We were hesitant to acknowledge the as it as it grew.
We wanted to promote home staking as the best solution.
Liquid staking a whole lot more competitive than running a
validator where you don't get any capital back.
You can't reuse that capital and and like add add risk to it to
get extra reward. One of the things that we don't
want in staking is colluding operators.
We don't want Coinbase and Kraken to work together, we want
them to be adversarial. 30% of the steak eat is in Lido.
That means that they are a sort of a systemic risk in Ethereum.
Can we slow down the amount of steak coming in knowing that the
majority of this is not the most valuable form of staking?
There are changes being proposed to sort of favor home stakers
and favor more decentralized forms of staking.
Welcome to Epicentre, the show which talks about the
technologies, projects and people driving decentralization
and the blockchain revolution. I'm Frederica ANZ and today I'm
speaking with Supervis and Nick so who are the Co founder and
executive director respectively of the Reddit community, East
Staker. So before we talk about Reddit
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So in superfiz, it's a an it's an absolute pleasure to have
both of you on. It's kind of we've haven't, we
haven't had a staking episode in a while.
So tell me about yourselves. Hey, so I'm superfiz.
I have been an Ethereum since the Olympic test net, actually
since before that since I read Vitalik's paper introduced smart
contracts to me. Totally didn't understand it,
but I had this kind of gut feeling and I've just been
curious about Ethereum since then.
Around 2018 I got interested in proof of stake.
That was about the time that the first model got discarded where
it was stake 1500 ETH and it was, it was totally reworked and
I quit my job and I was like, I'm going to promote staking.
Like it's the thing that I want to do.
I, I felt passionate about it. And so probably since 2018, I
have been just obsessed with promoting proof of stake on
Ethereum. So that's me.
What was your job before you quit it?
So I was a school psychologist and a school counselor.
I worked with kids and I loved it.
But. That's actually, that's actually
weirdly in tune with kind of what you do for the Ethereum
ecosystem too. It's kind of like.
I didn't think so at first. Yeah, at first I, I was like,
I'm not, I'm not, you know, I got AC in intuitive computer
science. I, I, I've been a nerd my entire
life and I've always been into technology at computers.
But yeah, I, I took psychology classes because they were easy
and easy for me. They're not, you know, easy for
everyone. But they were it, it was in tune
with what I know. And so I did this career working
with kids and I, I was a guidance counselor.
And I do, I see a lot of parallels now between guiding
community, working with people, encouraging people, being
supportive and sort of seeing the path forward.
So yeah, there there are a lot of a lot of beneficial
parallels. Everyone can't be a developer.
Yeah, think of the others. What would happen if everyone
were to use gas? It's like it's like it's very
parallel to kind of like absolutely, yeah, no.
And I think kind of the the ecosystem absolutely needs many,
many non defs. May need non defs actually.
But yeah, what about Unix O? So I was like very, very loosely
into crypto before I ever heard of staking, before staking ever
launched. But at some point I was just
buying Ethereum and I kept seeing this #32 throwing around
and I was like, what is this number?
I'm very curious about this number.
And mostly I saw it from from supervise because we were both
part of the E finance community, which is another Ethereum
community on, on Reddit. And so I got, I learned how to
stake myself. And at some point I started
answering a lot of questions in the East Acre subreddit And
super Fizz reached out to me and was like, you're very helpful.
Can you can, can we, can we get you to help more?
Can we get you more involved? And so I got involved through E
acre and I used to be an an an oceanographer and I actually
left my job in oceanography because I was getting really
into staking and really into this ecosystem and I wanted to
throw myself in completely. If I could follow up on that,
the I, I have always and to this day, and even in this this talk,
Nixo answers things the way that I wish that I could.
And so she even in Reddit, Twitter, wherever, you know, I
answer and I'm satisfied with my answer.
And then I read Nixo's answer. I'm like, damn, I wish I had
said it that way. So I, the reason I'm so excited
to promote and encourage her is because we're on the, on the
same wavelength in so many ways, but she has an ability to say
things better than I might have said them.
So that's that's my excitement. That is such a wonderful
compliment. I I really like that.
So super first. So when, when you kind of quit
your job as the school guidance counselor, how did you finance
yourself? I mean, were you already very
long either or kind of how, how, how did this kind of, I mean,
obviously most people kind of have to make a living.
So kind of promoting staking on Ethereum's probably not one of
the jobs in the school guidance counselor's list of jobs that
you recommend to students. So how, how, how did that play
out? Yeah, that's interesting.
And I don't think I've ever actually answered this before it
it was crypto. I, I also held Bitcoin and ether
and I had several dash master nodes or they were dark coin and
Dash. And I, I really that year
reached a point with my crypto investments and this is around
2018, that I felt like my daily volatility was higher than my
annual income. And that, that was just weird to
me. I'm like, why am I doing, you
know what? This, which I loved it.
I did it for 15 years. It was very rewarding, but it
wasn't financially rewarding. And I felt like I could, I could
make a bigger impact in a better, you know, a bigger
impact in the world through promoting staking, then
continuing to do this, you know, really non financially rewarding
thing. And since that time I've, I've,
and I haven't had any, any jobs, but I've, I've had, you know,
arrangements that, that have that have supported me.
