Scribbler Logo

    You have 4 summaries left

    Bell Curve

    The Staking Router + DVT: A Seismic Change for LSTs | Izzy (Lido) & Oisín (Obol)

    Tue Jul 18 2023
    Distributed Validator TechnologySolo StakingClient DiversityLiquid-Staking ProtocolsDistributed ValidatorsPermissionless Bonded ValidatorsReducing Barriers to EntryAdvantages of Distributed ValidatorsStaking RouterStake AllocationBalance Sheet of SteveDesigning Modules and Governance MechanismsSemi-Autonomous ProtocolsRestaking ModulesPayout Mechanism and Revenue SharingInclusivity and Collaboration in StakingRevenue Sharing and Distribution ChannelsRisk Management and Protocol ComplexityProtocol Governance and Risk ManagementMonitoring and Decision-Making in ProtocolsFuture Possibilities and Challenges

    Description

    The episode features discussions on Distributed Validator Technology (DVT), solo staking, client diversity, liquid-staking protocols, distributed validators, permissionless bonded validators, distributed validation, benefits of distributed validators, reducing barriers to entry, advantages of distributed validators, staking router, stake allocation, balance sheet of Steve, designing modules and governance mechanisms, semi-autonomous protocols, restaking modules, payout mechanism and revenue sharing, inclusivity and collaboration in staking, revenue sharing and distribution channels, risk management and protocol complexity, protocol governance and risk management, monitoring and decision-making in protocols, and future possibilities and challenges.

    Insights

    Distributed Validator Technology (DVT)

    DVT encourages more solo staking by providing fault tolerance if one machine goes down.

    Client Diversity and Liquid-Staking Protocols

    Tooling like Docker installations and front ends have made it easier for solo stakers to participate in Ethereum.

    Distributed Validators and High Uptime

    Distributed validators (DVs) provide better uptime for proof of stake chains like Ethereum.

    Benefits of Distributed Validators and Liquid-Staking Protocols

    Distributed validators are beneficial for running low-powered validator nodes.

    Permissionless Bonded Validators and Reducing Barriers

    Permissionless bonded validators in Ethereum started with a high bonding requirement, but liquid-staking protocols have been reducing this requirement.

    Advantages of Distributed Validators and Staking Router

    Distributed validators allow for more on-prem and bare metal machines, reducing reliance on the cloud.

    Staking Router and Stake Allocation

    The Staking Router transforms LIDO into a marketplace of stake allocation.

    Balance Sheet of Steve and Stake Allocation Modules

    We're actually looking at a very high level illustrative sort of version of a balance sheet of Steve both before and after the staking router gets implemented.

    Designing Modules and Governance Mechanisms

    The design space for creating your own modules allows more sustainable mechanisms.

    Semi-Autonomous Protocols and Restaking Modules

    Eventually, with sufficient data on-chain, protocols can become semi-autonomous or fully autonomous with fewer governance mechanisms.

    Chapters

    1. Distributed Validator Technology (DVT) and Solo Staking
    2. Client Diversity and Liquid-Staking Protocols
    3. Distributed Validators and High Uptime
    4. Benefits of Distributed Validators and Liquid-Staking Protocols
    5. Permissionless Bonded Validators and Reducing Barriers
    6. Advantages of Distributed Validators and Staking Router
    7. Staking Router and Stake Allocation
    8. Balance Sheet of Steve and Stake Allocation Modules
    9. Designing Modules and Governance Mechanisms
    10. Semi-Autonomous Protocols and Restaking Modules
    11. Restaking Modules and LIDO's Balance Sheet
    12. Payout Mechanism and Revenue Sharing
    13. Inclusivity and Collaboration in Staking
    14. Revenue Sharing and Distribution Channels
    15. Risk Management and Protocol Complexity
    16. Protocol Governance and Risk Management
    17. Monitoring and Decision-Making in Protocols
    18. Future Possibilities and Challenges
    Summary
    Transcript

    Distributed Validator Technology (DVT) and Solo Staking

    00:00 - 06:44

    • Distributed Validator Technology (DVT) encourages more solo staking by providing fault tolerance if one machine goes down.
    • The merge and introduction of withdrawals have made solo staking easier by reducing technical barriers and risk surface area.
    • There has been significant growth in client software and tooling for running validators, making it easier for solo stakers to participate.

    Client Diversity and Liquid-Staking Protocols

    06:16 - 13:18

    • Client diversity in Ethereum has grown, with new clients entering the space and existing clients evolving and growing.
    • Tooling like Docker installations and front ends have made it easier for solo stakers to participate in Ethereum.
    • Liquid-staking protocols are meeting the renewed demand for solo participation.

    Distributed Validators and High Uptime

    12:58 - 19:35

    • Distributed validators (DVs) provide better uptime for proof of stake chains like Ethereum.
    • With DVs, if one node goes offline, others in the group keep it up and running.
    • The goal of DVs is to achieve high uptime similar to professional load operators.

