A picture explains who are the important participants in the Ethereum Staking ecosystem

Original Title: "Mapping the Ethereum Staking Ecosystem"

Original Author: Staking Rewards

Original Compiler: Peter Pan @BlockBeats

Ethereum has switched after the merger When it comes to the PoS consensus mechanism, PoS fosters a staking ecosystem composed of participants who play an important role in securing the Ethereum network.

In this article, Staking Rewards breaks down the Ethereum pledge stack in detail, showing the Ethereum Staking ecology All the active parts in , and clarified the operation mechanism of the relevant pledge method. So understanding the subtle differences between these stacks and staking options will help users make better decisions when staking their ETH.

These stacks are read from the bottom up, based on the Ethereum protocol, and then Is execution and consensus clients, middleware, DVT network, staking options, infrastructure services, staking pools, liquid staking derivatives, custodians, wallets, data providers and tools, etc. However, the graph may still miss some items, so it will be updated in the next iteration.

Ethereum protocol

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Ethereum protocol is a set of rules run by Ethereum nodes, which embody the core infrastructure of thousands of decentralized applications.

Transactions on Ethereum are signed by full nodes, who broadcast signed transactions to validating nodes Network, validating nodes execute transactions (execution layer), verify their qualifications and reach consensus on state (consensus layer/beacon chain). The new agreed state is then stored again in the full node with the latest block.

The execution layer is managed by execution clients running on thousands of computers around the world, which Maintain the overall state of the Ethereum blockchain while using the Ethereum Virtual Machine to complete transactions.

The consensus layer is managed by the consensus client running on the same computer. Consensus is reached among thousands of computers on the latest state of the Ethereum blockchain, verifying its accuracy.

Client Software

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Ethereum is a distributed network of computers (nodes) running software that validates blocks and transaction data. To participate in the Ethereum network, users need to install software called a client on their computer to turn it into an Ethereum node.

A "node" is any instance of the Ethereum client software that connects to the Ethereum software other computers to form a network. But not all nodes on Ethereum are the same, mainly divided into full nodes and verification nodes:

1) Full nodes

Full nodes implement the consensus rules of the Ethereum protocol so that they cannot be tricked into accepting blocks that do not follow them, the nodes will Do:

- sign transaction

- store full blockchain data

- verify all blocks and state

- will The signed transaction is broadcast to the verifier node

2) Verifier node

The verifier node receives the broadcast transaction from the full node, then executes the transaction, verifies its qualification and reaches a state consensus (at the consensus layer).

Due to the client software, all nodes work and interact only with the protocol. Clients are implementations of Ethereum that validate data according to protocol rules and keep the network secure. Every validator in the Ethereum network must use these clients, whether the user is staking at home or through some kind of service, the clients need to use and interact with the Ethereum protocol, they form the first level of the staking stack .

The merged Ethereum has two parts: the execution layer and the consensus layer, both layers Run different clients and play specific roles.

1) Execution Client

Listens for new transactions broadcast in the network, executes them in the Ethereum Virtual Machine (EVM), and keeps a database with the latest state of all current Ethereum data. The following are some of the main execution clients of Ethereum:

Besu, Erigon, Geth, Nethermind

2) Consensus Client (Consensus Client)

Implements a PoS consensus algorithm that enables the network to reach consensus based on verified data from executing clients.

Lighthouse, Lodestar , Nimbus, Prysm< /a>、Teku

Client diversity

Client diversity is building resilience important part of the network. By having a variety of clients used by a node, it limits the impact of a bug or attack on a single client and secures the network. If more than 66% of validators use a single client, and that client is attacked or encounters a critical bug, it poses a risk to the entire Ethereum network and could lead to blockchain disruption and huge losses for node operators.

To achieve finality on the network, 66.6% of validators are required. If the client owns more than 66.6% of the market and they fork to their own chain, they will be able to complete it. Once the fork occurs and is finalized, the validator will not be able to return to the original (real) chain and will not be penalized; if 66.6% of the chain is slashed at the same time, the slashing penalty is 32 ETH.

So what is the solution? These situations can be avoided by limiting the client market share to 33% and educating the community on the importance of client diversity and encouraging them to use less popular clients in pursuit of maintaining the integrity and resilience of the Ethereum network . The current distribution of consensus and execution clients is as follows:

Flashbots / MEV

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Maximum extractable value (MEV) is the maximum value that can be extracted from block production in excess of standard block rewards and gas fees by changing or excluding the order of transactions in a block. is applied by Proof-of-Work (PoW) miners.