It has worked out really well. Like I mean air drops or even
just staking like staking still doesn't.
I don't I don't have enough ETH that staking pays all of my
bills, but it is a a very nice foundation.
Yeah, absolutely. So kind of when you came into
this topic of staking, this was before the transition to proof
of stake, right? So how has how has the Staker
enthusiast community or the Staker community actually
changed since? It, it has been AI would call it
a dramatic transition. And in the beginning, 32 ether
was not that expensive. And I, I can't really quote a
price, but it was a couple $1000.
And so really anyone who or most people who were deeply committed
could buy a full validator and a mistaker with the changes in
price and really onboarding more people who are speculative in
nature rather than technical in nature, there has been a shift
toward focusing on returns rather than focusing on securing
the network. So this long shift has been away
from individual takers and toward, you know, LS, DS, simple
deposits, restaking whatever pays the the highest APY.
And I don't think it was unpredictable, but I I guess I
sort of hoped it would take longer than it has.
What? What sort of topics are
currently the mainstay of East Sticker?
Nicks, I'll let you. I'm, I'm a little, I'm a little.
I have turned more toward mainstream Ethereum the past few
months and Nicks is still very deep in staking, so I I think
you'd be better for. So, yeah, I'm full, I'm full
time. I'm the only person who's full
time at East Acre right now. So I would say that the main,
the main things on East Acre are, are in staking in general
is just making sure that staking is accessible for people.
And so I actually, I, I just put out a survey of, of stakers
because we were curious to see like what their pain points were
and sort of what, what stumbling blocks.
And I, I do have some we were talking about like this, the
makeup of stakers earlier we were talking about like the
technical backgrounds or the technical capabilities.
And I actually do have some statistics from the survey.
And it is, it is quite large. Like 9090% of people consider
themselves having a technical background in staking or a
technical background. 90% of people in staking consider
themselves to have a technical background.
So while it does like it involve some technical capability that
people still need a lot of help troubleshooting and people do
wish there was some sort of plug and play option that you could
just plug in and like earn money with.
But the fact the fact sort of is like you are at this point
throwing down $100,000 into a validator.
And so I, I think now the biggest, the biggest hurdle that
we sort of need to overcome is the fact that, and this is a
really big topic that we're probably going to get into is
that the economies of scale are really hard to overcome.
And we're seeing staking pools, liquid staking tokens and big
professional operators benefit more from staking than home
stakers are. And it's, it's making home
stakers feel sort of like sidelined, feel sort of like
staking isn't meant for them. And like they might be pushed
out eventually because the as the APR continues to go down,
they're just less competitive than these big staking
operations that can put up with lower APR for some period of
time because they're not necessarily relying on what the
APR is. They're relying on the fees that
they're taking from the people who are delegating their stake
to them. OK, maybe that's that's kind of
there. There's a lot to unpack here.
So maybe kind of let's look into the different ways that staking
happens, right? Say, say I have 32 ES.
So in principle, I could run my own validator.
If I don't want to do that, what are my alternatives?
So if you don't want to run your own validator, you can
definitely use a staking pool. And that is the option that most
people are taking because that means you don't have to be
engaged in the ecosystem at all. You can take your your capital,
you throw it into a staking pool, they give you a liquid
staking token back and then you can take that liquid staking
token and walk it over to D5 for some extra yield, which makes
liquid staking a whole lot more competitive than running a
validator where you don't get any capital back.
You can't reuse that capital and and like add add risk to it to
get extra reward. But there are also other options
like so 32 ETH is the minimum amount for a validator, but
there are other protocols coming online that lower that financial
barrier. And these, these have been a
long time in the making. The, the one that's live right
now is Rocket Pool and that lowers the barrier to 8 ETH plus
2.4 ETH of 2.4 worth of their, their token in ETH.
And so that sort, that sort of lowers the financial barrier,
but it doesn't really lower the technical barrier.
They have their own software that lowers the technical
barrier a little bit, but you still need to be be using
command line. But our big thing is we do want
people running from home. Like we don't necessarily want
people throwing things in delegating capital because
there's enough of that going on. And that's actually become
really problematic. So I will, I will just say,
like, if people want to run from home, the technical barrier is a
lot lower than people on Twitter seem to think it is.
I think that people see command line and it scares them.
And I am not, I'm not a super technical person.
I came from science, not coding. And I don't know how to code.
And I I managed to do it. One of the really interesting
things I heard you acknowledge is that you can get more right
now from delegating your ETH to someone else and you know, going
through resaking or or depositing every yield.
That is something that we we need us.
We were hesitant to acknowledge as it, as it grew, we wanted to
promote home staking as the best solution, as the most valuable
solution, most rewarding solution.
And only by acknowledging that the playing field is, is
disparate, that you can make more through an LSD.
That's the only way that we can tackle the situation and, and
begin to improve it. And that's I'm I'm.
