原文标题：《 ConsenSys：上海升级 ETH 质押提款终极指南 》
Original article by Andrew Breslin,Michiel Milanovic, Simran Jagdev, Consensys
Ethereum is going through a period of rapid infrastructure development. Since the first implementation of the Ethereum blockchain was rolled out in 2015, it has undergone a series of planned technology upgrades. Each upgrade brings Ethereum's vision further into focus - to be the open, decentralized, trusted, no-access, programmable layer of infrastructure upon which the future of the Internet, the economy, and much of our digital life is built.
In September 2022, Ethereum merged to unify Ethereum's consensus and implementation layers. It was a pivotal moment in Ethereum's history and led to a number of important improvements, including reducing the network's carbon footprint by 99.95%. By switching to a proof-of-interest consensus mechanism, the merger changed the way value was accumulated across the Ethereum network and reduced new ETH issuance by a staggering 88%. Prior to the merger, IP-1559 The introduction of Ethereum made transactions more efficient by changing Ethereum's gas fee system from a bidding system to a two-part system - a standard base fee per block (which is burned by the protocol), and an optional tip (priority fee) that users can pay to speed up transactions. After the merger, the combination of IP-1559 That led to the most deflationary moment in Ethereum's history and strengthened the security of the network.
Now, the Ethereum community is rallying behind the next planned upgrade on the roadmap -- the Shanghai/Capella upgrade. It is doubly named because it is the first simultaneous upgrade of Ethereum's executive and consensus layers, and is highly anticipated because it will enable pledged ETH withdrawals.
In particular, this upgrade will enable ETH pledged at the consensus layer to be withdrawn to the Ethereum execution address for the first time since ETH pledge became possible in December 2020.
The activation of withdrawals addresses another "wild card" in Ethereum's roadmap - potentially encouraging more verifiers to participate and facilitating further decentralization and security of the Ethereum network. By increasing the portability of pledges, drawdowns will lead to increased competition among pledge providers - potentially driving further innovation in the industry and gradually lowering barriers to entry.
Pledgers using third-party pledge services will be given the opportunity to (re) evaluate how and where to pledge their ETH based on factors such as maximization of incentives, validator performance, simplicity of user experience and expense.
Independent pledge (operating Ethereum validators independently) brings the most decentralization and security benefits to the network, but remains challenging for most retail pledgers due to the associated technical and operational requirements. Those who wish to pledge without this operational overhead can choose from a number of different products, ranging from fully managed and centralized vendors, to unmanaged, decentralized agreements. It is the responsibility of each pledgee to choose a partner whose values are aligned with their confidence in upholding the Ethereum features that the pledgee values, whatever they may be. Collectively, the pledge is the custodian of Ethereum's value.
The Shanghai/Capella upgrade is expected to be a significant event for Ethereum. It will have several implications for the pledgor, the Ethereum pledging ecology, and DeFi more broadly:
Partial and full withdrawals will give the long-term pledge access to funds that have been locked up for more than two years. However, early pledges have proven their faith in Ethereum, and they may be more inclined to pledge this newfound liquidity than to make a profit.
By reducing the liquidity risk of pledging ETH, drawdowns can inspire confidence in liquidity pledge agreements and make ETH pledge a more attractive opportunity in general, especially for institutions that are generally risk averse.
Finally, we would like to see an increasing flow of liquid pledged tokens into DeFi agreements as confidence in these tokens and competition among issuers builds.
