EthStaker: Ethereum Staking Wars - Nixorokish & Superphiz. Ep. 551

Transcript

we were hesitant to acknowledge the as it as it grew we wanted to promote home staking as the best solution liquid staking a whole lot more competitive than running a validator where you don't get any Capital back you can't reuse that capital and and like add add risk to it to get extra award one of the things that we don't want in taking is colluding operators we don't want coinbase and Kraken to work together we want them to be adversarial 30% of the um stake e is in Lio that means that they are a sort of a systemic risk in ethereum can we slow down the amount of steak coming in knowing that the majority of this is not the most

valuable form of staking there are changes being proposed to sort of favor home stakers and favor more decentralized forms of staking welcome to epicenter the show which talks about the Technologies projects and people driving decentralization and the blockchain revolution I'm Fred an and today I'm speaking with super and nixo who are the co-founder and executive director respectively of um the Reddit Community is Saker so before we talk about Reddit and staking and everything in between let me tell you about our sponsors this week this episode is brought to you by gsis gsis builds decentralized infrastructure for the ethereum

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can stti directly to cors one's public note from your wallet set up a white label note or use the recently launched product opus to stake up to 8,000 e in a single transaction you can even offer high yield staking to your own customers using their API your assets always remain in your custody so you can have complete Peace of Mind start sing today at chorus. one nio and superface it's a an it's an absolute pleasure to have both of you on it's uh kind of we've haven't we haven't had a staking episode in a while so tell me about yourselves uh hey so I'm super Fizz I um have been an etherian since the Olympic test net

actually since before that since I read uh vitalic um paper uh introduced smart contracts to me totally didn't understand it but I had this kind of gut feeling um and I've just been curious about ethereum since then uh around 2018 I got interested in proof of stake that was about the time that the first model got discarded where it was stake 1500 eth um and it was it was totally reworked and um I quit my job and I was like I'm going to promote staking like it's the thing that I want to do I I felt passionate about it um and so probably since 2018 I have been just

obsessed with promoting uh proof of stake on ethereum so that's me what was your job before you quitted so I was a school psychologist and a school counselor um I worked with kids and I loved it but uh that's actually that's actually weirdly in tune with kind of what you do for the etherum ecosystem too it's kind of like uh it's funny I didn't think so at first yeah at first I I was like I'm not I'm not you know I got a C in uh in of computer science I I I've been a nerd my entire life and I've always been uh into technology into computers um but yeah I I took psychology classes because they

were easy and uh easy for me they're not you know easy for everyone but they were it was in tune with what I know um and so I did this career uh working with kids and um I I was a guidance counselor and I do I see a lot of parallels now between guiding Community working with people encouraging people being supportive um and sort of uh seeing the path forward so yeah there there are a lot of a lot of beneficial parallels everyone can't be a developer yeah think of the others what would happen if everyone were to use gu it's like it's like it's very parallel to kind of like yeah absolutely yeah no and I think kind of the the ecosystem absolutely needs uh many many nevs

mainly nons actually but uh yeah what about you nio um so I was like very very Loosely into crypto before I ever heard of staking before um staking ever launched but um at some point I was just buying um ethereum and I kept seeing this number 32 thrown around and I was like what is this number I'm very curious about this number and mostly I saw it from um from Super Fizz because we were both part of the e finance Community which is another um etherum community on on Reddit um and so I got I learned how to stake myself um and um at some point I started answering a lot of questions in the East acre subreddit and super

Fizz reached out to me and was like you're very helpful can you can can we can we get you to help more can we get you more involved um and so I got involved through eaker um and I used to be um an an oceanographer and I actually left my job in oceanography because I was getting really into staking and really into this ecosystem and I wanted to throw myself in completely if I can follow up on that the I I have always and to this day and even in this this talk nixo answers things the way that I wish that I could and so she even in Reddit uh Twitter wherever um you know I answer and I'm satisfied with my

answer and then I read nix's answer I'm like damn I wish I had said it that way uh so I the reason I'm so excited to uh promote and encourage her is because uh we're on the on the same wavelength in so many ways but she has an ability to say things better than I might have said them so that's that's my excitement that is such a wonderful compliment uh I I really like that so uh super so when when you kind of quit your job as the school guidance counselor how did you finance yourself I mean were you already very long e or kind of H how how how did this kind of I mean obviously most people kind of have to make a living so kind of promoting staking on ethereums probably not one of the jobs

in the school guidance counselor's list of jobs that you recommend to students so H H how how did that play out yeah that's interesting and I don't think I've ever actually answered this before um it it was crypto um I I also held Bitcoin and ether and um I had uh several Dash Master nodes um ear or they were darkcoin Dash um and I I really that year reached a point with my crypto Investments and this is around 2018 that um I felt like my daily volatility was higher than my annual income and that

