ETH Rio 24 - Staking for Institutions | Colton Campbell, Mike Bear, Mirella Guguilmer, Rony Szuster

Transcript

I would like to invite here first Ronnie again from Mercato Bitcoin thank you Ronnie uh Mike Bear from figman please uh thank you uh colon come on nice nice meeting you m okay cool now we have the whole team on we have the whole team on um I think was um a guy called Lucas he asked it before what's going on now that we're changing from proof of work to proof of stake how

does that look like so pretty excited to hear more about this we are seeing a big case for reaking as well so looking forward to know more from you we're bringing the mic mics to you hey everybody every body hello hope you all feel nice after the lunch so let's start now our poo right so we have a team of stars here in figment I'd like them to introduce themselves so please Mike hey I'm Mike Bear thanks uh to ethereum Brazil for hosting and organizing and thanks to everybody in the audience we're looking forward to chatting with you for the next 30 minutes hey guys I'm Colton I'm a senior

sales engineer at figment uh coming all the way from the US and and uh yeah appreciate you guys sitting in to listen to us hey everyone I'm Mella I'm from Brazil s Paulo and I'm protocol on boarding lead at figment very excited to be here perfect thank you guys so we'll talk now a little bit about staking right so we just saw this month that the ethereum network reached 1 million validators which is a incredible number of people really investing in the security of the chain and we want to understand more a little bit about what is exactly staking what are the rewards involved in what are the risks how can we participate in this uh action and also how can we do it through figma and

me Bitcoin perfect so please Mike explain to us a little bit more what is staking first sure um so when you think of staking I think the easiest way to think about it is making new blocks you have blockchains they're running a variety of nodes and they're receiving transactions from users all day and all night long and when those transactions get bundled and approved uh and they're correct they get put into a new block uh the staking provider signs that block and they append it to the chain and thus the block height increases so that's what figment does we help create new blocks on blockchains and staking is important because it increases the security on the Chain which we'll get into a little bit

more later it also allows you to participate in community and governance related activities and it also gives you a reward when you perform an action that helps the blockchain the blockchain rewards you as a as a Staker as a delegator and you earn a token or sometimes several tokens uh and then figman passes those on to to our customers um perfect thank you very much and colon please explain a little bit more about the security regarding the stake I mean what what is that we are securing when we stake our eat there in the Bitcoin chain what are the the end game of staking in the future can you talk to us

a little bit Yeah so one of the main things that staking provides on a lot of these blockchains is uh is security um and so generally when people think about Security on blockchains the number one thing that comes to mind is what does it cost to attack that blockchain or to compromise that chain um and so that's one part of uh security that staking provides on on blockchains the other one is making sure that uh the blockchain is highly available so as you continue to send transactions from day to day on a on a blockchain you want to make sure that the nodes the computers that are serving that blockchain um are continuously online and Performing the way um that the the blockchain expects them to um and so when you look at like some of the most successful blockchains today um there's a few attributes that

really make blockchains uh those top blockchains secure um one of them is having a decentralized set of validators and a large number of validators um and so that's really for two reasons the first one is uh making sure that if you have a small uh set of validators that means that they could all collude um and maybe write their own reality of the blockchain that's different from what everybody else is uh is really wanting to happen um the other one is making sure that um the network as a whole of all those validators is available and can continuing continue processing transactions on the Chain so that's what you want to have a large number of of validators on there um and the other one is making sure that those validators are doing the uh the right thing they're performing they're highly performant

validators um and uh if you if you don't have a blockchain that's that's doing those things it's very hard to see how um it there's really a lot of value in using it um and so coming full circle there um by by staking your assets with validators that do uh do a lot of those things and making sure you're sticking with a bunch of different validators um is the way that you get security on uh on blockchains today perfect and in order for us to understand a little bit better I'd like you to give me some examples some analogies right Mela can you tell me an analogy of staking yeah of course so I think we can all agree that blockchain is complex and especially one thing that web 3 is really great at H is embracing

people from all areas so it's normal for as less technical folks to have some trouble or take more time understanding exactly and visualizing all that exactly what it means so one thing that I'm a big fan of is met for analogies because it definitely helps us visualize better what we're actually talking about and how we can see the same thing in reality so when it comes to security you can imagine something like let's say you were at a bar or at a party somewhere you went out Friday night would you feel safer with a building with three bodyguards or five bodyguards 50 bodyguards or one with over thousand over millions it's pretty