Andrew Breslin, Product Development
Michiel Milanovic, DeFi, Market analyst
Simran Jagdev, Senior Content Marketing Manager
Ben Edgington, Principal Product Owner, Protocol Engineering
Mikhail Kalinin, Principal Investigator, Protocol Engineering
Roberto Saltini, Principal Researcher, Protocol Engineering
Kuhan Tharmananthar, Product Lead, Codefi Staking
Matthieu Saint Olive, Senior Product Manager, Codefi Staking
Abad Mian, Chief Product Manager, MetaMask Staking
Johann Bornman, Group Product Leader, MetaMask Agency
Matt Nelson, Hyperledger Besu & Web3Signer Product Manager
Nicole Adarme, Head of Institutional Marketing
Tsvetan Mitev, senior graphic designer
Ethereum is the infrastructure layer on which the future of the Internet, the economy and much of our digital life is built. Supporting our digital future on a global scale requires improving Ethereum's scalability and security, while maintaining a decentralized network; In other words, the blockchain trilemma needs to be solved.
The solution - not an easy task - is expected to be delivered in six phases. The Merge, the Surge, the Scourge, the Verge, the Purge, and the Splurge. Each stage of the Ethereum roadmap is largely independent of the others and runs in parallel.
Ethereum's latest upgrade, Ethereum Merge, was successfully executed on September 13, 2022. Consolidation refers to the union of Ethereum's execution layer (EL) and consensus layer (CL), which marks Ethereum's transition to a proof-of-interest (PoS) consensus mechanism. This move away from the energy-intensive proof-of-work (PoW) consensus mechanism reduced Ethereum's annualized energy consumption by more than 99%.
The merged Ethereum operates as a single blockchain and consists of two layers: the execution layer, where Ethereum transactions are processed and broadcast to the rest of the network, and the consensus layer, which runs Ethereum's PoS consensus algorithm and handles transaction settlement and final results. According to Vitalik Buterin, this upgrade takes us halfway through Ethereum's broader roadmap.
Figure 1. Ethereum roadmap. Source: Vitalik Buterin, Twitter
Next came the Shanghai/Capella upgrade, the former being the name of the EL upgrade and the Capella being the name of the CL upgrade. The key outcome of the Shanghai/Capella upgrade is that it will realize the withdrawal of ETH that has been pledged.
A pledge that currently has locked ETH (i.e. verifier balance) on the Ethereum CL will be able to extract it to the Ethereum execution address. An execution address is the standard address on the main Ethereum network that users are familiar with.
This report aims to place the Shanghai/Capella upgrade within the broader Ethereum roadmap and Outlines the three key features it implements: updating the verifier's withdrawal vouchers, partial withdrawals, and full withdrawals.
From there, we'll delve into the impact of withdrawals. We will examine the impact that partial and full withdrawals may have on ETH's liquidity supply and investigate how increased portability of equity is driving competition and rapid innovation across the Ethereum pledge industry.
As noted above, Ethereum's next planned upgrade is known as both the Shanghai Upgrade and the Capella Upgrade. Shanghai/Capella is doubly named because it is the first simultaneous upgrade of Ethereum's EL and CL. In principle, it is not mandatory to upgrade two tiers at the same time, so we will use the respective names for the EL and CL upgrades for the sake of precision.
As the first synchronized upgrade of Ethereum EL and CL, Shanghai/Capella will also be the first Ethereum fork triggered by a specific timestamp. With the exception of mergers, all previous forks have been triggered by reaching a specific block number. Switch to a fork triggered by a timestamp so that EL and CL can be upgraded simultaneously.
In addition to withdrawals, the Shanghai/Capella upgrade will also provide some minor technical improvements to the Ethereum Virtual Machine (EVM).
However, since drawdown, or IP-4895, is the key feature provided in the upgrade, this report will focus on this issue.
The exact date of the Shanghai/Capella upgrade is still to be determined, but core Ethereum developers - who volunteer to contribute to the development of the open source software - have been making steady progress toward that goal. They have been testing forks in various test nets, the most recent being the Sepolia test Net, which successfully performed the Shanghai/Capella upgrade at 4:04am UTC on 28 February 2023. Next will be the Goerli beta network, and after that, if all goes well, the Ethereum mainnet.