that was just weird to me I'm like why am I doing you know what this which I loved it I did it for 15 years it was very rewarding but it wasn't financially re rewarding and um I felt like I could I could make a bigger impact and a better you know a bigger impact in the world through promoting staking than um continuing to do this uh you know really non-financially rewarding thing and since that time I've I've and I haven't had any any jobs but I've I've had uh you know Arrangements that that have that have supported me um it has worked out really well like I

mean airdrops um or even just staking like staking still doesn't I don't I don't have enough eth that staking pays all of my bills but it is a very nice Foundation yeah absolutely um so kind of when you came into this topic of staking this was before the transition to proof of stake right so how has how has the Staker Enthusiast Community or the Staker community actually changed since it it has been a I would call it a dramatic transition in in the beginning 32 ether was not that expensive and I I can't really quote a price but it was a

couple thousand dollar uh and so really anyone who or most people who were deeply committed could buy a full validator and Staker um with the changes in price and really onboarding more people who are speculative in nature rather than technical in nature there has been a shift toward focusing on returns rather than focusing on securing the network so this long shift has been away from Individual sakers and toward um you know lsds simple deposits reaking whatever pays the the highest um apy and I don't think it was unpredictable but

uh I I guess I sort of hoped it would take longer than it has what what sort of um topics are currently uh the main day of East scker ni I'll let you uh I'm I'm a little I'm a little um I have turned more toward mainstream ethereum the past few months um and Nyx is still very deep in staking so I I think you'd be better for so yeah I'm full I'm full-time I'm the only person who's full-time at East AER right now um so I would say that the main the main things on East Acer are are in staking in general is just making sure that staking is accessible for people and so I actually I I just put

out um a survey uh of stakers because we were curious to see like what their pain points were and um sort of what what stumbling blocks and I I do have some we were talking about like this uh the makeup of stakers earlier we were talking about like the technical backgrounds or the technical capabilities and I actually do have some statistics from the survey um and it is it is quite large like 90 90% of people consider themselves um having a technical background in staking uh or a technical background 90% of people in staking consider themselves to have a technical background so um while it does like it involve some um technical capability people still need a lot of

help troubleshooting and people do wish there was some sort of plug-and-play option that you could just plug in and like earn money with but the fact the fact sort of is like you are at this point throwing down $100,000 into a validator um and so I I think now um the biggest the biggest hurdle that we sort of need to overcome is the fact that um and this is a really big topic that we're probably going to get into is that uh the economies of scale are really hard to overcome and we're seeing um staking pools liquid staking tokens um and big professional operators uh benefit more from staking than home

stakers are and it's it's making home stakers feel sort of like sidelined feel sort of like staking isn't meant for them and like um they might be pushed out eventually because the as the APR continues to go down um they're just less competitive than these big staking operations that can put up with lower APR for some period of time because they're not necessarily relying on what the APR is they're relying on the fees that they're taking from the people who are delegating their stake to them um okay maybe let's let's kind of there there's a lot to unpack here so maybe kind of let's look into the different ways that staking happens right say say I have 32 East so in principle I could run my own valid data

um if I don't want to do that what are my Alternatives so if you don't want to run your own validator you can definitely use a staking pool and that is the option that most people are taking because that means you don't have to be engaged in the ecosystem at all you can take your um your Capital you throw it into a staking pool they give you a liquid staking token back and then you can take that liquid staking token and walk it over to D5 for some extra yield which makes liquid staking a whole lot more competitive than running a validator where you don't get any Capital back you can't reuse that capital and and like add add risk to it to get extra reward um but there are also other options like so 32 e is the

minimum amount for validator but there are other protocols coming online that lower that Financial barrier and um these these have been a long time in the making the the one that's live right now is rocket pool and that lowers the barrier to 8 eth plus uh 2.4 eth 2.4 worth of their their token in eth um and so that sort that sort of uh lower owers the financial barrier but it doesn't really lower the technical barrier they have their own um software that lowers the technical barrier a little bit but you still need to be be using command line but our big thing is we do want people running from home like we don't necessarily want people throwing things in delegating Capital because there's enough of that going on and that's

actually become really problematic so I will I will just say like if people want to run from home the technical barrier is a lot lower than people on Twitter seem to think it is um I think that people see command line and it scares them and I am not I'm not a super technical person I came from science um not coding and I don't know how to code and um I I managed to do it one of the really interesting things I heard you acknowledge is that you can get more right now from delegating your eth to someone else um and you know going through reaking or uh or depositing yield that is something that