easy right you want the the one with the most bodyguards available especially when it comes with a let's say it's a huge party so you want as many as possible and that's exactly what the what you know ethereum speaks to so many node operators running so many bodyguards all ensuring that everything the trust is operational and everything is optimized and working as it should and that's why we have the trustless system because security is enforced by them this yeah this is incredible I mean nowadays as I said we have more than 1 million validators in it which means more than 32 million if Stak right which accounts with if about $33,000 today

more than 96 billion dollars securing the chain of course we don't need to have to have an attack we just need to have onethird of the the compromised e but still is a lot of money it's a lot of Economic Security right and this is the main point of the next topic that we're going to talk about we can use this Economic Security that the users you give by staking their if in also other applications right that's the idea that we'll talk about soon about RIS taking but before that I have a question for you all guys I want to know which one here already does staking in ethereum and anyway via exchanges via decentralized exchanges via ETFs via

anything that you want you can do it alone at your house so please raise your hands again 1 two 3 4 5 6 7 okay that's good that's good all right and how how did you do it I mean via an centralized exchange via decentralized exchange Victor the one you oh using very nice so also using figment and you didn't have any problem with slashing right that's very nice good but now let's go back to our main topic right so as I said we have a lot of capital deposits in the Bitcoin chain right in the the staking in the ethereum

blockchain and we can use also this Economic Security this Capital to provide security for other applications so Mike please explain us a little bit more about what risk taking is and what is actually igen layer the one that created this idea for us happy to so the development on ethereum has been incredibly strong since its founding uh but there's a new novel application out there uh called igen layer that allows for even more development on ethereum uh and it allows for people to build blockchains and stand up blockchains on top of ethereum uh in ways that is much more simple and

faster and safer than standing up a blockchain on your own um you it rewards you as an ecosystem participant if you're a builder because you get to move much more quickly and you don't have to Source your own security you can leverage or borrow the security of the million bodyguards on etherum um and as a delegator or a Staker you receive token rewards not just from ethereum but also from all of the protocols that are built on top of ethereum uh these are called avss they're actively validated Services there are about 10 live right now 40 or 50 more will be coming over the next few months uh so it's going to be a huge ecosystem topic for the rest

of the year and it represents a new wave of building on ethereum that promises to make ethereum even more functional than it is today this is super exciting right do AG just have its airdrop and the community is actually was on rage before but then it was calm down but this is really a a bigy like I layer just grew like in three or four months it's got like a million deposits so it's like it's a very huge attract a lot of interest from the the players in the market and this is very interesting but I want to know C on which problems does air really solves yeah so I I think it's worth jumping back and looking um before Igan

Lair I mean Igan Lair is still definitely in its early days but like um if you wanted to launch your own like L1 for example or maybe like your own um data availability layer or something like that if you want to launch your own blockchain it's a hard thing to do um and so if you think back to like what I was saying earlier about what it means to have a very secure blockchain one of them is having a large number of validators so if you're um a protocol developer and you have this you know great idea in your head about what you want to build as this new chain you can't just start building right away what you have to do first is go out and find all these uh all these different validators like figment like some of our competitors um you probably want to find

people who are going to be running validators from from their home um and that's a hard thing to do uh you have to convince them of your vision you know maybe that they're going to be rewarded properly um for securing your chain it's it it really takes away from um focusing on the core um objective that you have when you come up with this idea um and so instead of just having to do that on your own what igen lay is really uh providing to these protocol developers is um is this network of validators that are already saying hey we're interested in in validating these these avss are actively validated services and you as one of these new blockchains can tap into that Network um the other thing that's really hard when you start

launching a new blockchain is that um it's very likely that uh you don't have a high amount of asset stake um so this is what we call like Economic Security what Rony was talking about earlier is um you know when you think of like like a high amount of asset Stak you want to have like a high dollar value and so maybe like your token price isn't very high or like your market cap in general isn't very high or there's just not a lot of people staking on your new chain um that means it's easy to compromise that chain it's um and and compromising a a brand new blockchain means it's it's it's usually toast um it's it's very hard to recover from that as a brand new project um and so with this new concept of reaking it uses uh it's called shared

