Darren Langley - The Stakes Remain High Keeping Ethereum Decentralized

Transcript

So um thank you very much everybody. Um so I am Darren Langley. I'm the general manager of the core team for Rockpool. So uh just in case people don't know what Rocket is, we're a decentralized liquid staking protocol. We are the third largest um liquid staking protocol um on Ethereum today. Uh we're staking about 1.7% of Ethereum today. Um and we have about 2,000 um node operators across the world and a huge community of node operators. So uh we have a liquid staking token called re um and obviously um as I said before we have these node operators. So with rocket poolool unlike a lot of um staking protocols you can actually um stake on the node side as

well. All right. So it has been a big year for Ethereum. Uh there have been three core narratives that have uh garnered a lot of attention um driven a lot of demand um and obsessed crypto Twitter in general. So these are exchange traded funds, digital asset treasuries and regulation. So the uh ETH ETF market um has kind of like hit 22.5 billion um in terms of market cap. Uh most of the ETH ETFs uh launched about mid 2024. Um although we didn't really see any kind of like

strong inflows until 2025. Um the ETFs currently uh track the the kind of um the value of holding ETH. Um most of the uh ETFs don't include staking and that's mainly because of regulatory uncertainty um kind of stopping the ETF providers from doing that. The few that have offered staking actually uh couldn't pass through all of the yield. They they only did half of it because they have to uh meet redemption requirements and all that sort of stuff.

So then you got uh ETH focused digital asset treasuries. They kind of burst onto the scene uh pretty much overnight um and they started buying up ETH um and packaging up into kind of equity products. um their growth has been extraordinary. Um they in a very short period of time they've acquired over 4% of the ETH supply. Uh BTCS is actually one of those treasuries and they're actually using Rocket Bull um to stake their ETH. So uh we come to regulation. So the SEC finally engaged with industry and they provided some essential clarity on uh staking activities. So the guidance

confirms that staking is not a securities offering. Uh that staking providers don't need to be uh registered stake uh securities providers. Um now that to be honest mo for most of the people in this room that's pretty obvious. Uh so um you know this clarif but unfortunately this clarification took a very very long time to produce. um other markets such as the UK have also uh got similar uh sort of things coming and even in Australia as well. So basically this is a win for common sense uh and uh and kind of common sense regulation and innovation uh regulatory momentum keeps building.

So the the US Treasury has introduced some stuff recently um around ETF providers sharing uh sharing yield as well. Um so you know everything looks you know pretty good in terms of that. So you know is this is this a good thing necessarily? Uh well actually there does seem to be a bit of a problem. So where is the new stake going? Uh it's going to centralized exchanges centralized staking providers um and pools only have like a handful of entities who actually run their nodes. Um if this trend continues as we've kind of heard in the last one uh particularly as ETH ETF providers um come online and actually do

stake their ETH um then it does pose a fundamental problem for Ethereum. So I'm going to switch to liquid staking for a little bit but I'll come back to in a minute. So okay so let's talk about liquid saking uh because it does actually have some advantages for institutions. It's easy to custody. Uh there's transparent pricing. Um it's easy, relatively easy in terms of accounting. Uh it's liquid whether that's via selected liquidity providers or kind of DeFi itself. Uh and it's not non-technical.

So why are they using centralized providers uh instead of for example a decentralized liquid staking protocol that distributes the stake across 2,000 independent uh node operators uh many of which are are home stakers. Uh it turns out that the majority of the problem is actually regulation again. uh back in August um this year, the SEC finally clarified the position on liquid staking. Uh so essentially extending the staking uh treatment to liquid staking as well for most liquid staking activities.

When we spoke to like one of the largest asset managers in the world, they said up until recently liquid staking tokens were impossible. Um, but now they're on the table uh and they're kind of like playing catch-up in terms of uh whether they're going to use it and uh but they're are excited about some opportunities. So this is kind of confirmed by the um Vanic Lido deal um which is essentially an SE um ETF. Um and at Rocket we're kind of seeing similar opportunities. Um so an interesting section in the VANC

Lido submission uh was that centralization was highlighted as a as a risk. Um that you know in their words you know that it could adversely affect the security and stability of Ethereum uh as well as the value of the ETF shares. So this kind of shows that uh institutions know the risks or at least they can enumerate the risks. Um but whether they like truly understand the risk is is is another matter. Um so uh you know what this is an extremely kind of exciting time for Ethereum um you know bringing on the the world's

kind of capital uh but it's also an extremely dangerous time for Ethereum as well. So for Ethereum to succeed these new entrance need to embrace decentralized um protocols or products. uh they need to contribute to Ethereum's value proposition um rather than kind of undermining it. Um they shouldn't necessarily do this because of something subjective like alignment. Um this is kind of like basic risk management. Um contributing to Ethereum's value proposition actually creates long-term sustainable wealth for their clients.

