well you can probably expect to spend about 20 or 30 dollars a month for that cloud server the risk is that it's a loss of decentralization there are likely to be a lot of people running their ethereum two nodes in cloud services and i know they have fantastic uptime but if by some chance those cloud services go offline your node will be offline and it will be out of your control if a large portion of the network goes offline at one time like aws goes down and 35 percent of ethereum two nodes are on aws the network will go into an activity leak in activity leak which means that all offline validators will lose ether until finality is reached again and online validators will remain a will maintain a constant balance if they do the validating job perfectly finality is reached again when more than 66 percent of the validators are back online and validating while one in strong incentives for stakers to remain online it's even more important for them to remain online when many others are offline by this time you've thought about your hardware and you're ready to start building a stable software stack a survey of the ethereum community conducted by my friend nolan found that 75 percent of stakers plan to run linux 15 plan to run windows and 10 are virtualizing or running osx my strong preference is to stake using ubuntu linux 20.04 the long-term support version of ubuntu i've had great success with it and i feel like that platform is more or less accepted as a community standard 75 percent of stakers will run a local server while 25 will stake on a cloud-based service beyond that you're going to need data for from an ethereum one client like guess and an ethereum 2 client these are the pieces of software that have been in development for the past two years and you're most likely to recognize the names prism lighthouse teku and nimbus but first let's talk about the need for ethereum one data data from the ethereum one chain is required for running a proof of stake validator the beacon chain needs to know about deposits that are submitted for inclusion into the proof of stake network and the only reliable way to get this is from the ethereum one chain the first way to do this is is to connect to a service like infira these are services that provide a data feed about the ethereum one chain so that rather than running your own service you can connect to them and get the data you need i don't recommend using a feed because if it goes down it will stop your entire staking operation and you won't be able to do anything about it if that provider goes down and you decide that you want to switch to hosting your own node it will take you several days to sync the chain and all of that time you'll be slowly leaking ether from your stake my suggestion is to run an ethereum one service like geth some people feel that this is an overkill because you'll probably need 500 gigs of space for gas in the long term and 48 gigs of memory just to keep death running happily but the benefit is that it contributes to the decentralization of the network and it means that if these those service providers go down you'll still be validating one of the key concepts of ethereum to staking is to be robust and resilient against single points of failure like relying on third party services one of the things that i encourage people to do when it comes to staking is not to look like anyone else if everyone runs the same setup any flaw in that setup is going to ripple through the network and affect everyone potentially leading to inactivity leaks where greater than one-third of the nodes are offline you don't want to be in that group of people that goes offline and the way to prevent that is to keep your system updated and secure and to make sure your internet connection is stable so let's say you're using a local isp that can be great you might go offline once a month for an hour but it's much better to go offline once a month for an hour than to be offline at the same time that many of the validators on the network are offline if half of the validators go offline inactivity leakage will kick in but if you're the only one offline it'll be a tiny penalty the next big factor is choosing a client there are four clients that will likely be launch ready based on what what we know right now and those are lighthouse prism teku and nimbus each of these validator clients are written in different programming languages and they've all passed tests that show that they know how to interact correctly with the ethereum 2 protocol ethereum 2 network communications really are a protocol now because there's a standard way of communicating between different clients one of the strengths of ethereum ii design is this protocol style development where different clients learn to speak the same language to reduce the chances of miscommunication if there were only one client it could communicate any way it liked there wouldn't be any need for protocol style communication or standardization it would also be weaker and open to network attacks when you choose one of these clients the thing you want to do is choose one that's not used by everyone else i encourage people to use the second or third most popular client because choosing the most popular client brings the biggest risk of inactivity leaking if something goes wrong to that with that client the validators using that client will leak below 16 ether and those validators will be pushed off the network unless they can get a software fix or they can switch to a different validator client and that really does work after you've selected your client setup and your and you're set up your system the way you want it's time to head over to the ethereum to launch pad for mainnet you'll find this at launchpad.ethereum.org and for test nets you'll put the test net name in front of that address like medasha.

launchpad.ethereum.org the best advice i can give to anyone is to spend a full month staking on the test net before even considering staking 32 ether on the main net so really makes sense to start at medasha.launchpad.ethereum.