At its core, Ethereum's value lies in the decentralized network of verifiers who work together to build and secure the Ethereum blockchain, as well as the wider social layer of the Ethereum community. It is this decentralized, unlicensed community of contributors that produces Ethereum's trusted neutrality, censorship resistance, openness, immobility, and near-impenetrable security. For this reason, running the Ethereum Validator independently, also known as Independent Pledge, is considered the gold standard for Ethereum pledge because it gives the greatest benefits to the pledge and decentralization of the network.
The independent pledge is critical to the network by ensuring that no single entity has disproportionate power over decisions made throughout Ethereum. Some like ETHStaker Communities like ethdo Tools like Besu Teku Such dedicated implementation and consensus layer customer teams are making it easier for more and more Ethereum community members to run an Ethereum validator independently.
That said, running validators independently creates technical, operational, and financial hurdles for some users. These types of Ethereum pledge have a number of options through which they can pledge, including non-pledge service providers like Codefi Pledge and top liquidity pledge agreements available through MetaMask Pledge.
While the pledgee can delegate the operational aspects of running the validator to a third party, the onus remains on them to choose a partner whose values align with those of the Ethereum characteristics that the pledgee values. Where these people choose to pledge, and with whom, has a crucial impact on the decentralization of Ethereum.
Despite being a community governance system, implementing the Ethereum roadmap requires significant infrastructure changes and therefore important decisions to be made. In order to make these decisions, a strong decentralized governance process is needed to build consensus among affected stakeholders; In other words, to build consensus among each Ethereum community member.
Ethereum governance occurs off-chain, meaning that decisions are made through an informal process of social discussion. If the community reaches consensus, changes are implemented in the code.Ethereum communityEvery member of Ethereum is involved in the governance process of Ethereum, including various types of pledge. The pledge is the custodian of the Ethereum network, and through independent pledge, or non-pledge, allocating their shares to like-minded partners, the pledge can "vote" with their pledge and influence the future direction of Ethereum.
For most Ethereum pledges, the Shanghai/Capella upgrade provides the first opportunity to change how and to whom they originally decided to pledge. This provides an opportunity for a variety of pledges to consider their personal value, the value they want Ethereum to embody, and to pledge in a way that reflects that value. Those who can afford to do so should consider running a validator independently if their goal is self-sovereignty and contributing to the decentralization of Ethereum. Others can "vote with their pledge" through a partner with shared values. In this way, the Ethereum community as a collective can protect the reason Ethereum is the decentralized trust infrastructure of our global digital future.
With that in mind, let's take an in-depth look at withdrawals, how they will work, and how their impact will play out in the overall Ethereum ecology after the Shanghai/Capella upgrade.
We know that the key outcome of the Shanghai/Capella upgrade is to allow the pledgers to withdraw the ETH they have invested in, but more specifically, it will provide three key functions related to extraction.
The ability to update the Ethereum authenticator's withdrawal credentials from the old 0x00- type (derived from the BLS key) to the newer 0x01- type (derived from the Ethereum address).
Partial withdrawals, or consensus layer rewards earned by regular and automatic "looting" from an active verifier's balance (more than 32 ETH).
Full withdrawal, or recovery of the entire balance of an "exit" verifier.
While partial and full withdrawals are different operations, it is worth briefly pointing out some of the commonalities between them.
First, only verifiers with the newer withdrawal certificate of type 0x01- are eligible to make partial and full withdrawals. Verifiers with earlier drawdown certificates of type 0x00- can qualify by updating their credentials to the newer version. However, there is no need to do this immediately, as the verifiers who have drawdown certificates of type 0x00- will continue to earn rewards, just as they have since the origin of the Beacon chain.
In addition, there is a single, automatic withdrawal process for both partial and full withdrawals. Every 12 seconds (per session), the protocol "sweeps" Ethereum's verifier set and identifies the first 16 verifiers that are eligible to make some or all withdrawals. Up to 16 withdrawals can be processed per period, however, full withdrawals are slower to process because they need to "exit" the validator first and have additional delays.
