SOTS #21: Decentralized Staking Pools and Exchange-Based Staking

Transcript

hey it's super fizz friday december 4th 2020. i got the date right today um state of the state is my kind of daily maybe daily so far daily uh stream about what's going on with ethereum staking so i have two things i want to talk about today the first thing is the ethereum quiz show i like to call it trivia trivia is not a world recognite recognized word so we call it the quiz show that is uh happening tomorrow december 5th at um 1800 utc or 12 p.m that's noon central time um in the united states so we

i think we have our participants down um there's probably always room for one more if you want to ping me um and we're always welcoming sponsors now i'm not organizing all of it this time but i'm under the impression and i know we did it last time that all of the sponsorship funds that we raised will be distributed to the winners and participants so everyone who participates will walk away with some ether i think so you'll want to read the official instruct or the official guide on reddit at any rate uh it will be streaming on youtube if you just want to watch and it should be a lot of fun you should learn a lot about how ethereum works just by following those those quiz questions

and you'll get to know more about the people in the ethereum uh the eth2 the east staking ecosystem so it should be a lot of fun and i hope you can make it that is december 5th at 1800 utc the other thing that i want to talk about today is about um centralization of staking so today is a big hurdle we passed a hundred that's not right we passed a million ether in the deposit contract that is nearly twice the minimum required for genesis and really what that means is that many people who were on the sidelines prior to genesis and wanted to take a

wait and see approach have felt like now is the time the network is stable they want to get in and make some of those rewards and as an organizer or i like to call myself the beacon chain health consultant the biggest threat to the beacon chain right now is centralization of nodes and that is a big problem with any with many proof of work systems like you see that um the proof of work mining for ethereum one is centralized into four or five staking pool i'm sorry four or five mining pools that really control a lot of the hashing power now it's balanced so none of them really has the

opportunity for a 51 attack but my belief and my goal is that we can do better with staking with proof of worst work staking and the reason that we can do better is the hardware requirements are much lower for proof of work i'm sorry for proof of stake than for proof of work and that means many more people have the opportunity to participate without buying expensive hardware that has to be replaced frequently now there is a barrier to entry but if you look at clients like nimbus if if you are on a very tight budget you could connect to one of the ethereum one feed providers that are

available on ethereumnodes.com and you could use the nimbus staking client and as long as you have bandwidth available you can stake on very low end hardware i don't necessarily suggest using low-end hardware but what i am saying that is that by that participation you can be a part of decentralization decentralizing the network and you can also earn a pretty handsome reward for doing that now what really concerns me is we're definitely we're already seeing exchanges get involved in providing staking as a service and what's going to happen with those exchanges is that

you'll deposit with them and they will give you a coin in return um my favorite name for it is beth or beacon chain east but they'll be different for every pool um i don't think there's going to be one common standard for a while so you'll take your beth and that exchange will stake your ether on your behalf or actually on their behalf because they've given you something and you can then take that beth and trade it um sometimes at a premium so like ideally the longer you hold it the more it would appreciate because it would be connected to the staking rewards that you would get um and so i see in the future

that most trading of ether will be done in these secondary tokens rather than actual ether because most ether will be locked and staking and gaining rewards and so people who trade on a daily basis will be trading those derivatives and they'll also be exchanging them between exchanges that's all fine and good i have no problem with that i very much expect it but my interest is not in trading my interest is in the health of the core protocol and as a protocol enthusiast as a beacon chain health consultant i know that it's best if the most people stake individually at home

whether you have one validator client or 50. you're definitely being a better network custodian if you are staking at home even if you have um low poor hardware and difficulty with bandwidth kind of what you're doing is um securing the network from a lot of different locations um from a lot of different configurations so let's say that i participate with an exchange and i give them my exchange my ether and they begin staking it in many ways they're going to be a centralized provider they we're in we're concentrating the points of failure for a lot of

validators into one place now i trust that they're going to be very careful with their funds they don't want to lose them but that doesn't preclude the likelihood of some kind of error or collusion that could cause more significant problems for the and the way we avoid that the way that we promote the long-term health of the beacon chain and the ethereum platform is by taking responsibility for our own coins by staking solo at home and when the opportunity presents to do decentralized trustless staking that we participate in those solutions rather than giving

our funds to an exchange i'm very interested in decentralized trustless pooled solutions uh basically what this means uh in the model that i'm aware of is a node operator like i could as a node operator i could deposit 16 ether and then i could accept deposits from other users who would combine my ether and theirs and i would stake as a trustless node operator and those people would receive a reward that that model is while it's not as good as solo staking it is better than using a staking service and it's better than

using an exchange-based stake and so if you have less than 32 ether that is the best solution and while i do not like to promote brands i also know that people are trying to figure out what that means let me say simply that i'm interested in speaking with um with the organizers of one of the pools who are promoting this kind of solution and hopefully i'll have more to share with you about that tomorrow really what this boils down to is if you are able to solo steak from home i strongly suggest that you do that for the health of the network

and for um the the long-term benefit of ether if you are someone who has less than 32 i strongly suggest that you just hold it a while and wait until these decentralized trustless pooling solutions become available and at that point you'll be able to protect the network almost as someone who is solo staking so i appreciate your time i'm glad to have you with easttaker nolan said i had to say smash and i forgot what i'm supposed to say um anyway i hope you'll follow my channel i don't know the fancy words but i'm glad to have you on this journey

and congratulations to um everyone who participated in the deposit contract that we have a million ether in deposit so take care thanks