So, uh, exchange traded funds and digital asset treasuries, you know, give Ethereum some exciting momentum. But what we got to remember is onboarding out of Wall Street and and Tradfire and that sort of thing is kind of like a a midgame rather than an endgame. Um, the end game, you know, will go much further. Um, it'll be much more impactful um, and, you know, much more um, profound in many ways. So there are many ways that this could play out. Um in the future we could see a shift away from centralized um uh intermediaries and more towards kind of self-custody enabled by algorithmic

financial technology. Um why is this important? Um a useful analogy is kind of like self-driving cars. Um just as self-driving cars uh reduce in theory will reduce accident rates um self-custody algorithmic systems could actually help to stabilize economies uh and reduce this kind of like boom and bust um cycles. Obviously this is one possible um uh vision uh but it's pretty interesting how it play.

So, uh, my talk's very short and sweet, but, uh, if you want to find out more about Rocketpool, it's rocket.net. Uh, we have a fantastic Discord community full of staking fans. Um, and whether you are a liquid staker or a node staker, um, come and see us. That's it. [applause] [applause] We do have an opportunity for a few questions if there's any in the audience here. Okay. I don't I don't think I'm seeing any at this moment here and uh nothing online from what I'm hearing about. I guess I did have uh one one question

which is um Darren when when you look at it and you see kind of the risk of centralization and perhaps the uh uh you know the perceived uh financial institutions that are coming in. Um is there some mixture or some you know uh Vitalik this you know yesterday in his talk said when asked the question what did he think of uh institutions coming he simply answered I think a very elegant uh and short response that they're a user of Ethereum. Yeah. Uh is is there some um you know perceived mixture or proration or share in which we think that there should be institutionalized staking versus homestaking? Is there some mixture or or what degree of percentage of homestakers actually preserves the decentralization?

>> I don't necessarily have like a a full figure. Um, from a rocket pool perspective, um, we uh, our DAO has committed to uh, not breaching I think it's like 20% of of all stake. Um so that's a commitment that that we've made and so that's where we will we will cap because we feel that anything more than that is is taking away from the uh the value proposition of Ethereum even even bec even if the fact that you know we're a decentralized network. So we spreading the stake across many many node operators even then just from the the governance perspective we're much better to um keep it to 20%. Um so that's that's where we sit. Um yeah, I mean

there is the power law exists in in pretty much everything. Um but what's really important is the the long tail. Uh Rocketpool has currently a median uh validator rate of two. Even though we got 2,000 node operators and we're, you know, staking 1.7% of the network, you know, we have this extremely long tail of node operators who are running kind of like three 42 ones um of of validators. So that they are really important to kind of like maintain the the decentralization and inclusion.

>> Excellent. Another question here. >> So you talked about how the like the regulatory issues are getting resolved. So when you do talk to institutions, why aren't they using rocket pool right now since the regulations? >> Uh it's more that they're playing catch-up. Um so they uh they liquid sen tokens were literally impossible for them and they didn't expect it to change. Um and so uh they're kind of playing catch-up on getting their compliance teams um up and ready and analyzing uh protocols to make sure that what they're doing is is is correct. Um, so that that's the main that's the main thing. It's just kind of like timing. Uh, there's also a lot of

infrastructure that kind of happens. There's like custodians and all that sort of stuff. So that's that's also something that we're kind of like sorting out. Um, but yeah, it's mainly yeah, lots of steps to to kind of like get to that point. >> Thank you. >> One more question in the back here. >> Thank you. uh you talked previously or you've talked about the difference of centralized exchange delegated staking versus uh like onchain uh rocket ball sty liquid staking tokens.

>> Um the previous talk was uh also talking about the impact of LSTs or or just delegated staking in general on the network. Uh are you aware or can you talk on any difference between like centralized exchange uh staking versus uh onchain staking? >> Yeah. So >> sorry from the perspective of the network's health rather than user risk. >> Right. Okay. Um so okay so the one thing is so with a the centralized um uh exchange um thing they're running the nodes or generally

very few entities are running the nodes and there's a high influence there's so they're also the field of influence is very strong um and so they can they have usually contractual relationships with those with those people and so the influence is very high um with rocket pool they don't know their node operators with um in fact we don't know our node operators either that's by design um and we we uh keep that distance from our from our node operators um but uh so that in that sense there is no influence from that perspective and really we're a service provider but there's no uh they they have no influence on the actual um uh

yeah they they they couldn't there's no standover technique Yeah, they they couldn't actually threaten us in that way. Um so, uh yeah, so that's that's a that's a big thing. Um on the liquid staking side, that's that's on the liquid staking side. As I said, we've committed to um capping and so our LST couldn't get to a point where it it could overtake ETH. Um uh it just complements from that perspective. >> All right. Well, please give a round of applause for Langanger's here.

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