Finally, there will be no gas costs associated with performing a partial or full withdrawal. While both partial and full withdrawals result in the balance of the Ethereum address being credited to the withdrawal amount, they are not transactions processed by Ethereum's EL. Instead, withdrawals are considered system-level operations, or topping up account balances, Blocks in the chain of the way it works is similar to PoW paid to miners] [coinbase trading (https://www.javatpoint.com/coinbase-transaction#:~:text=A coinbase transaction is the,also sent in this transaction.). Since each block is only allowed 16 such operations, and the cost of performing them is negligible relative to the user and smart contract transactions, so withdrawals incur no gas costs.
Activating a new Ethereum verifier requires depositing 32 ETH into Ethereum's deposit contract, along with a payload of other data. Part of this data payload is a field called the verifier's withdrawal voucher, which defines where the verifier's withdrawal balance is sent.
Currently, Ethereum authenticators may have two versions of the withdrawal certificate, distinguished by their withdrawal prefix, namely: 0x00- type, or 0x01- type.
Only verifiers with credentials of type 0x01- are eligible to withdraw part or all of their balance. This is due to technical differences between these withdrawal certificate types. That is, the 0x00- type credential is from the BLS public key, while the 0x01- type credential points to a standard Ethereum address.
As mentioned earlier, the Capella upgrade makes it possible for ETH (i.e. the validator balance) "locked" on the Ethereum CL to be extracted and credited to an Ethereum address on the EL. To do this, the recanted validator must have a corresponding Ethereum execution address where the recanted balance was sent. In short, the 0x01- type withdrawal certificate provides this corresponding execution address, whereas 0x00- type does not.
As of February 20, 2023, approximately 58% of active Ethereum verifiers have type 0x00- withdrawal certificates. When the Beacon chain launches in late 2020, 0x00- type vouchers are the only available option, while the newer 0x01- type vouchers are available until 2021.MarchBefore they were introduced. Therefore, all verifiers activated before this date have credentials of type 0x00-.
As you can see from Figure 2, about 20% of the newly activated verifiers still set their withdrawal credentials to the old type 0x00-. This may be due to the independent pledgee or institution using outdated guidelines to activate the validator, or it may be a deliberate decision by the pledgee who wishes to avoid any potential tax implications of automatically obtaining working capital from a partial withdrawal. Note that in many jurisdictions the tax implications of a pledge have not been clearly defined and this is not tax advice. Tax rules vary from jurisdiction to jurisdiction, and consult a certified professional in your jurisdiction for advice.
Figure 2. Weekly beacon chain deposits by type of withdrawal voucher. Source: ConsenSys, Dune Analytics, @DataAlways
For validators certified at 0x00, the Capella upgrade includes an action to update their withdrawal credentials to type 0x01-. Doing so requires the owner of the validator of type 0x00- credential to sign and submit a withdrawal credential change message to Ethereum's CL via the Consensus layer client using their existing withdrawal credential (BLS key).
According to the Ethereum Consensus specification, the rate at which 0x00- type credentials can be updated to 0x01- type credentials is limited to 16 per block (every 12 seconds). However, unless there is an immediate need for working capital, validators of type 0x00- vouchers should not feel pressured to renew before any particular date, as they will continue to accumulate rewards just as they did after the Beacon chain was activated.
** Note that once the verifier has updated its withdrawal voucher from type 0x00- to type 0x01-, no further changes can be made. ** This is a one-time, unidirectional change from Type 0x00- to Type 01- Withdrawal voucher.
Partial withdrawals are periodic "write-offs" of verifier balances in excess of 32 ETH. This will automatically happen with any validator that has a withdrawal voucher of type 0x01- and is active and has a balance of more than 32 ETH.
