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The State of Staking in October 2022

Validator participation on the Ethereum mainnet, anticipation of staking withdrawals, and a performance update on Codefi Staking.
by Kuhan TharmanantharNovember 16, 2022
The State of Staking in October 2022

Allora. We are now almost six weeks since the time of the Panda Fusion aka the Merge. Almost 450K validators were active on the Ethereum mainnet as of October 27, according to data from beaconcha.in. After a very quiet staking summer, 10% more stakers have activated since the beginning of September.

Source: beaconcha.in 

The average participation rate of validators is lower after the Merge, when compared with pre-merge levels. This was inevitable since validators are simultaneously working on two layers– the consensus layer and the execution layer– versus prior to the Merge. The first part of this excellent article from our friends at Attestant is a good explanation as to why validator participation has reduced after the Merge.

Source: beaconcha.in

As expected, the clients on both layers have continued to release performance optimization updates and I expect that will carry on into 2023 as more major changes arrive.

Withdrawals Draw Near

I heard a vicious rumour yesterday that withdrawals might arrive in February 2023. Say what?! I daresay for stakers, that is wonderful news, and they’ll be more than happy to start extracting the rewards they’ve been accumulating over the last two years. For staking providers, however, this relatively short timeline is a challenge given the complexity of the process. Having just listened to the AllCoreDevs call, I very much doubt that withdrawals will be enabled so soon. They will only finalize the scope of Shanghai (the fork that will include withdrawals) at the end of next month.

So, these are the current principles. They are still a draft version, yes but the timeline will force us to rely on this to start thinking of how to implement it from a provider’s perspective:

  1. To withdraw ETH from validators, whether partially or fully, the withdrawal credentials must be of the 0x01 type (ie – an address from the execution layer rather than the early BLS 0x00 credentials).
  2. Partial withdrawals of balances greater than the maximum effective balance (32ETH) will occur automatically on a frequency yet to be determined. Validators experiencing a partial withdrawal will not need to be removed from the active validator pool.
  3. Full withdrawals can only take place on validators that are no longer in the active pool – ie, they have voluntarily exited using a signed message or have been slashed or have been inactive for long enough to breach the lower 16ETH threshold.

There are still plenty of details to uncover, especially around step 1. Some of that work will be required by third parties (such as Ledger) with whom customers entrusted the original BLS withdrawal keys. As we clarify these, then we will communicate with our customers and implement features to support those workflows.

Codefi Staking

For almost the last two months, we have fallen far below our usual high standards in terms of performance. 

There are two main causes for this drop:

  • A critical piece of software became unstable in its current configuration. It has taken some time to resolve and we now have the fix in our staging environment for final testing review before we release to production.
  • One of our execution clients suffered from producing many empty blocks. This meant that those validators selected missed out on the post-Merge priority fees available. This was fixed in early October.

With resolving the above two issues, along with the ongoing related improvements from client teams, we expect to trend back towards our excellent performance levels sooner rather than later.

Right now, the team is about to deploy MEV into our infrastructure, making the extra rewards available to our customers. In addition, we are improving our reporting performance since the API was struggling with the amount of data now being gathered at the validator level.