we we me us we were hesitant to acknowledge as it as it grew we wanted to promote home staking as the best solution as the most valuable solution most rewarding solution and only by acknowledging that the playing field is is desperate that you can make more through an LSD um that's the only way that we can uh tackle the situ a and and begin to improve it and that's I'm I'm it's a difficult acknowledgement uh but it also brings the ability to change it I also like I have trouble with that because um so many people come into

crypto as as is normal um just wanting to sort of gamble some wanting to make some money um and I would say 95% of this ecosystem is um throwing darts at a board hoping to make it rich but I I believe in ethereum as something that can level the playing field something that can possibly like mitigate the wealth Gap by by reducing the amount that economies of scale are able to uh bring you to and I I think that it's very very important that we pay attention to how staking grows up and how the consensus layer and the base the base protocol of ethereum grows up in order to preserve that because I think that blockchain can actually like

actually has the potential to be really dystopian if we have this insanely efficient surveillance system but we don't have a way to protect against it being captured by just a few entities um and so I think that staking is the fundamental way to protect making sure that staking is decentralized is the fundamental way to protect that right now and so um the fact that you can make more on an LST right now is is a little devastating because um it means that we're losing this fight against um against making ethereum anti- monopolistic there are changes in the there are changes being proposed to sort

of favor home stakers and favor more decentralized forms of staking that um I am I am uh very much in support of and I hope that uh they get a lot more support because I do still think that ethereum can be this really ideal um endgame where the financial system is run in a much more Equitable way can I highfive you in the screen is that sorry that's see that's why I listen to her sorry let's let's talk about liquid staking so kind of like the liquid staking kind of it means you can kind of delegate um less than 30 to e to kind of say Lio um and uh basically they will um

generate bu on that for you but at the same time you get a liquid token back that you can use for instance as collateral in say a a lending pool where you can kind of uh borrow say eth against this again and you can stake e so basically you can kind of generate yield on this multi multiple times which you can't if you're a home steaker right so which is why um in addition to kind of being technologically much much easier because you just have to press it it's just pressing a button right I mean basically anyone who use Lio it's very easy to use so in addition um to being easier it's

also more lucrative which is why pretty much around 30% of all Stak e currently is in Lio so kind of kind of can you walk us through the issues that this kind of presents yeah um so it's it's definitely more lucrative but it's also more risky um when you stake all your your risk is um with the beacon chain contract and with the staking contract and that's it um when you are using a liquid staking token um your risk is with the um staking contract with the protocol with um the smart contract of the liquid staking token and so it introduces a lot

more um risk into the protocol and when we have a situation right now like um like Lio has 30% of the um stake e is in Lio and um that means that they are sort of a systemic risk in ethereum and so if um there was a bug in the Lio staking contract uh that would not just be an issue for the people holding liquid staking tokens it would be an issue for all of ethereum for everybody who's holding ethereum for the entire crypto ecosystem because ethereum is such a large part of the crypto ecosystem um and so it would be one of those situations that you see in the news where it's like some large collapse that

um and people who had open positions get liquidated um and so this is not just an issue for stakers this is not just an issue for eth holders this is an issue for the entire crypto ecosystem F like can you think of any I I wanted to you back onto that I was trying not to cut you off but there there's a more long-term in transcendental risk as well that comes from that kind of centralization it is that uh adoption stagnates over the long term it's that when um nation states when corporations when three litter agencies look at ethereum they they're actively evaluating to determine whether

it is a um a truly decentralized platform can we operate on this platform or can we manipulate it maybe and uh for for those actors to have the confidence that ethereum is a truly decentralized platform we need to ensure that there aren't these large actors who could control the network and that feeds into our long-term value into our 20 or 30y year value um because the failure of those large actors to adopt because we're centralized will have this long-term negative effect but it's not obvious right now right now you know you're saying hey I'm getting you know 10% apy but that that sacrifices our long-term ability to uh to to dig into

uh the potential uh user base F when you say con control the network what exactly do you mean do you mean kind of like censor people or take away funds from people or what's what's kind of the threat scenario here hyperbole at at 30% um I would say that there is uh no technical risk but um in in in the long run if if Lio continues to grow and one of the things honestly I try not to talk about them too much I I'm not interested in giving them a a lot more um publicity but they're developing uh I think it's called Lio Alliance and they are um organizing other operators as as kind of

a cohort and one of the things that we don't want in staking is colluding operators we don't want a large we don't want you know coinbase and Kraken to work together we want them to be adversarial maybe friendly but but adversarial still so that they're not colluding to make decisions later if there's an a large Alliance of stakers um a formal alliance of stakers then they have these back channels where they can say hey um you know I don't I don't like this initiative can we shut this down at the developer level um or hey can you get your people to vote for this um or or if they even were able to