It's a difficult acknowledgement, but it also
brings the ability to change it. It also like I have trouble with
that because so many people come into crypto as as is normal,
just wanting to sort of gamble, wanting to make some money.
And I would say 95% of this ecosystem is throwing darts at a
board hoping to make it rich. But I, I believe in Ethereum as
something that can level the playing field, something that
can possibly like mitigate the wealth gap by by reducing the
amount that economies of scale are able to bring you to.
And I, I think that it's very, very important that we pay
attention to how staking grows up and how the consensus layer
and the base, the base protocol of Ethereum grows up in order to
preserve that. Because I think that blockchain
can actually like actually has the potential to be really
dystopian if we have this insanely efficient surveillance
system, but we don't have a way to protect against it being
captured by just a few entities. And so I think that staking is
the fundamental way to protect. Making sure that staking is
decentralized is the fundamental way to protect that right now.
And so the fact that you can make more on an LST right now
is, is a little devastating because it means that we're
losing this fight against, against making Ethereum anti
monopolistic. There are changes in the, there
are changes being proposed to sort of favor home stakers and
favor more decentralized forms of staking that I am, I am very
much in support of. And I hope that they get a lot
more support, because I do still think that Ethereum can be this
really ideal end game where the financial system is run in a
much more equitable way. Can I high five you in the
screen? Is that sorry?
But see, that's why I listen to her.
Sorry. Let's let's talk about liquid
staking. So kind of like the liquid
staking kind of it means you can kind of delegate less than 32
ETH to kind of say Lido and basically they will generate
yield on that for you. But at the same time, you get a
liquid token back that you can use for instance, as collateral
in say a, a lending pool where you can kind of borrow say ETH
against this again and you can stay ETH.
So basically you can kind of generate yield on this multi
multiple times, which you can't if you're home Staker, right.
So which is why in addition to kind of being technologically
much, much easier because you just have to press it, it's just
pressing a button, right? I mean, basically anyone who's
used Lido, it's very easy to use.
So in addition to being easier, it's also more lucrative, which
is why pretty much around 30% of all stake is currently is in
Lido. So kind of kind of can you walk
us through the issues that this kind of presents?
Yeah. So it's, it's definitely more
lucrative, but it's also more risky when you stake all your,
your risk is with the Beacon chain contract and with the
staking contract and that's it. When you are using a liquid
staking token, your risk is with the staking contract, with the
protocol, with the smart contract of the liquid staking
token. And so it introduces a lot more
risk into the protocol. And when we have a situation
right now like like Lido has 30% of the steak teeth is in Lido
and that means that they are a sort of a systemic risk in
Ethereum. And so if there was a bug in the
Lido staking contract, that would not just be an issue for
the people holding liquid staking tokens.
That would be an issue for all of Ethereum, for everybody who's
holding Ethereum for the entire crypto ecosystem, because
Ethereum is such a large part of the crypto ecosystem.
And so it would be one of those situations that you see in the
news where it's like some large collapse that and people who had
open positions get liquidated. And so this is not just an issue
for stakers. This is not just an issue for
ETH holders. This is an issue for the entire
crypto ecosystem. Fisk like can you think of any?
I, I wanted to piggyback on that.
I was trying not to cut you off, but there there's a more long
term and transcendental risk as well that comes from that kind
of centralization. It is that adoption stamates
over the long term. It's that when nation states,
when corporations, when three letter agencies look at
Ethereum, they they're actively evaluating to determine whether
it is a a truly decentralized platform.
Can we operate on this platform or can we manipulate it?
Maybe. And for, for those actors to
have the confidence that Ethereum is a truly
decentralized platform, we need to ensure that there aren't
these large actors who could control the network.
And that feeds into our long term value, into our 20 or 30
year value, because the failure of those large actors to adopt,
because we're centralized will have this long term negative
effect. But it's not obvious right now.
Right now, you know, you're saying, hey, I'm getting, you
know, 10% APY, but that that sacrifices our long term ability
to, to, to dig into the potential user base. 1st, when
you say control the network, what exactly do you mean?
Do you mean kind of like censor people or take away funds from
people or what's what's kind of the threat scenario?
Here at, at 30%, I would say that there is no technical risk,
but in, in, in the long run if, if Lido continues to grow, one
of the things honestly, I try not to talk about them too much.
I, I, I'm not interested in giving them a a lot more
publicity, but they're developing, I think it's called
Lido Alliance and they are organizing other operators as,
as kind of a cohort. And one of the things that we
don't want in taking is colluding operators.
We don't want a large, we don't want, you know, Coinbase and
Kraken to work together. We want them to be adversarial,
maybe friendly, but but adversarial still so that
they're not colluding to make decisions later.
If there's an, a large alliance of stakers, a formal alliance of
stakers, then they have these back channels where they can
say, hey, you know, I don't, I don't like this initiative.
Can we shut this down at the developer level or hey, can you
get your people to vote for this or, or if they even were able to
control 50 or 66% through this kind of collaboration collusion,
it is possible that they could change the future of the
network. And so it, it is not, I can't
call it a a current threat. It is a potential threat that is
continuing to grow. And that's that's why we're
cautious of it. OK.