org when you get there you'll go through a bunch of really valuable information it's worth your time to spend plenty of time checking out every bit of information there after you complete the information portion you'll have the opportunity to tell the launch pad how many validators you want to run and you'll download a deposit script that will help you generate a 24 word seed phrase and corresponding keys for all of your validators next you'll use metamask to upload your validator to upload a list of your validator keys and submit 32 ether deposits to the ethereum one network while i find it to be a pretty easy system i would really push everyone to play with it for a long time on test net using gurley ether until they're completely comfortable with the flow of events before sending real ether and that's it from that point you'll import your import your validator keys into your client and make sure everything is synced up then it's just a matter of waiting until your validator is inducted the easiest way to check the status of your validator is to enter the ethereum one address that you sent the deposit from into the search field at beacon chain beacon.cha.in and it will tell you the public keys for any validators that you submitted deposits for as i wrap things up there are a few things i'd like to share with everyone about best practice the first best practice is don't host your validator in two places this means don't run your validator on two computers at your house or at one computer at your house and one on the cloud at the same time because running those two validators at the same time will cause you to send conflicting data to the network and it will produce a slashable offense basically what this means is that your validator has a chance to be randomly selected to provide an attestation every 12 seconds if you somehow manage to have two machines with the same validator keys it's inevitable that they will submit different data at some point and this is considered a malicious offense by the network the easy way to prevent this is to only run one staking node only keep your keys on one computer the second thing i want everyone to remember is that you should not stake too much as excited as i am about ethereum 2 i also recognize that there's risk involved there are risks that many that may not be obvious at first one of those risks is that the price of ether could go very high while your ether is locked up for a long time and you can't sell them because they're locked up if you think there's any chance that you're going to need to either that you're staking don't stake them just hold on to them the third thing is your seed phrase when you go through the launch pad process as a staker you're going to get a 24 word seed phrase that seed phrase will be used in the future to generate your withdrawal key if you lose those 24 words you won't be able to withdraw your funds you'll be able to continue validating with your validator keys but you'll never be able to withdraw the funds and they will simply be lost to the network don't lose your 24 word seed phrase finally be careful where you send your ether as ethereum 2 emerges there will be a lot of exciting places to send your ether to gain rewards there will be services and exchanges promising to stake for you there will be people bragging about how good they are at running a stake in node and there will be people who post fake addresses for you to send ether to for staking you have to be extremely vigilant with your ether and keep in mind that this transition is a prime opportunity for dishonest people to pick up some low hanging fruit it's been really great sharing ethereum two with you i know it's going to be really exciting and i can tell you that the east acre community has done a lot of preparation to help everyone feel comfortable getting involved with staking you can find us at reddit.com r eatstaker or on our discord instagram eatstaker we also have a couple of programs that you might be interested in one of them is called the ethereum studymaster it's a program where you can read articles every week for 10 weeks and take a quiz on those articles after 10 weeks you can earn a proof of attendance protocol a poep token for demonstrating your knowledge of ethereum 2. now that's just a neat way to show that you have invested time and are knowledgeable about ethereum it kind of gives you a little incentive to learn more about how things work you can learn more about the studymaster program at ethereumstudymaster.

com easttaker has also developed a really cool collaboration style program where you can single signal your interest by completing a form then get added to a small group with four other people who you can develop a long-term staking relationship with in a private discord chat it's just a way to connect with a small group of people in the community rather than being overwhelmed with so many people at one time in addition to what we in addition to that we have a great group of east acre educators on our discord channel those are a group of about 10 people who are ready to help you anytime you come into our general room on the e-stick or discord and ask a question so we want you to feel comfortable we know that staking isn't right for everyone i'll be the first to admit that you should think long and hard before you commit to snaking but if and when you decide to do that or if you even have questions about it we definitely want to be here to support you and we will always do our best to lead you in the right direction thanks for your time and good luck with staking i'd like to thank michael geeson from unvetica for providing support for this presentation for 30 minutes after this live call if you check out on vedica.com ethonline you can claim a poep token that's a proof of participation token by entering the secret word eathstaker in lowercase you can also find all of the resources from this talk on that site thank you very much and take care wow thanks hank that was a great talk um we do have one question from the chat uh if you just have a minute to get into it um so alex wyckoff asks i'd love to hear your suggestions on routers off-the-shelf brands tend to bog down a lot of sustained peering connections are y'all using unified dream machines or something else so i love that you said the unified dream machine um the ubiquity line is is a favorite among our community um and so it's not that i want to promote them but uh i'm using a ubiquity er4 right now and it's working well the dream machine line is is very popular um so yeah the the upper tier of consumer hardware that the ubiquity line provides is is probably what we're looking at okay and we've actually got one more quick question great can you stake using offline keys i don't know the current status of that and i think that that it would be better to better to get a question an answer for that offline i i don't i don't want to shoot in the dark and and and aim wrong great uh well the the viewer ask that question um i mean if you want to jump into our chat after you're done here feel free to jump in and some questions and of course there's the e-sticker discord the links of what you shared earlier that someone can definitely find this answer to all right thank you so much for joining uh thank you supervisors thank you michael uh and we'll talk soon thank you so much