security um where a larger protocol that has a high amount of Economic Security or in other words like a high amount of asset stake in terms of uh like economic value um can actually be used from A New blockchains Perspective so if I'm um Colton chain for example I don't have to just go out and find my own validators and rely on my own security I can tap into ethereum um and instead of you know a high percentage of my network getting slash or like misper forming I can just use um ethereum security instead and um right off the bat have a secure network so um those are really the two uh the two benefits from Ian layer in terms of

uh security um so yeah perfect M I want to to give me another analogy please and also tell me if you're bullish or bearish regarding IG in the future not in a price perspective but in a market share perspective Ah that's easy but sure let's go with analogy first so I'll give it I give I'm not going to be changing or adding actually nothing because Colton said it all I'm just going to be putting it in a way that when you're talking to friends and saying yeah I restak my eth and they asked why you can easily easily explaining they would say oh that's why so here's the way that you should see

it when you're making dinner for friends it's not an easy task at all you got to buite ingredients you got got toay pay attention to the seasoning you got to set a time you got to clean the house set the table it's a whole deal with I with what ion layer is doing is setting the table for you cleaning the house putting your friends right at your door did I say setting the table leaving everything right uh PR and proper cutting up all the ingredients and taking care of the seasoning and you as a builder only has to only have to pay attention and care about what really really cares what you really care what

you should be focusing on which is cooking the ingredients which is your product everything else is taken care of is already set and you just have to focus on what you should really be the high value of AIO operation and there you go as soon as you're done all your friends are there everything is ready music is playing and you just have to have dinner with your friends so when they ask you I'm going to restake why you why are you reaking that's you can put it with that you know that's how you can frame your answer because it's easier that way and you get to claim rewards afterwards so this is It's incred the power that this gives is huge remember in the the last panel that I was talking here we were saying crypto needs a killer app right we need

something like Microsoft Excel in order to attract regular people as I said my grandmother anybody to use crypto even if we abstract all the use cases and what really taking is and what IGA ler is doing is vital for that because that's exactly what you guys said it's much easier to use this Economic Security that already exists in ethereum and also you can avoid slashing risks using institutional uh companies that can do the taking for you so don't need to to take this risk as a as a retail person I mean you can use methods to mitigate those risks and then you can focus only on building what this Market Market needs which is this next killer

app the next Excel that we can do the next dep that we revolutionize theight the next game that will be hyped right so this is very important it's not only a new hype right it's not a a meme coin that is creating for nothing like these have a use case a lot of use case right and this is one of the jobs that I like the most about figment right this is very nice to see people professionally working H in this area in order to allow other people to Simply St their their if there be sure that it will be safe that we will be uh uh generating some revenue for them and then they can focus on development they can focus on building they can focus on everything else right so I have one question for you three

also H what are the difference between a if if I'm a person like in the retail risk taking or an Institutional risk taking right what are the differences just for for the people to understand what is the the mean the difference at all U that's that's a great question and I think it leads into a really interesting point about the functionality of igen layer another problem that it solves is the liquidity problem so previously if you wanted to stake eth you would have to lock it up for the bonding period which is dynamic it may be three days it may be 30 days uh depending on the Dynamics of the network and that can be challenging yes there are liquid staking protocols that issue you a receipt token

or a deposit token but the uh there are reaking protocols out there that issue liquid reaking tokens uh like Renzo or puffer or kelp there are probably 15 of these um so in the retail space we've seen tremendous adoption of liquid raking tokens somebody says Okay I want to stake my ethereum and I want to be eligible for I can layer air drops and AVS rewards when they go live and they get a they get an LRT uh and they can go into defi with it and so we're seeing a tremendous amount of retail or adoption uh in the LRT space the institutions are a little bit more uh slower moving they uh see potential benefits from airdrop

farming if you will by going in early but right now AVS rewards are not yet live so the institutions are cautiously waiting in uh it's also uh a little bit of a truism that if you have 50 or 60 blockchains 50 or 60 avss maybe only 10 of them are going to be durable for the long run maybe even a small handful of them uh are potentially fraudulent or the code was written incorrectly and POS some smart contract risks to the users so we're seeing institutions weighed in a little bit more carefully but in the retail space uh it's really quite quite jumping yeah I mean I I would agree with