Yeah. So I see that.
So Nick, so you said earlier that there are ways of kind of
that are being discussed of making solo staking more
attractive. Can you go into those a little
bit? Yeah, absolutely.
So there are lots of different variables that can be messed
with in order to make decentralized forms of staking
more attractive. But there is not a full-fledged
proposal right now. Our best proposal right now is
basically saying all of the new new steak that's coming in, of
all of the new steak that's coming in, 90% of it is coming
from liquid staking protocols from staking pools right now.
And so we are trending upwards. We have not, we have not seen a
dip in, in the demand for staking.
Like I think right now the queue just emptied out the staking
queue, the number of validators coming in every epoch just
emptied out for the first time and maybe more than a year.
So the the staking queue, the amount of staked ETH people
throwing capital in has been up only.
And so there is a potential, there's, there's potentially a
situation where we end up at 99.9% ETH staked.
And in that situation, because we know that the majority of
the, the home stakers, the people who are the most
decentralized forms of staking came early on to the Beacon
chain. And they represent now a small,
a very small amount of the new state coming in.
Can, can we slow down the amount of state coming in knowing that
the majority of this is not the most valuable form of staking?
So this, this change is the, the name of this really contentious
thing is issuance changes. And so it's basically the reason
it's so contentious is it's 'cause it's basically changing
the monetary policy of Ethereum, saying we're going to change
how, how Ethereum issues ETH to the people who are securing the
chain in order to slow down stake.
And what this is, is a mitigation proposal for, for
it's an intermediate proposal for a proposal coming later on.
And the the thing that the things that can be in that
proposal later on are messing with with a number of different
variables to make decentralized forms of staking more
attractive. So right now this is just a
simple issue and the the proposal that exists right now
lowering issuance, it's just a very simple change.
It's just lowering issuance so that staking is less attractive
in the in the like right now so that we can propose something
later on. What can come later on is
something like correlated staking, correlated offline
penalties. And so this is something Vitalic
proposed. And basically right now what we
have is correlated slashing penalties.
So if somebody attacks the network, somebody has 1000
validators that all double sign on something or all tried to
change something on the network, we see that they have 1000
validators and we slash all of them.
The network, the consensus rules slash all of them and apply
this, apply this factor to it saying a lot of validators got
slashed at once. It looks like you guys are
colluding. So we're going to slash more of
your capital than it would if it was if you were just one staker
who like messed up and double signed or or did something
silly. And So what we could do is apply
that correlation factor to people who are staking.
So say I'm a professional operator who runs 10,000
validators and I have a power blip and my state goes offline
for 10 minutes and I missed two out of stations on the network.
Could see that a 10,000 validators missed two out of
stations and apply a correlation penalty to that stake that says
this stake all looks like it's run by the same operator.
So we're going to, we're going to give you a, a harsher
penalty. And that that would
preferentially benefit small stakers because they wouldn't
experience that correlation penalty.
And so that's just that's one of the things that could be applied
to the eventual change that that we are trying to that we would
like to implement some intermediate change that gave us
time to implement that. It's worth saying that even even
among people who are deeply aligned, like even with people
that we share a lot of values with, that we see Ethereum in
the same way. There's a lot of a lot of
consternation about this because it changes the monetary supply
because it, for some people, there was a promise to users
that, you know, this is how things were going to go forward.
But Nixon and I don't necessarily see that there has
been any promise to anyone. We see that this is an emerging
technology and that we ought to continue to develop it and
really kind of shepherded and safeguarded until it is really
hardened and calcified over the long run.
And if you look at these proposals like the the majority
of the criticism that you see, at least the where the criticism
originates, if you look at the people who are most strongly
criticizing the, a lot of them are associated with liquid
staking pools. And so like, that sort of tells
you that you're hitting the right pain points, but then they
bring out these arguments that are like, oh, this will hurt
solo staking or this isn't good for the network and it's a scare
tack. It won't.
You scared the children. Yeah.
So it scares the rest of the Etherians because they're being
told this, this proposal is the end of the world.
And the amount of sort of capital that you see going into
this propping up those concerns is concerning right now because
right now the financial interest in preventing those changes is
the least it will ever be from now on is the is the minimum
that it will be from now on. As as we get further and further
along the stake rate, like right now we're at 30%, we could be at
40% in six months, we could be at 50% in eight months.
That criticism will only go up, and it will be harder and harder
to implement changes that hurt the people who are benefiting
best from the system right now. The people who are benefiting
most from the system right now have the most financial interest
to stop these changes because the incumbents like to keep
things like the status quo because that's who is
benefiting. And it's funny because their
arguments arguments don't sound selfish.
Their arguments are this will harm home stakers.
You must hate home stakers if you want to do this because home
stakers are the most valuable thing and you would harm this by
doing this. And those arguments come from
constituents who do don't actually represent home stakers,
but that is their argument. And they're, they're doing
things like working to get developers on the core
developers call. Like we, we need to do more
research and include our developers in, in the, the core
devs call. Those are the kind of tactics
that they're they're, they're designed in the long term to
derail something that is really better for the network in favor
of their interest. There, there are home stakers
who are against these changes and I don't want to, I don't
want to dismiss their concerns because there are, I know, I
personally know home stakers who are against these changes and
some of them run thousands of validators.