How to extract MEV after Ethereum merges? The majority of MEV will be extracted by independent network participants known as “searchers,” who run algorithms to detect profitable MEV opportunities and use bots to submit these profitable transactions to the network. Validators then receive a portion of this MEV, as Seekers pay higher gas fees (which go to validators) to ensure their transactions are included in a block.

How do MEV opportunities arise?

MEV opportunities primarily come from market participants using and interacting with the entire DeFi ecosystem.

1) Liquidation

Lending protocols are very popular in the DeFi ecosystem, and lending protocols allow users to deposit some collateral (ie ETH) and then borrow assets against that collateral. The value of this collateral (ETH) fluctuates with the market value of ETH, and if the value of the collateral falls below a certain threshold, the protocol will allow anyone to liquidate the collateral (to pay back the borrowed asset). If a position is liquidated, there is usually a liquidation fee that is shared with the liquidator - this is where the MEV opportunity arises, and the searchers are racing to find a liquidation transaction and submit it first to earn the liquidation fee.

2) Dex arbitrage

< p>Arbitrage trading is the act of buying Token on one exchange (such as Uniswap) and then selling the same Token at a higher price on another exchange (such as Sushiswap). Due to the mechanism of the blockchain, users can complete this transaction in one go, and searchers will monitor the price difference of DEX and look for opportunities to execute such transactions.

3) Sandwich trading

< p>“Sandwich trading” is behind the scenes of DEX arbitrage opportunities. Assuming a large DEX arbitrage transaction is submitted to the mempool, this transaction is likely to drive up/down the price of the purchased Token. Whereas Seekers will watch the mempool and calculate the likely impact of that trade on the currency pair, if it's likely to push up/down the price significantly, they can execute buy/sell orders before the block is done and then sell shortly thereafter /Buy it, profit from the transaction.

Where did Flashbots come from?

Additionally, some searchers will:

- Observe the memory pool (where the exchange is located) for profitable transactions;

- copy potentially profitable transactions and replace them with their own addresses;

- once the frontrunner confirms the transaction If it is indeed profitable, they will increase the gas price of the transaction to get ahead of the original transaction and capture the MEV found by the original searcher.

In response, new services emerged. Flashbots is an independent project that extends the Go-ethereum client with a service that allows seekers to submit MEV transactions to miners without revealing transactions to the public mempool, which solves the problem caused by leaders and has Helps reduce high gas prices.

MEV-Boost is an open source middleware that verifiers can run to enter competitive block building market. The middleware allows validators to access blocks from the builder market, MEV-boost will simply plug into the user's consensus client, allowing it to outsource specialized block building without knowing the technical details of how it works, these builders generate Blocks contain transaction order streams and block proposal validator fees.

Furthermore, the Flashbots team found that separating the roles of proposers and block builders facilitates Greater competition, decentralization, and censorship resistance for Ethereum.

Distributed Verification Technology

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Distributed Validation Technology (DVT: Distributed Validator Technology) refers to an Ethereum validator running on multiple untrusted nodes to improve fault tolerance and security. It eliminates the single point of failure problem, if <33% of participating nodes in a DVT cluster go offline, the remaining active nodes can still reach a consensus on what to sign and generate valid signatures for their staking responsibilities.

The core goal of DVT technology or Distributed Client:

- to be Delegators provide a no-slash decentralized security layer while earning staking rewards;

- Simplifies the process of setting up a validator for those with little or no technical knowledge or previous exposure to cryptocurrencies;

- Build the foundation for the Ethereum staking community, ensuring that the spirit of decentralization continues at the heart of the network.

DVT creates a decentralized staking infrastructure that distributes the operations of Ethereum validators , improved security, increased inclusiveness and network decentralization are possible.

Risks involved with traditional validator clients

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A validator client is software that acts on behalf of a validator, attesting to the state of the chain by holding and using its private key. A single validator client can hold many key pairs, controlling many validators.

Verifiers sign messages with their staked private key, which can only be used by the verifier Accessed by client software that schedules the creation and signing of messages according to the responsibilities assigned to validators. The main risks of this setup are:

- Pledge private key is located in one (centralized) location, if someone has unauthorized access to this private key, a conflict message may be generated, which may result in the validator's ETH being slashed;

- If the user does not operate his own validator, the stake will need to be The private key is handed over to the operator that the user is using, and this requires an assumption that the user must trust the operator to store the pledged private key safely and reliably;

- If the verifier client software does not create a message in time To perform validator duties, validators will suffer activity leaks that will reduce their ETH balances, which can be caused by software bugs, internet downtime, hardware issues, and power outages, among others.