control 50 or 66% through this kind of collaboration Collision um it is possible that they could change the future of the network uh and so it it is not I can't call it a a current threat it is a Potential Threat that is is continuing to grow and that's that's why we're cautious of it okay yeah so I see that so Nick so you said earlier that there are ways of kind of that are being discussed of making um solo staking more attractive um can you go into those a little bit yeah absolutely so um there are lots of different variables that can be messed

with in order to make decentralized forms of staking uh more attractive but uh there is not not a um full-fledged proposal right now um our best proposal right now is basically saying all of the new new Stak that's coming in um of all of the new Stak that's coming in 90% of it is coming from liquid staking protocols from staking pools right now and so um we are trending upwards we have not we have not seen a dip in um in the demand for staking like I think right now the queue just emptied out uh the staking queue the number of validators coming in every Epoch just emptied out for the first time in um maybe more than a year so the the staking queue the amount of staked eth

um people throwing capital in has been up only and so there is a potential there's there's potentially a situation where we end up at 99.9% e staked and in that situation because we know that the majority of the uh the home stakers the people who are um the most decentralized forms of staking uh came early on to the beacon chain uh and they represent now a small a very small amount of the new stake coming in can can we slow down the amount of stake coming in knowing that the majority of this is not the most valuable um uh form of staking so this this change is um the the name of this

really contentious thing is issuance changes um and so it's basically the reason it's so contentious is because it's basically changing the monetary policy of ethereum saying we're going to um change how how uh ethereum issues eth to the people who are securing the chain in order to slow down stake and what this is is a mitigation uh proposal for for it's an intermediate proposal for a proposal coming later on and the the thing that the things that can be in that proposal later on are um messing with a with a number of different variables to make decentralized forms of

staking more attractive so right now this is just a simple issue the the um proposal that exists right now uh lowering issuance is just a SI very simple change is just lowering issuance so that staking is less attractive in the in the um like right now um so that we can propose something later on what can come later on is something like um correlated staking uh correlated offline penalties and so this is something balic uh proposed and um basically right now what we have is correlated slashing penalties so if somebody attacks the network somebody has a thousand validators that all double sign on

something or all try to change something on the network we see that they have a thousand validators and we slash all of them the network the consensus rules slash all of them um and apply this apply this um factor to it saying uh a lot of validators got slashed at once it looks like you guys are colluding so we're going to slash more of your Capital than it would if it was if you were just one Staker who like messed up and double signed or did something silly um and so what we could do is apply that correlation factor to people who are staking so say uh I'm a professional operator who runs 10,000 validators and I have a power blip and

my state goes offline for 10 minutes and I missed two attestations um the network could see that 10,000 validators missed two attestations and apply a correlation penalty to that stake uh that says this stake all looks like it's run by the same operator so we're going to we're going to give you a a harsher penalty and that that would um preferentially benefit small stakers because they wouldn't experience that correlation penalty and so that's just that's one of the things that could be applied to the eventual change that um that we are trying to um that we would like to uh Implement some intermediate change um that gave us

time to implement that it's worth saying that uh even even among people who are deep aligned like even with people that we share a lot of values with that we see ethereum the same way there's a lot of um a lot of consternation about this because it changes the monetary Supply because for some people there was a promise to users that you know this is how things were going to go forward um but Nix and I don't necessarily see that there has been any promise to anyone we see that this is an emerging technology and that we ought to um continue to devel develop it and really kind of Shepherd it and Safeguard it until it is uh really hardened and calcified over

the long run and if you look at these proposals like the the majority of the criticism that you see at least the where the criticism originates if you look at the people who are um most strongly criticizing that a lot of them are associated with liquid staking pools and so like that sort of tells you that you're hitting the right pain points but then they bring out these arguments that are like oh this will hurt solo staking or this isn't good for the network and it's a scare tacket won you pick up the children yeah so it scares the rest of atherion because they're being told this this proposal is the end of the world um and the amount of sort of capital that you

see going into um propping up those concerns uh is concerning right now because right now the financial interest in preventing those changes is the least it will ever be from now on is the is the minimum that it will be from now on as as we get further and further along this stake rate like right now we're at 30% we could be at 40% in 6 months we could be at 50% in8 months um that criticism will only go up and it will be harder and harder to implement changes that hurt the people who are benefiting in best from the system right now um the people who are benefiting most from the

system right now have the most financial interest to stop these changes because incumbents like to keep things like the status quo because that's who is benefiting and it's funny because their arguments arguments don't sound selfish their arguments are this will harm home stakers you must hate home stakers if you want to do this because home stakers are the most valuable thing and you would harm this by doing this and those arguments come from uh constituents who do don't actually represent home stakers but that is their argument and they're they're doing things like working to get developers on the core developers call like we we need to do more research and