But I I would also argue that somebody who runs thousands of
validators as a home staker is just as valuable as somebody who
runs 11 validator. What we're really looking for is
is millions of validators all around the world.
Yeah. Can you clarify the exact
intermittent proposal again? So basically is it to kind of
cut off new people from staking or lower than staking rewards
for everyone who's currently staking and will be staking in
the future? So basically is it, is it kind
of levelling the playing field or is it just kind of drawing a
line where you say everyone who staked before this point is
still good and everyone after? No, that that would be terrible
that we acknowledge that, that would be terrible.
So basically you have an X axis and AY axis and this is the
amount of stake that or the amount of APR that people are
getting. The less stake that is in the
system, the more APR people get. And so that's just taking this
curve and moving it down. So it's just lowering APR so.
OK, everyone gets less. Yes.
Up to 100%, they eat, there's still an APR, there's a return
and it, it could be lower and lower.
What we're really interested in is changing that curve so that
around 30% of stake, 25% of stake that rewards, this is
complex terminology. Rewards actually become
negative. So the closer you get to 2527%,
whatever that that sweet spot is, your rewards trickle down
to, you know, 1%, .1% zero and then a negative return.
And yes, that will cause some people, some entities to
withdraw from the network. We, we believe, and there are
really 2 interesting angles on this, we believe that that will
lower interest in liquid staking tokens and that many home
validators will still survive that.
So it is a cut, but it is a beneficial to long term cut.
And the other side of that is if if a maximum of 30% of Ether are
staked then Ether holders Ether is still the currency of
Etherium stake or an LST provider that controlled 80% of
stake. ETH does not control the
network. Etherium holders who hold the
other 70% of of Ether, they are still the stewards of the
network, not someone who holds a third party token.
That is, that is, you know, then the that is potentially the
money of ether, if that makes sense.
Yeah, that makes sense. So is is the idea that the
network security doesn't benefit from kind of people from the
31st to the 99th percentile of East stake?
So basically, if every single ETH were to be staked, wouldn't
make the network any more secure than say, if a third of ETH were
staked? That is correct.
We don't have an exact number and that is a criticism.
We don't have an exact number for what is needed to secure the
network. I've heard estimates that are
anywhere from 1% to 12% of all staked of all Ether needs to be
staked in order to secure the network.
We're at 30 something percent. Everything above this is
superfluous, and everything above this serves validators,
and validators aren't meant to be served by the network, they
are in service of the network. OK.
And so basically you just said that kind of the APR depends on
kind of where you are on this act.
So how many, how many people are how many validates are staking
at the same time, right? So basically, but everyone makes
the same APR regardless of when they started.
So basically, if more people come online, then everyone gets
less, right? That's kind of the the basic
mechanism, correct. OK, then let's talk about kind
of solo stakers and what an idea network kind of what it would
look like. So basically having outlined
kind of all of the drawbacks of being a solo staker, you need to
have like some technical background, even if you're not a
dev kind of at least you have to be kind of like happy using
command line and so on. And I mean, there are also
somewhat plug and play systems. So kind of you could buy a DAP
note or Nevado and kind of it's, it's not really like you plug it
in, in the power source and you're good.
But kind of it, it lowers kind of the barrier to kind of entry
for, for people. So the large capital requirement
side. So those are people who kind of
have $100,000 in ETH lying around.
Whose stakes and why do they stake themselves?
So I would say the people who stake are the people who want
low risk returns, low people who have low risk returns and people
who are at least technically confident enough to know that
they can copy and paste from a guide.
We they can use command line if it's copying and pasting from a
guide. Like I said, 90% of stakers
consider themselves technically competent.
It also one of the big barriers is Internet connection is
bandwidth. And so we do see that 95% of
people who report staking who, who report are either from North
America, Europe or Australia. We see very few stakers in Latin
America. We see almost no stakers in
Africa. There are some in Southeast
Asia. Singapore is a hotspot for note
operators. And, and again, that's, that's a
lot about the capital requirement, but a lot of that
is about the network requirement too.
Because I'm in, I'm in South America right now.
Here in South America, it's harder to have a stable Internet
connection outside of very urban regions.
I'm in Buenos Aires and Buenos Aires has great Internet, but
outside of this very small capital, 50% of the country is
in poverty. And they, they're just not
serviced. They don't have the
infrastructure that's needed to. Even if they could procure
$100,000 or whatever the minimum requirement is for a protocol
that lowers the financial barrier, they couldn't
necessarily set up a node that could keep up with the with the
bandwidth requirements. But a home staker in your
definition is someone who actually runs the physical
infrastructure at home. So kind of if I were to have
like an AWS node, I wouldn't be a home staker.
Is that correct? You wouldn't be a home staker,
but you would be a remote staker.
I still, I still consider those valuable players.
They're not as valuable as a home staker because they
somebody could turn off their node.
