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Codefi

The State of Staking in August 2021

Your monthly update on the rapid developments happening on the Beacon Chain and TBFKAE2 (The Blockchain Formerly Known As Eth 2).
by Nicole Adarme, Kuhan Tharmananthar, Ben EdgingtonAugust 27, 2021
State of Staking in Aug2021 Blog

More than 7M ETH has now been staked—ten months after the community was concerned the 500K ETH initialization mark may or may not be reached. The Beacon Chain continues to chug-along with participation in the high 90th percentile.

The next change on the horizon is the Altair Fork due next month. After that, all focus will turn to the Merge. The combination of the execution chain with the consensus creates challenges and opportunities for stakers.

One challenge is access to a live and current execution chain client. Validators will continue to be randomly assigned responsibility for proposing a block, however after the Merge, they will have to connect to an execution client and ask for the next block to be added. An opportunity lies in the fact that priority fees (awarded from proposing a block) will not be credited to a validator account on the consensus chain. Instead, they will be delivered to the account specified when the validator requested the block. This means these fees can be distributed to clients without any interaction with the operation of the validator itself.

Note that at the moment, the Merge is scheduled for Q1 2022 and the roadmap looks like this:

Yes, you’ve seen that somewhere before… 🙂 

Ethereum Staking Performance

Codefi Staking is powered by the Teku Beacon Chain client, also from ConsenSys. In terms of rewards earned, Teku has been the highest performing of the four production clients since the start of the Beacon Chain, and continues to outperform in Q3.

This first chart shows the number of days that each client earned the most rewards from making attestations (which comprise 97% of total rewards available) in Q3 so far. If each client were equally performant, we would expect them each to win about 25% of the time. However, we see Teku winning on 85% of days (47 of 55), and two clients that did not win on a single day.

aug staking nl 1

This translates to an overall out-performance for Teku in total rewards earned so far in Q3.

aug staking nl 2

We see that the worst performing client is earning almost 2% less in rewards than Teku, equivalent to missing out on $120 a year per validator at current ETH prices: serious missed revenue for a large staking operation!

Speaking of large staking operations, Codefi Staking continues to be among the best performers in Eth2. Three of the four best performing staking services are exclusively or significantly powered by Teku.

aug staking nl 3

Based on these performance assessments, institutions seeking to earn rewards by staking on Ethereum should engage staking providers that have proven track records of running optimal operations and generating maximum rewards—such as Codefi Staking.  

Codefi Staking Product Update

Codefi Staking has released support for Eth1 addresses to be used as the withdrawal credentials for staking. This means that new stakers can use the accounts, storage, and security measures they are familiar with as the input to the deposit process for Eth staking.

Up next, the team will focus on the following: 

  • Smart Stake, which will enable stakers to transfer withdrawal control from one address to another
  • Upgrading and simplifying our API endpoints to make the connectivity process as smooth as possible

We are also exploring the idea of issuing NFTs with every validator staked:

Codefi Staking proposes the issuance of an NFT to represent each validator staked. The value of your NFT(s) would reflect the intrinsic value of your ETH balance, instantly reflecting the rewards earned by your stake (e.g. in 1 year, your NFT, originally worth 32ETH, would be worth 34.112ETH based on the current 6.6% APY). The owner of each NFT will have sole control over its withdrawal and management.

To understand how useful this NFT would be to existing validators, we have 2 questions for you. This will take 30 seconds, we promise!

Staking Made Simple

Staking Ethereum with Codefi Staking is more straightforward than ever, and is available via an API or platform interface. Here is the step-by-step guide:

  1. Sign terms and conditions
  2. Onboard onto the platform (1-2 days)
  3. Login and click ‘stake’
  4. Specify a group for your stake, the withdrawal credential, and the desired ETH value 
  5. We craft the payload(s) and trigger the transactions in your wallet
  6. Sign the transaction

And you’re all set! Your validator is up and running, securing the Ethereum network and earning 5.8% APY.

Decentralized Pools

Lido’s “decentralized” pool approach has been hugely successful. Rocketpool, an even more ambitious, decentralized Ethereum staking service is aiming for launch in the next quarter. Whilst Lido’s validator operators are selected by the founders and then presumably by the DAO, with Rocketpool, anyone can become a validator.

Rocketpool has its own token equivalent to stETH and it’ll be interesting to see how the market values both tokens.

Other References

There are so many great places to get detailed information on what’s happening with the Ethereum roadmap. A good place to start is Ben Edgington’s fortnightly update (despite his stubborn refusal to dispose of the Eth2 nomenclature!).