However, some solutions have been developed to help solve these problems, and the SSV network facilitates is one of the research and development projects, which received funding from the Ethereum Foundation in 2021, and is dedicated to solving the shortcomings of traditional validator client settings.

SSV Network

SSV provides the infrastructure for splitting and distributing validator private keys into multiple "KeyShares" to run Ethereum validators across multiple untrusted nodes .

Currently, validators must run on a single node, which creates a single point of failure. If the node needs maintenance or goes offline due to a problem, it may be slashed. SSV splits the node's validator private key into multiple KeyShares and distributes them to each node. If a node goes offline due to one of the above reasons, the remaining nodes holding the KeyShares will respond and operate the validator to ensure no downtime .

This creates a secure staking solution where users do not need to hand over validator private keys to Operators, thus solving the current problem of staking private key processing.

Obol Labs

Obol Labs is a research and software development team building PoS infrastructure, focusing on internet bonds, DVT and multi-operator verification. The Obol network facilitates trust-minimized staking with multi-operator verification, which opens the door for adoption of low-trust access to Ethereum staking, which can be used as a core building block for various Web3 products.

Additionally, Obol built "Charon", a middleware that enables any All Ethereum validator clients can run together as part of a distributed validator. It acts as middleware between normal authenticating clients and their connected beacon nodes, intercepting and proxying API traffic.

Solo-Staking

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Personal staking is called "Solo-Staking", and users need to deposit at least 32 ETH to activate the validator software. As a validator, this user will be responsible for adding new blocks to the blockchain, processing transactions, and storing data, while securing the entire network in the process, and will be rewarded with new ETH.

In our opinion, staking alone on Ethereum is the best staking method, it Provides full participation rewards, improves the decentralization of the network, and never requires users to trust other parties with their funds.

In addition, users can also run physical dedicated hardware at home, which is called "Home- Staking”, the hardware will be connected to the Internet 7x24 hours and have a stable power supply.

Home-Staking is widely regarded as the gold standard of Staking, the main advantages are:

- Earn maximum rewards directly from the protocol to keep your validators up and online;

- Completely eliminate trust and never relinquish control of your funds keys;

- Security and decentralization that can be run on home hardware and added to the Ethereum network yourself;

- Best way to facilitate decentralization;

- Practice self-sovereignty: " Not your validators, not your network".

Disadvantage:

- Give up The convenience of handing over operations to others;

- Machines and networks must be physically prepared, maintained and potentially troubleshooted.

Recommended hardware requirements for Solo-staking at home:

- Fast CPU with 4+ Cores

- 16GB+ RAM

- 1+TB Fast SSD

- 25+ M/Bits Bandwidth

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However, depending on the client chosen by the user, slightly different hardware is required. The biggest bottleneck people usually face is disk space, and even after syncing with the Ethereum blockchain, it is better to use an SSD with a lot of extra space. See the full setup guide here.

Cloud-Staking

Cloud-Staking refers to using a cloud server to run a node, which may be easier than building and maintaining your own home server. It offers high server uptime and a static public IP address, and can be more cost-effective.

The disadvantage of this method is that it needs to trust a third party, and is using cloud such as AWS Services contribute to the centralization of the network. However, there are some decentralized cloud solutions available such as Flux or Ethernity Cloud.

Advantage:

- Provider Offers high server uptime and static public IP addresses;

- Getting a dedicated or virtual server is more comfortable than building your own.

Disadvantage:

- Trust a Centralized third party - server provider;

- Due to the size of storage required for a full node, renting a server can become very expensive.

Staking Providers

Staking Providers are one of the larger categories entering the Ethereum staking ecosystem, setting up, maintaining and running hardware and daily validator node operations. They are considered the backend operators who run all the computer and physical infrastructure that makes the PoS blockchain work.

Staking Providers is also a general term for institutions that provide Staking services, mainly including the following pledge providers:

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- Infrastructure Providers

- Validators as a Service (VaaS), including institutions providing institutional verification services

- Staking Pools

Infrastructure Provider

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The infrastructure provider of the staking pool directly provides verification services to the staking pool, they have dedicated hardware to maintain and operate the nodes set up through the staking pool, and focus on large-scale operations and provide scalable solutions to meet the needs of staking pools.

Meanwhile, infrastructure providers differ from Solo Stakers and VaaS in that: Solo Stakers run Own infrastructure, mainly focused on own home setup; Infrastructure providers provide large-scale solutions, they are able to set up, maintain and supervise thousands of nodes for staking pool; and Vaas refers to using third-party services to set up verification The server, the person who handles node operations and performs ongoing maintenance, the service allows users to outsource the "hard work" or running and maintaining nodes for a flat fee.