But if if you're running a stake staking node that is in AWS or
cloud or any Cantabo or any like service that gives you your bare
metal service or cloud service, you're still running the
configuration of your node and I still consider that valuable.
You you wrote a great disambiguation of that.
Where is that? It's on East Acre's paragraph
blog. And has to be a link to that in
the show notes. It is a, she gives a great
distinction. I I don't recall seeing remote
staker on there, but it, it really does break down the
different kinds of stakers and the value that they provide to
the network. I was impressed with that.
OK. So let's look at kind of a
healthy staking ecosystem, right?
So basically what do you want to avoid is that nodes are too
correlated with each other. So kind of there's different
dimensions that we can think of that kind of they could be
correlated in. So kind of there's very physical
ones like location and jurisdiction.
So kind of you could have a natural disaster, say an
earthquake or a volcano. It could have a jurisdictional
Black Swan event where for instance, I don't know, the
government says everyone who stakes ethers provides the
security and if you don't turn it off right now, we will come
after you sort of thing. And then there's using cloud
providers, right? So basically if everyone uses
AWS, then kind of obviously kind of the bottleneck here is AWS.
And I mean, if you look at what cloud providers are out there,
there's basically there's AWS and Google Cloud and Hetzner and
then everything else comes like, you know, very distant third,
fourth, then there's clients, right?
So basically we have beacon and execution chain clients.
So kind of if you have a client bug and kind of say 50% of the
network use a single client, then obviously that part of the
network would come down. So how do you see all of these
dimensions which are critical at the moment?
Which are you paying attention to?
When which are we doing OK on? I would like to let Nick's
answer, but I I also want to include that social coordination
and that is that collusion between multiple operators.
But yeah, and Nick's year, you're probably more attuned to
answer the whole question. I would say let's, let's do
three major categories, software, software diversity,
hardware diversity, geographic diversity.
But software diversity is talking about the consensus
layer clients, the execution layer clients.
And that is, that's a really easy fix for node operators
where you run a campaign that basically says like run a
minority client because there are all these terrible things
that could happen if if everybody is running the same
consensus or execution layer client.
And that's, that's often misunderstood as like an
altruistic endeavor, like, oh, if I wanted to be selfish, I
would run them at super majority client and I would be fine.
But that's not how it works. You put yourself at risk if you
are running a super majority client.
So I think the Ethereum community has actually shown a
great deal of motivation in changing that.
And Fizz sort of led the the initial call for consensus layer
client diversity. And then there's hardware
diversity. And I think we're, I think we're
actually doing great on that in terms of hardware.
You don't want everybody running the same PC, the same the hard
drive, the same RAM. And really, we've done a really
good job of making sure that people are running on different,
different sort of hardware. It's funny you say that because
I would love to see more platforms like, you know, gaming
systems and toasters and refrigerators like porting that
to, you know, different ARM style architectures and risk
style architectures like that would be that for me.
That would be real hardware diversity.
That would be niche nerd stuff. My Casio smartwatch.
Hey, somebody runs one on a vape.
Someone actually runs a validator on a vape.
It's kind of cool. I don't know if if it's maybe
it's just a OK, now that I said it, it sounds egregious, but I
saw it on Twitter, so it's real. Yeah.
Well, it must be true. That's right.
Yeah. And then there's geographic
diversity and that like geographic and hardware
diversity sort of overlap because you don't want everybody
running in the cloud. And I think that ether if I
likes to tout this one, this one statistic that some percentage
of noses run within like the within like 15 miles of the CIA
headquarters. And I think that's because like
that's where the maybe AWS or some cloud services reporting.
That's where the CIA runs their nodes.
Yeah. I think that I think that covers
all of the sort of. For you, what is what is
geographical is geopolitical social To me, like that's all
three of those together because it's geography, it's political
and it's social collusion like these large people colluding
together. It's anything that is not
hardware or software, it is geopolitical social.
OK. Let's talk about kind of the
client diversity because that that's kind of where currently
the, the situation is most dire, right.
So basically you said if I use a super majority client, say I use
guess which is in excess of like 60% or so of the network at the
moment as my execution layer client, how do I put myself at
risk? Can I say first, I don't, I
don't think it's the most dire. I think that social collusion is
currently the most dire, but client diversity has the most
attention right now. And so, yeah.
OK, let's talk about social occlusion.
Next, so the way that you put yourself at risk so say so gap
is actually under probably under 66%.
And I say probably because our data isn't necessarily correct.
We sort of have these, we have these probabilities, we'll just
we'll just leave it like that. Technically it is impossible to
see what the actual makeup of the execution layer clients is.
It's it's possible to see the consensus layer clients.
But so say we're above 66% and you are running the Super
majority client. I'm going to name it as a
different one because I don't want people to think Geth is a
bad client. Like let's say Nethermind is
above 66% and I'm running Nethermind and Nethermind has a
bug where they they actually sign something that's incorrect
and they finalize it because it looks correct.
Because if 66% of the network sign something that looks
correct to them, they're going to continue on.