include our developers in in the the cord dev's call those are the kind of tactics that uh they're they're they're designed in the long term to derail something that is really better for the network in favor of their interest there there are hakers who are against these changes and I don't want to I don't want to dismiss their concerns because um there are I know I personally know hom stakers who are against these changes um and some of them run thousands of validators but I I would also argue that somebody who runs thousands of validators as a hom Staker is just as valuable as somebody who runs one one validator well we're really looking for

is is millions of validators all around the world yeah c can you clarify the exact intermittent proposal again so basically is it to kind of um cut off new people from staking or lower the staking rewards for everyone who's currently staking and will be staking in the future so basically is it is it kind of leveling the playing field or is it just kind of drawing a line where you say everyone who stti before this point is still good and everyone after no that that would be terrible that would we acknowledge that that would be terrible so basically you have an x-axis and a y- axis and this is the amount of stake that uh or the amount of APR that people are getting the less stake uh that is in the system the more APR people get and

so that's just taking this curve and moving it down so it's just lowering APR so okay everyone gets less yes up to 100% st e there's still an APR there's a return and it it could be lower and lower what we're really interested in is um changing that curve so that around 30% of stake 25% of stake that uh rewards this is complex terminology rewards actually become negative so the closer you get to 25 27% whatever that that sweet spot is um your rewards trickle down to you know 1% 1% zero and then a negative return and yes that will cause some people some

entities to withdraw from the network um we we believe and there are really two interesting angles on this we believe that that will lower interest in liquid staking tokens um and that many home validators will still survive that uh so it is a cut but it is uh a a beneficial long-term cut and the other side of that is if if a maximum of 30% of ether are staked then ether holders ether is still the currency of ethereum um stake or an LST provider that controlled 80% of staked eth does not control the network ethereum holders who hold the other 70%

of of ether they are still the stewards of the network uh not someone who holds a third party token uh that is that is you know then the that is potentially the money of ether if that makes sense yeah that makes sense so is is the idea that um the network security doesn't benefit from kind of people from the 31st to the 99th pertile of e Stak so basically if every single eth were to be staked wouldn't make the network any more secure than say if a third of eth were staked that is correct um we don't have an exact number and that is a criticism we don't have an an exact number for

what is needed to secure the network I've heard estimates that are anywhere from 1% to 12% of all Stak um of all ether needs to be staked in order to secure the network we're at 30 something perc everything Above This is Superfluous and everything Above This serves validators and validators aren't meant to be served by the network they are in service of the network okay and so basically um you just said that kind of the APR depends on kind of where you are on this act so how many how many people are how many validates are staking at the same time right so basically but everyone makes the same APR regardless of when they started so basically if more people come online

then everyone gets less right that's kind of the the basic mechanism correct okay then let's talk about kind of solo stakers and what an ideal Network kind of what would look like so basically having outlined kind of all of the drawbacks of being a solo Staker um you need to have like some technical background even if you're not a Dev kind of at least you have to be kind of like happy using command line and so on um and I mean there are also somewhat plug- Inplay systems so kind of you could buy a d note or a Nado and kind of it's It's not really like you plug it in um in the power source and you're good but kind of it it lowers kind of the barrier to kind of entry for

um for people so um the large Capital requirement side so those are people who kind of have $100,000 in eth lying around who stakes and why do they stake themselves so um I would say the people who stake are the people who want um lowrisk returns low people who have lowrisk returns and people who are um at least technically uh confident enough to know that they can copy and paste from a guide um they can use command line if it's copying and pasting from a guide um like I said 90% of stakers um consider themselves technically competent it also

one of the big barriers is internet connection is bandwidth um and so we do see that uh 95% of people who report staking who who report um are either from North America Europe or Australia we see very few stakers in America we see almost no stakers in Africa um there are some in Southeast Asia Singapore is a hot spot for uh note operators and again that's that's a lot about the capital requirement but um a lot of that is about the network requirement too because um I'm in I'm in South America right now um here in South America it's harder to um have a stable internet connection outside of very Urban regions

