Dmitry Gusakov - Solo staking with Lido Community Staking Module

Transcript

that's why we are talking about it today let's do a quick recap of the things that you do need to be a solo Staker at the moment first of all you need huge bunch of capital to be precise at least 30 to e then you need Hardware then you need to cover operational costs then you need pretty significant develop skills to maintain all this software and complexity and the last but not the least you need luck you need to be lucky enough to get this huge juicy me because otherwise you will be upset and your incomes wouldn't be that great and it all looks pretty huge and complicated so let's make solo staking simple again it

is really complicated to be a solo Staker at the moment but it is by far the best way to improve ethereum decentralization that's why the main goal of lto community staking initiative is to make Stak simple and more accessible for anyone but how we can make it simple what we need to do for it and at this point you are probably thinking okay I'm hearing a talk from Lio about some product and these huge protocols they just make unilateral decisions they don't care about opinions of community they just throw product on a market and you either take it or go away let's find out why it is not so to be precise any decision any

significant change in Lion ethereum protocol is made through the following process so the first comes the proposal prepared either by lighter contributors or basically anyone in the community then the proposal is revealed to public and there is a public discussion anyone both ldo holders and just participants of community can share its opinion and then we move back to proposal to refine and improve it and the process goes on until there is an alignment between Community ldo holders and the authors of the proposal and after that we can move to implementation so now guys it is time to reveal the proposal we are at the

first stage and then we expect public discussion introducing Community staking module also known as CSM a staking router module made for Community Stak Akers by community stakers and staking fans with a key feature for sure being permissionless entry but you might ask are you guys Stak in community what do you mean by that actually term Community stakers was introduced not only by Lio but many participants of ethereum EA System and it is a bit broader term than just solo stakers because it includes not only individuals but groups of people running

ethereum validators being aligned with ethereum goals and what is I think the most important with the main motivation being not Financial because if you if your motivation is first of all Financial you will end up as a professional not operator and that's great but that's the other case and when we talk about Community stakers we see this groups or individuals being aligned with ethereum and being motivated first of all not financially to achieve outlined goals to make St solo staking simple and accessible it is proposed to focus on this three key values of community

staking module with the first one being reduce barriers to entry at the moment again it is extremely hard to be solo Staker with a l capital and other stuff the second key value is to improve ethereum resilence the more more independent actors are in ethereum network I would like to put a special emphasis here not in Lio but in ethereum network in general the more secure and decentralized ethereum network is and for sure we want to make solo staking more profitable even though we see Community stakers being not financially motivated at the end of the day we all need to pay bills so if we can make it more profitable then let's make it more

profitable and let's dive deeper into the list of key design and cool features to get you a bit more understanding of what we are proposing today let's start with design and here I want to focus on five main aspects the first one being nonlinear Bond Integrations permissionless entry first in first out stake allocation queue and performance Oracle for sure we start with permissionless entry and there's nothing to add here it will be permissionless anyone would be able to use CSM let's move on Integrations this is a key part because when you develop a protocol or a part of a staking protocol

it is mostly onchain things and offchain tooling but what you need to do also is client side is hardware and software used by validators itself and despite trying to invent yet another bicycle or create yet another software for validator preparation we propose to do Integrations with well-known Solutions both hardware and software so that it will be as easy as set it all in free clicks using your preferred existing solution and then just join lier the next cool feature or great design feature that I want to talk about is nonlinear Bond according to research

of lier contributors at the moment like currently right now Bond values from 4 Eve to 2 Eve seems to be sufficient to cover different grades of risks but what we believe in by we I for sure I mean l the contributors and specifically my team that the more validators are ran by a single note operator the less can be the bond requirement because the bond is associated not with a single validator but with a not operator in general so at the end of the day we have more coverage for individual extraordinary cases while still allowing lower entry barriers since for validator creation

not operator need to lock Bond it means that it will be fair the most Fair option to allocate stake to the not operators in the same or in similar order they locked Bond that's why we propose to use First in first out stake allocation queue for not operator the faster you come and appla bond the faster you get your stake the faster you can start your operation and the last but not the least feature design feature is performance Oracle keep in mind that while designing CSM we are not designing a new product from the ground up we are trying to implement staking module that need to work together with lier protocol

