The State of Staking in December 2021
At the time of publication, almost 9mm Eth has been staked on Ethereum’s Proof of Stake. Don’t forget that this Eth is locked until withdrawals are enabled (more on that later) and this ~8% of all Eth staked represents huge confidence in the future of the network.
Other good news is that Rocketpool went live in November and their much anticipated launch was smooth and unencumbered by issues. Rocketpool is distinguished from Lido since anyone can join Rocketpool as a node operator so long as they are willing and able to provide half of the required stake for activation.
Codefi Staking was also very happy to join the Rocketpool Oracle DAO (oDAO) and support an important staking decentralization protocol that we suspect will become, along with other such models, very important to the ecosystem.
One important piece of information post-Altair that we wanted to remind you of is that rewards are now going to be more irregular. Total rewards stayed the same but the distribution for proposals versus attestations was changed in favour of greater weight for the former.
For a more thorough update, check out our latest article that documents Institutional Staking, one year after the launch of the Beacon Chain.
As ever, we keep a close eye on client and operator performance. As noted above, since the Altair upgrade, there is now more variability in rewards, due to the block reward having been increased by a factor of four, and additional, occasional sync committee rewards being added. Overall rewards remain the same as pre-Altair on a long term average.
In order to make fair comparisons, we filter out the random block rewards and sync committee rewards from our analysis, and look at attestation rewards only. These account for over 84% of total rewards and give the most accurate assessment of the reliability and performance of a validator.
A great metric to look at is which client wins most often. That is, on any given day, the validators belonging to which client team generated the most rewards from attesting. If all clients were equal, this should be split 25% each way. However, we see that, in the 50 days since Altair, once again only Teku and Nimbus are in contention. As in Q3, the other two clients did not win on any single day.
In terms of absolute rewards earned from attesting since Altair, we see that the four clients are much closer. Once again, Teku leads, with Prysm, by far the most widely deployed validator client, continuing to lag.
Unsurprisingly, this translates into real world gains, with the staking services that use Teku exclusively, such as ConsenSys Codefi and Allnodes, outperforming once again.
Good progress continues to be made by all the client teams with weekly devnets being created and destroyed on a weekly basis as the finer details are nailed down. The Kintsugi testnet was deployed in the middle of December and will run through the New Year. All are invited to participate and send transactions!
With the merge comes the inevitable discussion around MEV. So, just for clarity in this audience, a reminder that post-merge, validators will be told they will be proposing a block. The original intention was that they would then reach out to an execution layer client and ask for a block (with the standing mechanisms for the mempool remaining in place as per today). On receiving a block, they would then propose the block they’d been given, it would be attested by others and so the chain moves forward.
There is concern that this would leave MEV solely in the hands of large staking providers and disincentivize individuals from running their own validators. Some of the proposed solutions are contentious and are being discussed within the community (they get pretty techy very quickly!) and hopefully an equitable solution can be found. ConsenSys is participating in Flashbots’ working group around the future of MEV.
The withdrawal release specification is also developing. It is scheduled for the release after the Merge and currently is made of three key elements:
- Making the Eth staked in validators withdrawable
- Enabling withdrawal credential change from 0x00 to 0x01
- Enabling partial withdrawal on amounts greater than 32 Eth
The first of these is the expected base change for enabling withdrawals once the voluntary exit message has been submitted. The next two, however, do make things more interesting: Changing withdrawal credentials from the 00 prefix to 01 allows all of those early stakers to remove their reliance on the new, somewhat difficult to store and use BLS keys and replace it with a tried and tested execution layer address. What’s more interesting is that this new address might be a smart contract which will allow those early stakers to access the new functionality and features that are arriving around staked Eth. The final ‘take the cream’ feature will make staking much more efficient. For large stakers or large pools, it offers the opportunity to essentially synthesize compounding on rewards by skimming off excess and triggering new validators. Watch this space for further innovation around this feature as it moves closer to release.
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. Anthony Sassano’s Daily Gwei is also a fun daily update on all things Ethereum: https://thedailygwei.substack.com
Institutional Staking Services
In 2021, the Decentralized Finance—or DeFi—ecosystem grew by over 20x. It has attracted millions of users and many of the world’s leading financial institutions with yields that far outweigh those in traditional finance.
Staking Ethereum rewards institutions 5.4% APY for securing the network and participating in its migration toward cleaner and greener Proof-of-Stake. By earning rewards at the protocol level, stakers can diversify risk and investment strategy by collecting stable passive returns while also participating in more active, high-yield activities.
Codefi Staking enables institutions to achieve optimized ETH staking rewards, and leverages ConsenSys’ leading industry position to do it better than anyone else.