I'm in Buenos arees and Buenos arees has um great internet but outside of this very small Capital 50% of the country is in poverty and um they they're just not serviced they don't have the infrastructure that's needed to um even if they could procure $100,000 or whatever the um minimum requirement is for a protocol that lowers the financial barrier they couldn't necessarily set up a node that could keep up with the with the bandwidth requirements but a home Saker in your definition is someone who actually runs the physical infrastructure at home so kind of if I were to have like an AWS node I wouldn't be a home Staker is that correct you wouldn't be a home Staker

but you would be a remote Staker I still I still consider those valuable players they're not as valuable as a home Staker because they somebody could turn off their node um but if if you're running um a stake a staking node that is in AWS or Cloud flare or any canabo or any like service that gives you um your that bare metal service or cloud service um still running the configuration of your note and I still consider that valuable you you wrote a great disambiguation of that um where is that it's on um East akr's paragraph blog fantastic we'll link to that in the show notes it is a she gives a great um distinction I I don't recall seeing

remote Staker on there but it really does break down uh the different kinds of stakers and the value they provide to the network I was impressed with that okay so let's look at kind of a healthy shaking ecosystem right so basically what you want to avoid is that um um nodes are too correlated with each other so kind of there's different dimensions that we can think of that kind of they could be correlated in so kind of there's very physical ones like location and jurisdiction so kind of you could have a natural disaster say um an earthquake or volcano you could have a jurisdictional Black Swan event where for instance I don't know the government says everyone who stes um uh ethers uh provides the security and

if you don't turn it off right now we will come after you sort of thing and then there is using Cloud providers right so basically if everyone uses AWS then kind of obviously kind of the bottleneck here is AWS and I mean if you look at what cloud providers are out there there's basically there's AWS and Google cloud and hetner and then everything else comes like you know very distant third fourth um then there's clients right so basically we have Beacon and execution chain clients um so kind of if you have a client bug and kind of say 50% of the network use a single client then obviously that part of the network would come down so H how

do you see all of these Dimensions which are critical at the moment um which are you paying attention to when which are we doing okay on I would like to let Nix answer but I I also want to include uh that social coordination and that is U that collusion between multiple operators but yeah and Nix you're probably more attuned to answer the whole question I would say let's let's do three major categories software software diversity Hardware diversity Geographic diversity but software diversity is talking about the consensus layer clients the execution layer clients and that is that's really easy fix for node operators where you run a

campaign that basically says like run a minority client because um there are all these terrible things that could happen if uh if everybody is running the same consensus or execution layer client and that's that's often misunderstood as like an altruistic Endeavor like oh if I wanted to be selfish I would run the super majority client and I would be fine but that's not how it works you put yourself at risk if you are running a super majority client so I think they in community has actually shown a great deal of um motivation in changing that and Fizz sort of led the um the initial call for consensus layer client diversity um and then there's Hardware diversity and I think we're I think

we're actually doing great on that um in terms of Hardware you don't want everybody running the same um PC the same hard drive the same RAM and really we've done a really good job of making sure that people are running on different um different sort of Hardware it's funny you say that because I would love to see more platforms like uh you know gaming systems and toasters and refrigerators like porting that to you know different arm style architectures and risk style architectures like that would be that for me that would be real Hardware diversity that would be Niche nerd stuff my Casio Smartwatch hey somebody runs one on a

vape someone actually runs a validator on a vape it's kind of cool I don't know if if it's maybe it's just a okay now that I said it it sounds egregious but I saw it on Twitter so it's real yeah it must be true it's right yeah and then there's Geographic diversity and that like Geographic and Hardware diversity sort of overlap because you don't want everybody running um in the cloud uh and I think that um ether F likes to tout this one uh this one statistic that percentage of nodes is run within like the C within like 15 miles of the CIA headquarters and I think that's because like that's where the um maybe AWS or some cloud services reporting that's

where the CIA runs their [Laughter] noes yeah I think that I think that covers all of the sort of for you what is what is geographical is geopolitical social to me like that's all three of those together uh because it's geography it's political and it's social collusion like the these large people colluding together it's anything that is not Hardware or software is geopolitical social okay let's talk about kind of the client diversity because that that's kind of where um currently the the situation is most dire right so basically you said if I use a super majority client say I use G which is in excess of like 60% or so of the network

at the moment um as my execution layer client um how do I put myself at risk can I say first I don't I don't think it's the most dire I think that uh social collusion is currently the most dire uh but um client diversity has the most attention right now and so yeah okay let's talk about social inclusion next um so the way that you put yourself at risk so say so gu is actually under un probably under 66% and I say probably because our data isn't necessarily um Cor we sort of have these um we have these probabilities um we'll just we'll just leave it like that technically it

is impossible to see um what the actual makeup of the execution layer clients is it's it's possible to see the consensus layer clients um but so say we're above 66% and you are running the super majority client um I'm going to name it as a different one because I don't want people to think gu is a bad client like let's say nethermind is above 66% and I'm running nethermind and nethermind has has a bug where they um they actually sign something that's incorrect and they finalize it because it looks correct because if 66% of the network signs something that looks correct to them they're going to continue on and it's going to take a while to figure out