and the default system currently used in lier protocol to distribute words is just a proportional system it works fine for permissioned operators because we Lio contributors have other ways to interact with them to say hey guys there's something wrong on your side please fix the performance and they will do because professional operators they put reputation as a stake with permissionless staking it is not so we know nothing about operators we we can probably we know something about them but not about all that's why performance performance Oracle here is crucial to create dependency between performance and rewards at the same time we think

that it wouldn't be correct to ask home stakers and solo stakers to aim to this 99999 numbers because it is hard and pretty much useless for ethereum network and for them that's why we introduce performance threshold a value that should be defi determined by liod and if not operators validators perform Above This threshold during the during period they get socialized rewards like everything fine no matter if it is for example 97 or 96% efficiency you will still get the same rewards while low performance who are below this threshold

wouldn't get rewards at all why it is needed because we don't want to incentivize people who just create validators and do nothing or don't care about performance at all but we want to ensure that small power outages or Internet outages or other things they would not influence the rewards for solo stakers so yes the rewards Above Performance threshold will be socialized and Below performance threshold no rewards sorry now let's briefly talk about cool features to give you a better understanding of why you as a solo Staker would probably prefer to use Community staking module let's start with low Bond we know

that bond is a crucial feature for security at the same time we know that ethereum ecosystem evolves and Lio protocol evolves and there are recent advances in different types of reporting and security assessment and we want to offer Bond as low as possible while still maintaining decent protocol security and security for St holders at the moment it looks like for E Bond is a good option but given that it will take us about 6 to n months to move to mainnet release I think that this number will be even lower simple ux is is very important you like using your iPhone or your Android

because you you you can access needed features within several clicks you just do it you just open take your phone and it is easy and understandable for you so why not to make solo staking experience the same you just prepare your validation setup using ux pretty similar to your iPhone or to your Android why not then you do just one action in CSM UI to upload your validator keys and provide Bond basically sign in only one transaction and that's it the only thing you need now is to operate and claim rewards whenever you like in any amount like you can claim it each month each

half a year each year and in any case it will be one transaction for the whole node operator no matter how many validators are no matter how many rewards acquired so this three steps is by far the simplest possible ux for solo validation gas fees has been a problem on ethereum for a long time and it will be so because it's a base layer it's a security base security layer SO gas fees can not be low but what can be low is gas costs we can reduce the amount of gas needed for operations and in the typical flow for solo staking with liquid staking protocol you need to do

all this huge stuff so many operations so many gas span with CSM we propose to minimize it to only two operations create your not operator and upload valid validator keys and claim your Rewards again anytime in any amount for any amount of validators and the rest will be your savings let's talk about me you all know me guys you all know it's a huge Lottery and that's the typical graph I would say it's optimistic graph of me rewards per one per one validator most of the time me wouldn't be that large but from time to time it can be enormously huge and

given that a single validator within the current state of ethereum will most likely produce from one to three blocks a year it's always a matter of chance if this three or two blocks within the whole year will be lucky and you will be lucky enough to get this huge me and the best the worst case here is if you are not if you are running validator for a year for two years and you were never lucky to get this huge me Spike with CSM the situation again will be totally different there would be no spikes and no pitfalls why because by design of any of light of protocol itself me is smoo across all Lia

validators and given the size of the number of lighter validators you can be confident that in most cases you will benefit from these huge me spikes because no matter if it is your validator or any other light of validator this me will be evenly smoo between Li validators and SD holders and the last thing I want to share about cool features of CSM is that there wouldn't be any other to any tokens involved except for eth no ldo no special LP tokens or any other tokens when you validate ethereum you need to provide ethereum as the collateral eth

as the collateral and if you you use LST protocol as a supplementary tool we see no reasons to ask for something else except for the base collateral and what is more important that your rewards will also have form not of Eve directly but most likely of s e which is one: one ratio with E and just keep in mind that lier is the only protocol to offer permissionless withdrawals in any amount so you can you can even clim your rewards as a withdrawal inft if you want if you don't want to deal with s but another cool feature of rewards being acquired as s is that you can not claim this your