VaaS (Authentication as a Service)

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Verification as a Service, also known as Staking as a Service (SaaS), represents a category of staking services where users can deposit 32 ETH and generate keys for validators. But in this case, the user delegates node operations to a third party. Also, instead of running hardware at home or using pre-configured nodes (Solo staking), users use third-party providers for hardware or cloud setup, maintenance, and upgrades.

How is this different from cloud staking? The key difference is that in Cloud Staking, the user is the one who has opted into the cloud service and is still doing the whole setup, monitoring and upgrading of validator nodes. Whereas in VaaS, users don't need to manage, monitor or run any operations of nodes, they just need to bring their 32 ETH to VaaS and pay a monthly fee for their services.

VaaS has three main advantages:

1) Still the user's own validator

Users get their own set of signing keys, and of course withdrawal keys, and Progress can be monitored by creating a dashboard through the service being used. It is semi-custodial in nature, as keys are shared between the user and the VaaS.

2) Easy to use

< p>VaaS providers help users through the entire process from start to finish, and users can forget about hardware specs, setup, maintenance, and any upgrades that need to be done.

3) Risks are limited

Users are generally not required to provide a withdrawal key, which prevents the service from withdrawing, transferring or spending their funds.

More and more VaaS providers can help users pledge ETH, but each provider There are different risks and benefits. Some providers on this list cater to institutional investors and may not be suitable for individuals, but they still provide validator services and thus fall into this category.

Staking pool service

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Staking pools are a collaborative way to allow many different users with small amounts of ETH to acquire the 32 ETH needed to activate a set of validator keys. This makes it possible for smaller players to participate in staking on the network and leads to the establishment of more validating nodes.

It is worth noting that the Ethereum protocol itself does not support the pledge pool service, so it is built separately to meet this need with a shared services solution, which has three main advantages:

< b>1) Low barriers to entry

Most staking pools allow users to stake with as little as 0.01 ETH, which is easier to achieve than meeting the 32 ETH requirement for staking alone.

2) As simple as Token exchange

Users don't need to worry about maintaining and setting up nodes, and the process of depositing into a pool is usually as simple as exchanging one token for another.

3) Liquidity Token

Staking pools usually provide users with Tokens representing their pledged ETH. The token can be used like any other token, enabling investors to earn staking rewards while being able to transfer, store, trade and earn yield across decentralized finance protocols. Liquidity tokens will be discussed further under "Liquidity Staking Agreement" below.

Additionally, staking pool services are typically run using smart contracts where funds are deposited to manage and track users shares and issue Tokens to represent the shares in the contract. Staking pools can be further divided into three categories, separating them based on whether they allow open, limited or specially curated validator sets.

1) Public participation as a validator

Open participation for validators means that everyone can participate in the consensus process and become a node operator in the network, whether you are an institution or an individual. It does not rely on a voting process to decide who can or cannot be a validator on the network, users are treated like any other node operator.

This democratized pledge system does not favor any party and is the epitome of permissionless pledge. An example using this protocol is RocketPool.

2) Limited Curated Validator Set
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A limited set of validators refers to the approach taken by some protocols where professional validators are carefully selected to maximize rewards and limit slashing penalties. The protocol has a committee to select top-notch validators to minimize staking risk, which means a group of decision makers decide who can be a validator, making it a permissioned protocol.

But the possible problems with this method are:

- Once Once operators enter the set, there is little incentive to improve;

- There are not many professional node operators running their own infrastructure, which may cause the protocol to exhaust the candidate pool.

Furthermore, if this selection process continues over the long term, it may create an all-out monopoly Alliance, and lead to a dystopian outcome for Ethereum. While unlikely, centralizing decision-making power in the hands of a small number of token holders is not the best outcome for Ethereum, and in the long run, it does not end well for networks that choose this path, where An example is Lido Finance.

3) Staking pool with an exclusively curated set of validators

A staking pool using a set of exclusive operators, such as: Ankr Staking , Alluvial Finance, Stakewise, Stafi.

Liquidity Staking Solution

A unique proposition of Staking Pools is that they issue liquidity tokens, which represent staked ETH, and allow users to trade or use that token in DeFi applications, as well as new trading/investment opportunities s return. The concept of issuing liquidity tokens for pledged assets is called liquid staking, and this is what most staking pools offer their users.