And it's going to take a while to figure out what's happening
because what it's going to look like is that the minority
clients are going to look like they're missing out of stations,
like they did something wrong. And so the supermajority client
is going to finalize to an incorrect chain.
And once the supermajority client finalizes to an incorrect
chain, you can't come back. You can't you're you, you
essentially are slashed for 100% of your steak.
You can learn lose all 32 ETH because you can't come back from
that. What would what's more likely to
happen is there would be some bug where you just stopped a
testing. And so that's like sort of the
second situation, you stop a testing, it's very clear that
the Super majority client is having an issue because the
whole network stops finalizing and that's finalizing not
progressing. So people are still able to make
transactions, but they're getting reorged after two or
three blocks. And that means that like
reorging is like the the your transactions can be reverted.
And so that would be realistically what would happen
is the the devs would spring into action and there would be a
fix put out within a couple of hours.
But what happens in that situation is that something
kicks in called the inactivity leak.
And that's that is the purpose of that is to drain these
validators so that they represent a smaller portion of
the network and the network can start finalizing as quickly as
possible again. And so if you are in the
supermajority client, in that situation, your validator starts
getting drained at a higher rate because it's trying to get you
off of the network. So either way, in these two
scenarios, there's a third scenario that's even less,
that's even less severe than that.
But in those two scenarios, you were the, you were your capital
is being lost. And in that more severe scenario
where you've lost 32 ETH, all of a sudden this is a whole network
wide issue because the people who lost their stake, who lost
32 ETH, who right now are going to be 30% of the the network
there. Well, 30% of 30 of the portion
that is staked are going to be fighting to say, you know what,
let's fork, let's fork and let's, let's remove this thing
that happened and pretend that I didn't get slashed or let's fix
this in some other way. And then you have the code is
law people versus like the social consensus issue people
and the whole network is thrown into this.
Do you remember when the Dow hack happened and it was like a,
a big issue? So you basically have this
situation again, where I couldn't see being a business
like an accounting business and saying like this is the network
I trust, like the IT would throw things into such contention that
I'm sure businesses would be like, this is this is not a
serious financial system. We can't, we can't run a
business on this because it's it's a mess.
So Supervis, you said that you are most worried not about the
client diversity issue, but you're most worried about kind
of the social political kind of collusion scenario?
This is something I haven't really talked publicly about,
but I feel like client diversity was a very big deal a year or
two ago. Right now, there is tremendous
awareness about it. We have, we're over the hump.
There's enough awareness that if, if we continue at our
current pace, client diversity, I don't want to say it's going
to take care of itself. It's still going to take a lot
of effort, but the inertia is there.
The real, my real concern about the success of the network now
is primarily social. It's not geographical or
political, yet it is social. And that is the idea of power
seeking, which is natural. And I'd have no difficulty with
power seeking I expected in something this large.
But if any of those power seekers are successful,
especially in what I consider this the use of aetherium, then
it could have very, very long term consequences.
And I'm careful not not to name names other, do you know, other
than what I've already said. But it really just takes an
entity or two entities to say, hey, we don't, we don't want
this proposal that Nixa was talking out to go forward.
That would harm our bottom line in the long run.
So let's just have a back channel here where we talk about
how we can shape and influence governance to make sure that
what we want is advanced. And then they, you know, kind of
put some money into it. Maybe they have researchers that
they're funding and the, the conclusions of that research
tends to support their foundations.
Or I, I call them mercenary researchers or they, they are
researchers for hire who will inevitably come to the
conclusion that the payee wants them to find.
And they can be pretty compelling and pretty loud.
And so that kind of social collusion to me is the the, our
biggest current threat. And it's, it's difficult because
it's, it's hidden and you don't always know about it and you may
never know about it. In fact, really effective social
collusion is something you'll never know about.
It looks organic. It looks like something that the
community wanted to happen. And so the way to prevent that
kind of social collusion is to get as many independent
individual operator validators everywhere in the world so that
they're all thinking for themselves.
They're all saying, is this good for Ethereum?
Is this good for my stake? Or is this is this serving some
other entity? But isn't that just protocol
lobbyism? So because we see that kind of
like in in politics outside of, you know, Ethereum and staking
and so on anyway. So how do you think we can
create a staking ecosystem where that isn't a factor if it seems
like it's something that naturally emerges in these in
these situations? Yeah.
To call it simple protocol lobbyism, I think is a
underestimation of of the threat because these entities are, I
don't want to make them nebulous, but they're like
chameleons. They can appear to be anyone
they want. They can come into a forum and
say I'm a home staker and this is how I feel and This is why I
don't want this to happen. I'm, I guess I'm most concerned
because of the nebulous and chameleon nature of the threat
that I feel like it's probably already bigger than we've
acknowledged. And I do think it is far more
significant than just protocol lobbying.
I think it is large entities who are willing to collude to get
what they want. I think that money can be a
powerful motivator to get things done.
And so I do think that like lobbying can sort of be pushed
and it could be guided in a in a beneficial direction.
I think that these these companies with financial
interests can reasonably and valuably contribute to research,
but I think that there needs to be a neutral, a neutral sort of
body who is the layer between that financial interest and the
people who are actually doing the analysis.