rewards for a year and don't be afraid that your rewards are just sitting here and doing nothing since it will be S your rewards will acquire additional rewards so we used to call it compounding and that was basically it about design now let's take a look at the Timeline what we expect in case of for sure Dow and Community approval at the moment we are at development architecture and prototyping stage in case of Dow and Community approval we can move on to audits at the first part of 2024 in Q2 Q3 we aim to launch testnet and you guys are all invited because

again it's permissionless and by the end of 20 24 we are aiming to propose the module to be launched on a mayet to keep track of all the things happening to get recent updates and to make sure to you will be the one to participate in testet get help and support please join Lio CS Community today make sure that you visited you also already visited or if not make sure to visit lier booth do three simple tasks and at the very end of the day today there's going to be a ruffle and you will get your chance to win one of

these magnificent boxes so don't miss it and I want to end up the talk with a simple thing today I shared The Proposal with you and the next step is public discussion so I kindly ask all of you guys to share your opinions on what do you think about the proposed CSM design you can do it either here after the talk near the booth or which is way better is to scan this QR code to go to Research Forum proposal and under the proposal leave your opinion no matter what it is you can say this proposal I don't like it I mean it can be done better feel

free to do so or you can say I support the proposal or any other option and if you guys are working on development of tools for validator Preparation or for any other tools that can be beneficial for solo stakers make sure to outline it in the comments to the proposal so that in the in the upcoming snapshot voting your company and your group your team might be outlined as potential partners that Lego committee should consider and that's basically it thank you so much [Applause] questions hey great talk Demitri um can

you maybe just zoom out and clarify how is this different than what will was talking about with the DVT stuff is that a separate module are we talking about separate modules within Lio now yes exactly so uh um it is important to do to speak about like to Define two terms Community St taking initiative in general includes permissionless staking DVT and any other options for Community stakers to participate Community staking module in particular this is the permissionless module yet another module for Li for staking router that will be mostly focused on solar participation with Bond and there are two reasons to

even think about this module with the first one being to offer more options for participants because some some participants might say Okay DVT is great but I would rather run validator on on my own and they should have option to enter lier and the second option is that at the moment currently we think that this module is the simplest one across the whole Community taking initiative except for simple DVT that will definitely go live on mainnet I think that it will go live on mayet way earlier um that this module can be implemented sooner than full featured DVT modules and even when full featured DVT modules are implemented will be just

a variety of options for Community stakers for them to choose either they want to use DVT if they want which technology they want to use and if they want to be solo to stay solo they should have this option so that's the main goal of this module so no ldo bond but how about ldo incentive oh that's that's a great question so yes definitely no ldo bond and any incentives regarding the community staking module again will be discussed publicly nothing is proposed yet feel free to make your proposal I mean it's

an open world it's Li is a DA anyone can propose but at the moment developers team contributors team are not considering any any specific incentives in ldo because again I don't think for me personally I don't think that paying with additional tokens or incentivizing with additional tokens is a good option validation on ethereum validation happens on ethereum rewards are in ethereum so the best way to incentivize solo stakers from my perspective is to offer better staking fees and lower Bond so that it will be way more Capital efficient or just more Capital efficient than typical Solutions um this might be an obvious

question but when the node operator brings a bond they'll get S for that Bond right um it depends on the actual implementation we are currently discussing several options what I can confidently say is that Bond will definitely be Stak but I cannot say for sure what in which form it will be the simplest option yes is to convert it into St and store it on the CSM contract while there still might be other options like re architecture of the core protocol to introduce Bond feature on a protocol level in this case Bond will still be St but wouldn't be represented as regular St so it will be more complicated

mathematics around it stay tuned for updates and share your opinion what what you think the best again in The Proposal this topic is briefly discussed and can you maybe just comment on like what you think the biggest um like why should a node op a solo Community node operator go with with this as opposed to a rocket pool is it mainly the lower bond is is ITV smoothing is it all of the above uh I would say all the above and I wouldn't say that not operator should obviously not choose rocket pool I would say that not operator should consider possible options and make an informed decision on which options he found find the best which is more comfortable for him from our side we

want to focus on simple ux low entry barriers and relatively profitable economics of a module so that's the the main features okay thank you if there are more questions you can ask Dimitri in the hallways when we while we get ready for the next speaker let's thank Demitri again [Applause]