    Benefits of Distributed Validators and Liquid-Staking Protocols

    19:16 - 26:06

    • Distributed validators are beneficial for running low-powered validator nodes.
    • Distributed validation reduces the capital requirements for staking.
    • Liquid-staking protocols like Obel and Rocketpool allow collective participation in securing the Ethereum network without needing the full capital requirement.

    Permissionless Bonded Validators and Reducing Barriers

    25:44 - 32:44

    • Permissionless bonded validators in Ethereum started with a high bonding requirement, but liquid-staking protocols have been reducing this requirement.
    • Reducing bonds lowers barriers to entry for interested participants and allows existing bond holders to multiply their values.
    • Distributor validators (DVs) enable further reduction of bonds by splitting them across multiple participants.

    Advantages of Distributed Validators and Staking Router

    32:15 - 38:36

    • Distributed validators allow for more on-prem and bare metal machines, reducing reliance on the cloud.
    • Distributed validators enable separate key management and reduce the risk of one person having control.
    • Upgrading versions and general maintenance can be done without taking software offline.

    Staking Router and Stake Allocation

    38:19 - 45:42

    • The Staking Router transforms LIDO into a marketplace of stake allocation.
    • Stake can be allocated to different modules based on configurable thresholds.
    • Modules need to be designed and presented to the DAO for approval before they can be added to the staking router.

    Balance Sheet of Steve and Stake Allocation Modules

    45:19 - 52:27

    • We're actually looking at a very high level illustrative sort of version of a balance sheet of Steve both before and after the staking router gets implemented.
    • The assets and liabilities of Steve are shown in the balance sheet.
    • There is also a surplus in case of a slashing event.

    Designing Modules and Governance Mechanisms

    52:10 - 59:21

    • The design space for creating your own modules allows more sustainable mechanisms.
    • The protocol needs to set up risk-adjusted safeguards for a sustainable validator set.
    • Monitoring the allocation of deposits may never be completely left to the free market.

    Semi-Autonomous Protocols and Restaking Modules

    58:56 - 1:06:10

    • Eventually, with sufficient data on-chain, protocols can become semi-autonomous or fully autonomous with fewer governance mechanisms.
    • Market forces may not accurately determine risk parameters in staking due to the unpredictability of black swan events.
    • The intersection between liquid staking and restaking raises questions about mechanics and risks associated with restaking modules within the staking router.

    Restaking Modules and LIDO's Balance Sheet

    1:05:43 - 1:12:48

    • Eigenlayer allows depositing SDE for RF into a contract, which can be appealing if there is core level integration with restaking.
    • Creating liquid fungible positions for less fungible assets has precedent in finance, such as bond ETFs.
    • Lido's balance sheet resembles that of a bank, with treasuries, commercial real estate, small business loans, etc.

    Payout Mechanism and Revenue Sharing

    1:12:26 - 1:19:36

    • The mechanism for how Lido pays out rewards involves an oracle checking the balance of ETH in the validator set and minting STEATH tokens.
    • Different modules may take different approaches to representing rewards.
    • There are openings for node operators in LIDO's curated operator module.

    Inclusivity and Collaboration in Staking

    1:19:08 - 1:26:16

    • Building systems that allow for inclusivity and encourage collaboration.
    • The importance of solo staking in the current scaling architecture of roll-ups and L2s.
    • Alignment with the core protocol of Ethereum in staking projects like Lido and Rocket Pool.

    Revenue Sharing and Distribution Channels

    1:25:49 - 1:32:46

    • The staking router enables revenue sharing and customized fees to distribution channels.
    • It offers a cleaner way to reward distribution channels compared to previous methods used by LIDO.
    • Maker could be a distribution channel for LIDO's liquid staking offering.

    Risk Management and Protocol Complexity

    1:32:24 - 1:40:04

    • The staking router mitigates the risk of competitors creating their own liquid-staking protocols.
    • There could be thousands of different modules in the future, including individualized modules for specific platforms like Maker or Aave.
    • Protocols can curate validators, validator types, and fee references in their modules.

    Protocol Governance and Risk Management

    1:39:37 - 1:46:53

    • The introduction of the staking router and permissionless pull sets or solo saker sets, along with dual governance, is LIDO's response to concerns in the self-limiting.
    • The possibility of a restaking module was discussed, but it is considered a lower priority for LIDO's core objectives.
    • LIDO may delegate the choice of restaking to users themselves.

    Monitoring and Decision-Making in Protocols

    1:46:35 - 1:54:05

    • Staking pools like LIDO may require monitoring of validators or node operations.
    • A project called 'Rated' provides node operator monitoring services for LIDO.
    • Minimizing human involvement in decision-making is important, but complete minimization would not be healthy for the protocol.

    Future Possibilities and Challenges

    1:53:40 - 1:58:51

    • The next episode will feature an overview of eigenlayer protocol, discussing its role as a two-sided marketplace between stakers and middleware operators.
    • There could be internal theme markets within LIDO that attract stake by lowering fees and selling co-location services to validators.
    • The need for more robustness and monitoring will increase with the introduction of the state staking router.
    1