Like that's what universities are.
That's what research in general has always been.
There's always been this neutral entity in between the people who
want the research done and the people who the research benefits
versus the people who are doing the analysis and can be swayed
sort of to lean to, to have biases towards some outcomes.
So I think I don't, I don't think it's impossible for
companies with financial interest to valuably contribute
to research. I do think that that's possible.
But if you kind of look at a research that we've seen come
out in the past, so things like smoking is really good for you,
best you can put into your body is like three Big Macs a day or
something. I mean, obviously there have
been researchers who've published these sorts of studies
usually then turns out that they were surprise, surprise,
financed by Big Tobacco or McDonald's, whatever.
So I mean, how do you, and I mean, researchers actually have
to disclose their financial interests, right, if they have
them. So how do you see that kind of
play out here? I think that we should leave
science to the scientists. Like I don't think that that a
company should be bringing in house like a bunch of
researchers who say like, OK, we want you to study this and we
bring your results to us and we will give you advice on how it's
going. And then we'll look over the
drafts and then we'll publish it from our research wing.
I think that they should go to to economy departments in
universities and say we want to set up a $1 million grant for
anybody who wants to study the intersection of computer science
and economy. And we're going to be hands off
about it. You guys decide who gets this
funding. You decide which which PhD
students want to study this. And I think that that's
possible. And I think that if you look
back at like or dubious research that's been done on like a glass
of wine a day is good for you, that you'll probably see that
the there, there weren't very good, there weren't very good
practices put in place. And I, I have, I don't know, I
don't have anything specific about that, but I, I'm betting
that that was not, those were not very well respected methods
with those with those studies. I I love that you brought that
one up because that belief still persists once you once you put
the money and effort into promoting that kind of belief.
Even after it's debunked, it still has.
It still pervades. Culture, it's like, I want to
believe that too. Glass of red wine per day.
I think it's two drinks, 3 drinks.
It's like, yeah, just being healthy.
Yeah, it's like, absolutely. How much do you think this is a
war that kind of has to be won on won on culture?
I mean, so kind of should we kind of just establish kind of
this is kind of what we believe in as takers?
You shouldn't delegate to like large staking pools.
So if you delegate kind of delegate to your friend, don't
delegate to like the the the protocol that already holds 30%.
Or do you think this is something that kind of has to be
put into rules into like extra hard coded rules?
It's never going to work to, to make it like a social consensus
because the reality is, is 95% of people, maybe even higher,
maybe 99% of people who come into crypto, they're just
throwing their dart at the wall. They're just hoping for the,
they're just hoping to invest in the, in the Google of 2000 and
trying to make it big. And like, if you think about it,
that's what crypto has done. It's, it's had big, big talk
about like becoming a global banking, a global financial
system that's accessible to everybody.
But like if you put people who make a dollar a day in the same
room as the people who make like $10,000 a day, there's going to
be this hustle culture that comes from one side.
And you can't blame them. You can't stop that.
You can't be like, you should be more ideological because it's
like they're trying to survive and gambling will always happen.
So I do think that crypto in general has been this idea of
how do we take greed and how do we take normal human, normal
human vices and use them, guide them and make it so that those
things are incorporated into a protocol rather than having to
fight against it and having to tell people to like be the on
the, the losing end of a, a prisoner's dilemma.
Like I think that we should we should try to account for human
behaviour rather than fight human behaviour.
I love that. I think those are actually
really nice parting words. So if people kind of want to get
involved in the East Sacred community or kind of want advice
on how to set up and so on, how do they find you guys?
Our website is East Acre dot CC. The discord is really active and
the subreddit is really active if you're more into Reddit than
discord. People love people who come in.
And if you come in and say hey, I'm I'm interested in staking,
how do I start this? People love to help.
Fantastic. Then let's let's see whether we
get any new stakers interested. It's definitely a super
interesting community is kind of to me, it's always reminiscent
of kind of, you know, kind of the maker communities.
I mean, not, not like crypto maker, but kind of like the
people who like tinker with stuff.
It's that kind of people who kind of end up in those and and
that that they're fun people, they're good people.
There's a big overlap too. Good.
And it's actually, it's really interesting because to be in the
community, you kind of have to have some skin in the game.
You don't have to. We have people who don't stake
at all, but you know, many people have 32 Ether, many
people have one Ether. And you also have to have some
interest in the long term success of Etherium.
And so putting those two things together, and I'm not saying
it's everyone, but a vast majority of the people have
something at stake and they have an interest in Etherium.
It makes for a really interesting group of people who
are are really fun to engage with.
And there's also some pride that kind of goes along with it.
I mean, basically if you go to conferences and talk about
staking people who stake, they talk about this with pride.
Like it's, it's like a part of their identity and kind of like
self description how they see themselves, right?
How do you know if someone's a solo staker?
They'll tell. You fantastic.
It's been a pleasure having both of you on.
And yeah, keep keep us on our toes.
You're keeping us honest. Here is the ecosystem.
Thank you so much for having us. Thank you so much, Frederick.