Partial withdrawals benefit the pledger because they can often receive the CL pledge award earned by their verifier (minus any penalties) without incurring any gas charges, or having to quit their verifier. Also, since the effective balance of an Ethereum verifier is capped at 32ETH, any remaining ETH in the verifier balance is unhelpful. Partial drawdown allows the pledgor to take these remaining, unproductive ETH and redeploy them to activate a new Ethereum validator, or elsewhere. Partial withdrawals should also benefit the Ethereum network, as it prevents excessively long exit queues and excessive attrition of verifiers, which could destabilise the network.
Active verifiers with withdrawal certificates of type 0x01- can expect their verifier balance to be upgraded in Shanghai/Capella per It is partially withdrawn once every two to five days. This is the expected time it will take to automatically "sweep" Ethereum's active verifier set and process withdrawals for those who qualify. A range is given, rather than an exact number, because it is not known how many 0x00- type withdrawal certificates the validator will update to 0x01- type withdrawal certificates immediately after the upgrade.
The low end of this range (2 days) assumes that none of the 0x00 certified verifiers update to 0x01 certified, making them ineligible for withdrawals. The higher end (5 days) assumes that all 0x00 authenticated verifiers are updated immediately. The reality is probably somewhere in between, but there is no data to support specific estimates.
A full withdrawal is a collection of the entire balance of an "exited" validator. The pre-steps to exit the validator require specific manual actions. However, for any validator, the withdrawal process occurs automatically: there is a withdrawal certificate of type 0x01- and it has exited.
Some other POS-guaranteed blockchains have a "unpledge" period, which is a fixed period in which, after submitting a withdrawal request, the pledgee must wait before they can get access to the assets they previously put down.
In Ethereum, instead of an "unbind" period with a fixed duration, it is given by the sum of two processes, each with a variable duration: the validator exit process, and the full withdrawal process.
The process of performing a complete withdrawal is divided into two parts. First, the validator must exit from Ethereum's consensus layer. The verifier is then subjected to the same automatic withdrawal process as performing a partial withdrawal, but with an added delay.
In short, the complete exit of a validator is expected to take at least 28 hours. This is the sum of the absolute minimum time required to exit the validator (5 durations, or 32 minutes) and the absolute minimum time required for the validator to become a full withdrawal (256 durations, or 27.3 hours). However, most full withdrawals will take longer than that.
Figure 3. Validator exit process Source: ConsenSys
Figure 3 depicts the high-level steps required to exit an active validator. Let's talk briefly about each of these steps.
An active validator with a withdrawal certificate of type 0x01- raises and validates blocks as expected.
The verifier's private key is used to sign a voluntary exit (VE) operation, and the signed VE is submitted (via CL client) to Ethereum's CL.
Maximum processing per time period 16 VE (every 12 seconds).
Once the VE operation is processed, and after at least After a five-minute delay (32 minutes), the state of the validator is updated from the active state to the quit state. At this point, the exiting verifier is assigned an exit duration (that is, the duration for which the verifier will be exited) and is formally enrolled in the exit queue. Although the validator has now signaled its exit, it must still perform all of the validator's responsibilities (that is, block proposals and proofs) until it is processed through the exit queue. The length of the exit queue depends on the total number of active Ethereum validators and the number of validators already in the queue.
After the validator is processed through the exit queue, its status is updated from exiting to exiting and the validation block is stopped.
For several reasons, it is important that the set of validators for PoS protocols change too quickly. Therefore, the exit of the validator is limited by the rate of exit from the queue. The duration of the exit queue is a function of the protocol's drain limit and the number of validators to exit before the validators of interest.
Churn limit is a variable that defines the maximum number of validators that can exit per cycle (per 6.4 minutes) and is given by the following expression:
Churn Limit =max(4, active_validators/65536)
Based on the above expression, the drain limit would be 4 until there are 327,680 active Ethereum validators, at which point it would become 5. After this, the loss limit increases by one for every 65,536 newly activated validators (loss limit quotient).