what's happening because what it's going to look like is the m the minority clients are going to look like they're missing attestations like they did something wrong and so the super majority client is going to find fin aliz to an incorrect chain and once the super majority uh client finalizes to an incorrect chain you can't come back you can't you're you you essentially are slashed for 100% of your Stak you can Larn lose all 32 eth because you can't come back from that what would uh what's more likely to happen is there would be some bug where you just stopped a testing um and so uh that's like sort of the second situation you stop attesting

it's very clear that the super majority client is having an issue because the whole network stops finalizing and that's finalizing not progressing so people are still able to make transactions but they're getting reorg after two or three blocks and that means that like uh rearing is like uh the the your transactions can be reverted and so that would be realistically what would happen is the the devs would spring into action and um there would be a fix put out within a couple ofs hours but what happens in that situation is that something kicks in called the um inactivity leak and that's um that is the purpose of that is to drain these validators so that they represent a

smaller portion of the network and the network can start finalizing as quickly as possible again um and so if you are in the Super majority client in that situation your validator starts getting drained at a higher rate because it's trying to get you off of the network so either way in these two scenarios there's a third scenario that's even less um that's even less severe than that but in those two scenarios you are the PE you your capital is being lost and um in that more severe scenario where you've lost 32 e all of a sudden this is a whole network wide issue because the people who lost their stake who lost 32 eth um who right now are going to be 30% of the the network there

well 30% of 30 of the portion that is staked um are going to be fighting to say you know what let's Fork let's fork and um let's let's remove this thing that happened and um pretend that I didn't get slashed or let's fix this in some other way and then you have the code is law people versus like the social consensus issue people um and the whole network is thrown into this do you remember when the Dow um pack happened and it was like a a big issue so you basically have this situation again where um I couldn't see being a business like um an accounting business and saying like this is the network I trust

like that it would throw things into such contention that I'm sure businesses would be like this is this is not a serious um Financial system we can't we can't um run a business on this because um it's it's a mess so super you said um that you are most worried not about the client diversity issue you're most worried about kind of the social political kind of uh collusion scenario this is something I haven't really talked publicly about um but I feel like client diversity was a very big deal a year or two ago um right now there is tremendous awareness about it we have we're over the hump there enough

awareness that um if if we continue at our current Pace client diversity I don't want to say it's going to take care of itself it's still going to take a lot of effort but the inertia is there uh the real my real concern about uh the success of the network now is primarily social it's not geographical or political yet it is social and that is the idea of um Power seeking which is natural and I have no difficulty with power seeking I expect Ed in something this large uh but if any of those power Seekers are successful um especially in what I consider this the Youth of ethereum then it could have

very very long-term consequences uh and I'm careful not not to name names other you know other than what I've already said but it really just takes an entity or two entities to say hey uh we don't we don't want this proposal that nixo was talking about to go forward uh that would harm our bottom line in the long run so let's just have a back channel here where we talk about how we can shape and influence governance to make sure that what we want is Advanced and then they you know kind of put some money into it maybe they have researchers that they're funding and the the conclusions of that research tends to support uh their foundations um or I

I call them mercenary researchers uh or they they are researchers For Hire who will uh inevitably come to the conclusion that the paye wants them to find um and they can be pretty compelling and pretty loud and so that kind of social collusion to me is the the our biggest current threat and it's it's difficult because it's it's hidden uh and you don't always know about it and you may never know about it in fact really effective social collusion is something you'll never know about it looks organic it looks like something that the community wanted to happen um and so the way to prevent that kind of

social collusion is to get as many uh independent individual operator validators everywhere in the world uh so that they're all thinking for themselves they're all saying hm is this good for ethereum is this good for my stake uh or is this uh is this serving some other entity but isn't that just protocol lobbyism so because we see that kind of like in in politics outside of uh you know ethereum and staking and so on anyway so how do you think um we can um create a staking ecosystem where that isn't ative it seems like it's something

that naturally emerges in these uh in these situations yeah to call it uh simp protocol lobbyism I think is a underestimation of of the threat um because these entities are I don't want to make them nebulous but they're like chameleons they can appear to be anyone they want they can come into a forum and say I'm a homaker and this is how I feel uh and this is why I don't want this to happen I'm I guess I'm most concerned because of the nebulous and chameleon nature of the threat that I feel like it's probably already bigger than we've acknowledged and I do think it is far more significant than just protocol

lobbying I think it is large entities who are willing to collude to get what they want I think that money can be a powerful motivator to get things done and so I do think that like lobbying can sort of be um pushed in it can be guided in a in a beneficial Direction I think that um these these companies with financial interests can reasonably and valuably contribute to research but I think that there needs to be um a neutral a neutral sort of body who um is the layer between that financial interest and the people who are actually doing the analysis like