that I think um the majority of the market so far in reaking has been through retail um um and to be honest it's still a very surprisingly large Market with 15 billion in tvl on Igan L um which is which is a large number but like as Mike said a lot of Institutions are figuring out you know how can they really grapple this new this new concept of reaking on ethereum um because there are a few ways you can participate whether it's through a liquid reaking protocol which is um like Mike said you basically restake your eth or your liquid staking tokens and you get back a liquid token um and so that's great for folks that want to go um and work in di5 but um there's more things to consider

than just um how easy is it to just deposit my token get one back there's also things um that you want to consider like do I want to participate in uh validating or earning rewards from every single one of these avss I mean like Mike said like some of them could be you know huge failure some of them could be really great and so like there's a lot of analysis being done on like um which of these avss are are going to be very successful like who are the uh VCS that are backing these avss um what problem are they really solving um a big one right now is tokenomics people are trying to understand how are these uh rewards and uh penalties going to work on ejs um so there's a lot to consider and it's all very new um so I think

everyone's getting together right now at least from our perspective and trying to understand like what's the best route to take um moving forward and I think we'll see a lot more of that as more of the uh protocol becomes available so like as AVS rewards and um and penalties start flowing to rakers is probably when we're going to see a lot more institutional adoption um so yeah I guess I can add a little bit just agreeing with what coton said there is a lot of um retail activity already there but maybe not so not so much when it comes to restak

which we see that and particular I do think it's you know something that we just have to deconstruct people who already stake and are not restating or don't even actually understand about that's why we care so much about breaking down those technical terms and making it easier it's to make it sound and and look less dating because it actually it really isn't it's just you know one more stop and one more Frontier that you can take and with the speed of the that we're seeing with um all the avss coming on I do think I invite everyone to actually check it out because with the speed they are coming out coming on at some point there's going to be something very excited that you probably can get excited about and

want to be involved so R taking is not that hard it is a very interesting concept and it does pay off to check it out and see if there is a place for you there most likely there is yeah definitely check it out and so for my last questions I want to know uh as I said a little bit before about the futures of this Market again not price related but market-wise I mean uh we have as I said about 96 billion dollar in staking in ethereum and we have around 15 billions in N layer so in reating so it should be about 15 to 20% of all the state if is already reate will we see this number rise in the next years maybe uh drived by the

invest the the the institutional investors coming to this Market as you you guys said that most of this Market is still retail people so will will see these markets grow in the next year with the institutional investors coming inside or do you guys think it will stay kind of a retail oriented Market I think a dream of everybody at this conference is that blockchain will be utilized in the next few years in a way that is seamless and elegant and probably invisible to the end user who's accessing the app um in order for that to happen you need an L1 to be very fast very secure and very

cheap in order for all of those things to happen you will need avss on ethereum to make it faster and cheaper without sacrificing security so yes I think without a doubt the number will continue to rise it will be driven by speculation because we can't predict what will actually happen but in this pursuit of increasing the scale and throughput and bandwidth of these blockchains I think the number of e staked and restak will continue to increase yeah I I would agree with that I think um and ultimately what Igan L and and reaking in general is doing is it's making the cost of trying new things new uh ways of building new

protocols decrease so um cost of failure is is much lower so um the ability for these new developers to um create new projects and uh try out different ways of building um the the infrastructure backing uh l1s and l2s uh as that becomes much easier to do um hopefully we'll be able to find solutions that are uh uh not only uh useful in the market but also like um helpful to those other existing protocols that exist today um so yeah I agree with that perfect you IED all yeah so before I asked if anybody on the on here I already Stak eat and we had like seven

people right seven or eight now I want to ask again who wants to stake and restake eat please raise your hand less people than before good a little bit more so our talk was was good right okay guys thank you very much I will open to questions if if anybody has a question please raise your hands we still have five minutes uh very simple one I think um when I open Twitter I got slapped in the face with the topic of