Traditionally, staking on PoS-based projects involves a lock-up period during which users assets cannot be traded or withdrawn. Taking Ethereum as an example, funds cannot be withdrawn from validators on the beacon chain until the Shanghai upgrade is complete, which limits the ability of users to actually redeem their own liquidity tokens for ETH rewards locked in the consensus layer.

This is why liquidity staking is so popular with investors as it allows withdrawals their ETH without actually removing the ETH from the staking contract.

The main benefits of liquid staking are also:

- Make the staking process Made simple, no management or hardware setup required;

- No limit on deposit size, which allows smaller players to participate;

- Liquidity pools allow users to participate in other DeFi protocols.

Some common examples:

- Go to Centralized

Lido Finance (stETH), RocketPool (rETH), Ankr Staking (aETHc), Alluvial Finance, Stakewise (SETH2), Stafi (rETH);

-  Centralized

Binance (BETH), Kraken (ETH2.S), Coinbase, cbETH.

Custodian

The custodian is the institution that actually owns the user's financial assets. It is usually a brokerage firm, commercial bank or other type of institution that holds the user's funds and investments for convenience and security. Additionally, custodians play a key role in institutional adoption of ETH by enabling investors to store their digital assets with regulated third-party custody providers.

Data Providers and Tools

Data provider

Data provider is the provider of data for the Organizations or enterprises used by third parties, some data providers provide access to datasets for free, some sell data for a fee, and some data providers provide free and fee-based hybrid data services.

The vast majority of Ethereum data providers provide their services for free and are committed to impartial and real-time staking market data to provide insights to the community. In addition, data providers can be divided into:

1) Investor Data

Staking Rewards: Central Information for the Crypto-Staking Industry Hubs and Data Aggregators

Dune: Community Based Blockchain Ecosystem Analysis< /p>

Token Terminal: Aggregate revenue data analysis of blockchain and decentralized applications

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2) Verifier Data

Rating.Network: Validator Rating

Nodewatch.io :Ethereum Node Analysis

Ethernodes.org:Ethereum Node Browser

Clientdiversity.org : Client Diversity Analysis

Migalabs: Ethereum Analysis

Eth2-fork-mon : Fork monitor for a set of configurable beacon nodes

Ethstats : Web UI for tracking execution layer node status

3) Other

Beaconcha.in: Beacon Chain Block Explorer

Beaconscan : Official Etherscan Beacon Chain Explorer

Blockscout:< /a>execution layer block exploration

Tools

The Ethereum community has developed tools to make the staking process more secure, efficient and scalable. Most of these tools are open source and can be found on Github:

Consensus-monitor : checks the user's Ethereum consensus layer node's Web UI

dshackle : for blockchain Fault-tolerant load balancer for api, including Ethereum RPCfauceth, EIP1559 compliant network faucets using Hcaptcha

ganache: simulator for execution layer development and testing purposes

genesis-generator : A tool for generating and exposing genesis files for execution and consensus layer clients

rpc-proxy : Web3 JSONRPC proxy, rate limiting and method filtering

< a href="https://github.com/skylenet/ethereum-helm-charts/blob/master/charts/testnet-faucet">testnet-faucet: A web faucet that can be used to distribute testnet ETH to users

testnet-homepage: simple website , which can be used to display useful information about user testnets

ethereum-metrics-exporter: prometheus exporter for ethereum execution and consensus clients

checkpointz: Beacon Chain Checkpoint Synchronization Provider

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Wallet and browser

Wallets and browsers are the connection points between users, protocols and the Ethereum chain, Wallets have different features to suit the needs of users, these listed provide Ethereum staking as a key feature of wallets.

Escrow pledge

Custodial staking means that users stake cryptocurrency through a centralized entity (i.e. Binance, Kraken, Coinbase), but it means that the exchange is the custodian of the user's assets, and the user entrusts the management of the private key to the exchange and is bound by its terms.

But this option is not recommended as the first choice for users, because it requires a large trust assumption And it is not conducive to the decentralization of the network. If users don't like to use self-hosted wallets and prefer to use centralized exchanges, that's another matter. However, users are always encouraged to support decentralization and learn how to use other options.

If you are new to the Ethereum Staking ecosystem, reading the above is still confusing or If you are overwhelmed, the following tree diagram can help to understand them more clearly.

Summary

Ethereum Staking The community is at the heart of the network, committed to supporting Ethereum's vision of building a digital future on a global scale. As more users begin staking their ETH and existing stakeholders continue to develop new staking products, expect Ethereum to become the dominant staking asset in the coming years.

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