The State of Staking in March 2022
The network continues to be stable and spectacularly boring regardless of the fluctuations of markets or global events. This seeming insensitivity is a great thing! However, any such discussion does lead towards the constant refrain from the Ethereum community, especially amongst client development teams, for the need for diversity in beacon chain clients.
Codefi Staking itself has now deployed the Lighthouse client into its infrastructure alongside the Tekus we were already operating.
The new long-living merge network (Kiln) is due for launch any day now. After this one, the intention is for the existing testnets on Ethereum to go through the same process. Codefi Staking will be ramping up its own decision making regarding the merge this month and will begin engaging directly with the testnets afterwards.
One of the things we will likely do is offer our current customers the opportunity to participate in testing to see how the allocation of priority fees is going to work. The client teams have been great at implementing our requests for fee-recipient address mapping at the validator account level which allow us to retain our non-custodial status.
Discussions and proposals continue regarding withdrawals. No timeline has been agreed although the hope is that it will be part of the first post-Merge update.
Look at the below graph:
This shows that this period of ‘locked-in’ is having a negative impact on the efficiency or “effectiveness” of the Eth held in validators.
One interesting evolving idea to address this is being able to identify a group of validators and sweep all their excess Eth into a new validator in a single go. The advantages for stakers are obvious, especially those with sufficient Eth to have enough excess to start new validators. For pools this would also be hugely valuable. At Codefi Staking, we were thinking we’d have to come up with an out-of-protocol process to mimic this for our institutional customers but having it inside the protocol makes much more sense.
The idea would also help the protocol in terms of reducing the number of exits or ‘taking the cream’ transactions. Most importantly, it would make staked Eth more efficient and therefore moderate rewards and staking activity accordingly. You can find the details of this here.
Whether because of the rumours around a withdrawal timeline or just a general nervousness around staking assets with no exit mechanism, liquidity is once again becoming a priority topic. Codefi Staking is working on an open standard mechanism that all staking providers would be able to leverage to enable liquidity across the network. As we dig further into the detail, we will publish it here or on a newsletter of its own.
Security and Operational Control
We are currently undergoing a SOC 2 Type 1 audit. This report followed by a Type 2 assessment later in the year will give our institutional customers the confidence that we are not taking short-cuts and have a robust operating and security environment to run validators on their behalf.
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’s fortnightly update. Anthony Sassano’s Daily Gwei is also a fun daily update on all things Ethereum: https://thedailygwei.substack.com/