raking uh why figman and not other players why should people focus you and why are you let's say special so I think when it comes to choosing a staking provider the first thing that I'd like to say is that there there's room for multiple staking providers the person who's running an at home validator that's fantastic every one of mela's bodyguards earlier is serving a purpose and so if you want a million bodyguards protecting where you are you need a million different validators running nodes um so diversity is very very important uh having said that the reason that figment is so large and so established and so trusted is because of the philosophy

that we utilize when deciding how to architect our Solutions this is a very very complex thing to do uh and so in the background we spend a lot of time and Care making sure that we're running very very specific versions of ethereum clients for example and we have the capability to switch very quickly using our infrastructure as code approach but it really comes down to trust um figment has a very deep bench of experts that scram ramble to cover our customers whenever they have problems or questions uh and the reason that we continue to grow and that people like working with us is because we're a trusted party that helps our customers solve problems uh but there are a lot of staking providers out there like I'm sure there are staking providers in this audience there's room for all of us it's a it's a

shared approach uh hi guys so my question is about money Legos and more than like we have Ian layer we have pendo so it's like um Crypton steroids right and uh to believe that something else or like uh pendo is the last uh barrier for money Lagos or people going to do something else to put in pandle to put in I layer to put in ethereum like they going to leverage more or I think it's it's done right now what was the question about money Legos yeah like uh people uh leverage their money in a bunch of

locations so that they gain points in Pand uh I layer and uh Stak as well yeah and while we I think we spent a lot of this panel talking about like all the great problems that Igan L solves it like we've said multiple times it is very early so um whether or not Igan lir is is the best implementation of reaking on ethereum we we don't know um the risks that do that are involved are one smart contract risk and two the risk that the value uh Stak on all these avss becomes greater than that of ethereum um however even if you look at the top you know 10 to 20 proof of stake protocols when you go on like coin market cap or

coin gecko um and add all of those together and compare it to ethereum it's still a very small amount so it would require a lot of these avss to become um it's a good problem to have because they would become extremely successful um and reach that same uh total value locked in Stak assets as ethereum and that's where reaking doesn't really make sense um however the point of igen lay is not really to be it well it's the point of igen lay is to solve whatever problem that you have uh as a as a protocol developer and as a as a Staker um but if you're familiar with like the original white paper that street Ram Canan and the rest of the I layer team came out with um the goal that they had was to build this uh sandbox almost for new Pro

protocols to launch um and essentially igir may not be a permanent home for all these protocols you could build an AVS um and once you get to a size of uh you know substantial size where you feel like you've made very good progress there are like more customization um features that you may want to add you may want to have more sovereignty um in terms of like your your protocol so maybe after that instead of being secured by just um ethereum you move to having your own protocol um so uh yeah I guess to answer your question the risks are definitely with uh layers and layers of smart contract risk um but that will never go away as long as things uh continue to live on blockchains um at

least in their current state and then also uh the total value State through avss compared to ethereum uh so connecting to his question I think like one of the things that worries me the most nowadays is that we are building new layers of of risks in order to leverage for for example points farming so with the airdrop hype a lot of liquidity flew into risk taking and then they use the liquid risk taking tokens to leverage on pendo and earn more more points and more rewards and how does this end so my question is like as you are like adding

these new layers and each layer has a different set of risks uh how much risk do you think the reaking layer adds to the equation purely the reaking layer there's a little bit of smart contract risk and there will be some slashing risk but unless you're going into unless you're using your lrts and going into defi I don't think there's like a a a leverage risk or like a credit risk per se but I think a lot of some of the risks are unknown and at this point and that's why we've seen very very cautious institutional adoption um I think you you rais an excellent point as did you like this

idea of like a financial crisis perpetuated on Leverage upon leverage upon leverage that were unable to unwind appropriately uh I think we understand that it's human nature that some of that will happen to begin with but to protect the core of the ecosystem in the core of the investment Capital people will need to use staking providers that have very prudent risk assessment metrics and that will not run certain avss because it is possible to just opt into one or two or none um but it it's also possible to just YOLO and go ham and take a lot of risk and lose it all but I agree with you there's a reason to be concerned but I think the benefits outweigh the risks at this point especially if you utilize

some prudent risk management perfect guys thank you very much for your questions thank you guys for your presentation see you next next time thank you