As of February 23, 2023, there are approximately 525,000. An active Ethereum validator. From Figures 4 and 5, we can see that the current churn limit is 8, which means 1,800 validators can be dropped per day (see Figure 4).
Figure 4. Maximum withdrawals allowed per day. Source: ConsenSys
Figure 5. Maximum loss of Ethereum. Source: ConsenSys
Plotting the historical number of active Ethereum validators against the corresponding attrition limit yields Figure 6.
Figure 6. Changes in active Ethereum validators. Source: ConsenSys, Glassnode
Knowing the churn limit and the number of validators to exit before the profit validator, we can calculate the total duration (in days) of the exit queue:
*Exit Queue Duration (days) = (((#_of_validators_to_be_exited)/(churn_limit))6.4 mins)/60/24
Figure 7. Full withdrawal process. Source: ConsenSys
After the validator is exited, there are two more steps before it is fully withdrawn:
An exited verifier experiences a delay of 256 times (27.3 hours), known as the minimum validator retractable delay, before its status is updated from exited to withdrawable. Finally, the redeemable validator is also subject to automatic "sweeps" that process partial withdrawals, after which its balance is withdrawn.
Full withdrawal rate limit
As mentioned above, all exiting validators must wait 256 periods (27.3 hours or 1.1 days) until they become withdrawable. Once the validator is available for withdrawals, the speed at which full withdrawals are processed is limited to 16 per file, by the same automatic "sweep" process that handles partial withdrawals.
Therefore, the following expression gives the maximum amount of time (in days) that any exiting validator should wait before its balance is fully extracted:
*Max. Time from Exit to Withdraw (days) ((withdrawals_eligible_validator_count/16)12)/60/60/24) + 1.1 days
Where "withdrawals_eligible_validator_count" is the number of validators that are eligible for some or all of the withdrawals (because a single automated "sweep" process handles both types of withdrawals).
We see above that the Shanghai/Capella fork is ready to "unlock" the pledged ETH from the consensus layer and make it available to extract to the Ethereum execution address. Withdrawals will have broad implications for the entire Ethereum pledging ecology -- from ETH liquidity provision to the competitiveness of Ethereum pledge providers.
Now that we know how the drawdown process will work, let's look at how they might affect ETH's liquidity provision.
Here we will try to understand how the ETH liquidity provision will likely be affected by partial and full withdrawals in the first few days following the Shanghai/Capella upgrade.
Much of this analysis depends on the behaviour of the pledgers, as well as the actions of the middlemen, whose exact plans after the Shanghai/Capella escalation remain unclear. Therefore, any conclusions drawn in this section are directional assumptions rather than definitive predictions.
Before we can reason out what might happen with partial withdrawals, we need to understand the current, pre-withdrawal state of Ethereum's set of active validators.
As of February 23, 2023, there are approximately 16.8 M ETH is pledged, accounting for 14.6% of the total ETH supply. The pledged ETH is stored in excess of 525,000 ETH. The average balance of the verifier in the hands of the verifier recently exceeded 34E TH. This indicates that the average Ethereum verifier has accumulated about 2 ETH CL rewards to date, and after the Shanghai/Capella upgrade, more than 1 million ETH could become working capital by way of partial withdrawal.
We can introduce Tripoli Data always-nbsp; To refine our understanding, where Ethereum verifiers are further divided into three related subgroups. 0x00 authenticated, Lido 0x01 authenticated, and non-lido 0x01 authenticated. A more detailed understanding of these specific subgroups of validators will help define our partial withdrawal model for two main reasons.
First, we know that only 0x01 certified verifiers are eligible to withdraw part of the funds immediately, so the total amount of ETH that partial extraction will "unlock" depends on how many 0x00 certified verifiers update to 0x01 after the Shanghai/Capella upgrade.