that's what universities are that's what um research in general has always been there's always been this neutral entity in between the people who want the research done and um um the people who the research benefits versus the people who are um doing the analysis and um can be swayed sort of to uh lean to have biases towards some outcomes um so I think I don't I don't think it's impossible for um companies with financial interest to valuably uh contribute to research I do think that that's possible but if you kind of look at a research that we've seen come out in the past so things like smoking is really

good for you or best you can put into your body is like three Big Macs a day or something I mean obviously there have been researchers who've published these sorts of studies usually then turns out that they were surprise surprise financed by uh big tobacco or McDonald's whatever um so uh I mean h how do you and I mean researchers actually have to Des close their financial interests right if they have them so how do you see that kind of play out here um I think that we should leave science to the scientists like I don't think that um that a company should be bringing inhouse like a bunch of researchers who say like okay we want

you to study this and we bring your results to us and we will give you advice on how it's going and then we'll look over the drafts and um then we'll publish it from our research Wing I think that um they should go to um e to uh e economy departments in um universities and say uh we want um to set up a $1 million grant for anybody who wants to study the intersection of computer science and economy um and we're going to be hands off about it you guys decide who gets this funding you decide which which PhD students want to study this um and I think that that's possible and I think that if you look back at like neb or uh dubious research

that's been done on like a glass of wine a day is good for you um that you'll probably see that the there there weren't very good there weren't very good practices put in place and I I have I don't know I don't have anything specific about that but I I'm betting that that was not um those were not um very well respected methods um with those with those studies I I love that you brought that one up because that belief still persists once you once you put the money and effort into promoting kind of belief um even after it's debunked it still has uh it still pervades culture many people yeah it's like I want to believe that too glass of red wine per day Dr

it's like yeah yeah I'm just being healthy yeah like absolutely how much do you think um this is a war that kind of has to be one on one on um culture I mean so kind of should we kind of just establish kind of this is kind of what we believe in as stakers you shouldn't delegate to like large staking pools so if you delegate kind of delegate to your friend don't delegate to like um the protocol that already holds 30% um or do you think this is something that kind of has to be put into rules into like extra hardcoded rules it's never going to work to to um make it like a social consensus because the reality is 95% of people maybe even

higher maybe 99% of people who come into crypto they're just throwing their dart at the wall they're just hoping for um the they're just hoping to invest in the in the Google of um 2000 and trying to make it big and like if you think about it that's what crypto has done it's it's had big big talk about like becoming a global banking a Global Financial system that's accessible to everybody but like if you put people who make uh a dollar a day in the same room as the people who make like $10,000 a day there's going to be um this hustle culture that comes from one side and you can't blame them you can't stop that you can't be like you should be more ideological because

it's like they're trying to survive um and gambling will always happen so I do think that um crypto in general has been this idea of how do we take greed and um how do we take normal human normal human vices and uh use them guide them and make it so that those things are incorporated into a protocol rather than having to fight against it and having to tell people to like uh be the on the the losing end of a a prisoner's dilemma like I think that we should we should try to account for human behavior rather than fight human behavior I love that I think those are actually really nice parting words so if

people kind of want to get um involved in the east St the community or kind of want advice on how to set up and so on how do they find you guys uh our website is eaker docc um the Discord is really um active and the subreddit is really active if you're more into Reddit than Discord um people love people who come in and if you come in and say hey I'm interested in staking how do I start this people love to help fantastic then uh let's let's see whether uh we get any new sers interested um it's definitely a super interesting um Community it's kind of to

me it's always um reminiscent of kind of you you know kind of the maker communities I mean not not like crypto maker but kind of like the people who like Tinker with stuff it's that kind of people who kind of end up in those and and they're they're they're fun people they're good people there's a big overlap too good and it's actually it's really interesting because uh to be in the community you kind of have to have some skin in the game you don't have to we have people who don't sake at all but you know many people have 32 ether many people have one ether um and you also have to have some interest in the long-term success of ethereum and so putting those two things together and I'm not saying it's everyone but a vast

majority of the people have something at stake and they have an interest in ethereum it makes for a really interesting um group of people who are are really fun to engage with and there's also some pride that kind of goes along with it I mean basically if you go to conferences and you talk about staking people who stake they talk about this with pride like it's it's like a part of their identity and kind of like self-description how they see themselves right how do you know if someone's a solo Staker they'll tell you you fantastic it's been a pleasure having both of you on and uh yeah keep keep us on our toes uh you're keeping us honest here as the

ecosystem thank you so much for having us thank you so much fedi