The State of Staking in October 2021
COP 26 & Ethereum Staking
It feels appropriate to mention COP 26 and the challenge we’re faced with catastrophic biodiversity loss and global warming. Ethereum’s move from Proof of Work to Proof of Stake will reduce the carbon footprint of block production by 99.9%. The community’s willingness to rebuild the (electric) plane whilst it’s in-flight and worth billions of dollars is both astonishing and admirable.
Staking remains the one solely Web3.0 activity available to the crypto community. It has no parallel in the traditional finance or technology worlds. Participating in this transition, securing the network in this way, can be just one of our contributions to a revolutionary and sustainable future.
Codefi Staking Product Update
Codefi Staking continues to improve and diversify its institutional staking platform. Important elements of the staking service include:
- Customers retain complete control over their ETH
- Customer ETH remains segregated
- Customers earn protocol-level rewards
- Globally distributed infrastructure
- Both Ethereum Mainnet Address and BLS12-381 withdrawal credentials supported
We are currently focused on obtaining a SOC 2 Type 1 audit and beginning preparations for the upcoming Merge of the consensus and execution layers of Ethereum. After the Merge, we expect validators nominated for block proposals to be awarded the priority fees from the selected transactions in the block, pushing rewards above the current 5.4% APY.
The State of Staking
More than 8.5mm ETH has now been staked on the Beacon Chain. Big news is that on October 27th, 2021, the Beacon Chain underwent its first hard fork, the Altair upgrade.
The upgrade went very well, if not quite flawlessly. All of the production clients, including of course Teku, navigated the fork itself wonderfully. Unfortunately, some issues arose due to stakers not having upgraded their clients or other parts of their infrastructure in time. The participation rate on the network (the proportion of validators that are voting correctly) dropped from 99.8% to 95% over the fork, but gradually climbed over the next few hours back to the 99%+ that we are used to seeing.
More concerning, around 20-25% of blocks failed to be produced during the hours after the upgrade. This turned out to be due to a very large exchange staking service that had not correctly upgraded part of its infrastructure. Since fixing this, the beacon chain has resumed its customary near perfect performance. Codefi Staking itself breezed through the upgrade without issues.
From a customer perspective, the key element of this is that the penalties for inactivity and for slashing have now been increased from their original levels: the training wheels are coming off. This means the selection of your staking provider, or client if you are running your own node, is even more critical than it used to be.
The much anticipated Rocketpool launch was set for October 6 but unfortunately, at the last minute, someone reported an un-addressed attack vector. This was essentially created because anybody running validators can ‘front-run’ deposits into a validator and pre-claim the withdrawal credential with just 1 ETH. This meant that any subsequent deposits, regardless of the withdrawal key associated with those deposits, would ignore that key and the validator would be associated with the pre-claim withdrawal credential.
The Merge Workshop
Both our Besu (Ethereum 1 client) and Teku (Ethereum 2 client) teams, alongside ConsenSys R&D, were delighted to participate in the face-to-face Merge Workshop that took place in Greece in early October. Developers and researchers from most of the Ethereum protocol teams gathered to work on a joint testnet showcasing Ethereum running under Proof of Stake.
The event was a huge success, and by the end of the week had succeeded in achieving its stretch goals. See our post-workshop write-up for more details and background. This all bodes very well for the move to Proof of Stake (The Merge) taking place next year.
Note that withdrawals are not, and never were, part of the Merge release. That will follow. Everyone, of course, keeps asking about timelines and whilst there are no firm commitments, it’s starting to look like the middle of next year for the merge go-live. Don’t quote us!
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!)
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