Second, we know that Lidos (like all liquidity pledge agreements) may redeposit and pledge ETH drawn from their verifiers as part of the partial withdrawal process. This is because doing so maximizes the return on Lido's liquid pledge token, stETH. Knowing this, we can discount ETH in our model from partial withdrawals from Lido verifiers, as these ETH are likely to be re-pledged immediately.
Checking the withdrawal credentials of the Ethereum Active Verifiers group from the perspective of these three groups revealed that 58% of them had type 0x00- withdrawal credentials. Of the remaining 42%, with withdrawal certificates of type 0x01-, approximately 61% (or 25% of all Ethereum verifiers) are operated by the Lido verifier group.
Figure 8. Ethereum Authenticator withdrawal voucher. Source: ConsenSys, Dune Analytics, @DataAlways
Dividing the total cumulative awards for each subgroup by the number of verifiers in each group yields the average cumulative CL awards for typical verifiers in each subgroup (Figure 9 for data as of January 29, 2023).
Figure 9. Average cumulative consensus layer rewards. Source: ConsenSys, Data Always
Knowing the relative proportions and average cumulative CL rewards of our three veritable subgroups, we can begin to reason about how partial withdrawals might proceed. Let's consider the first block added to the Ethereum blockchain, on the heels of the Shanghai/Capella upgrade.
Since the verifier without the 0x00 certificate is updated to the 0x01 certificate at this time, the first block will consist of 16 partial withdrawals made entirely of verifiers that currently have the 0x01 certificate set. Of these 16 validators, we can assume that 61%, or 9-10, are operated by Lido, and the remaining 6-7 are non-Lido 0x01 certified validators. If the above holds, then the first block after the Shanghai/Capella upgrade will "unlock" about 18.6 ETH (about 11.7 ETH from a Lido 0x01 certified verifier and about 6.9 ETH from a non-Lido 0x01 certified verifier).
At the same time that partial withdrawals for the first block are processed, the credentials of the first 16 0x00 certified validators who submit the withdrawal voucher change information will be updated to type 0x01, making them eligible for partial withdrawals. For each block, the composition of the partially drawn validators will change to include more validators that previously had 0x00 authentication. Since the validators for 0x00 authentication are older on average and accumulate more CL rewards, this will lead to a gradual increase in the total ETH extracted per block.
As Tripoli Where the ETH profile extracted from each block peaks, "depends on how many percent of 0x00 validators switch their certificates immediately, but in the most extreme case where all 0x00 validators require replacement, the profile will peak after 70 hours, The amount of partial withdrawals for each block is approximately 37.34 ETH - of which 3.01 ETH is from the Lido validator."
This is from Data Always The animation shows how many ETH will be unlocked in the first "sweep" of Ethereum's set of active verifiers under four different scenarios. The number of ETH unlocked, the duration of the sweep, and the proportion of each verifier subgroup included in these partial withdrawals under the assumption that 25%, 50%, 75%, and 100% of the verifiers of 0x00 authentication are immediately updated to 0x01 authentication.
Figure 10. Partial withdrawal if the Shanghai fork occurs today. Source: Data Always
As of February 23, 2023, there have been. 920 People voluntarily quit, indicating that these verifiers intend to quit altogether. In addition, in order to resolve the recent Securities and Exchange Commission (SEC) investigation Kraken The centralized trading platform agreed to pay a $30 million fine and stop its U.S. pledge service. From Hildobby Data show that Kraken verifiers account for all active Ethereum verifiers. 7.3% & have spent Above. While it is unclear whether all Kraken validators will need to be fully withdrawn, in the most extreme case, this would result in 38,000 validators (1.2 million ETH) being withdrawn shortly after the Shanghai/Capella upgrade went live. Assuming the attrition limit for this agreement is 8, it will take more than 20 days to process the entire withdrawal for this amount.
Beyond that, any estimate of the number of validators who will drop out entirely is pure guesswork.
Given the current rate of activation of the new validator and the timeline for the Shanghai/Capella fork is still unknown, Ethereum's drain limit could be 8 when Shanghai/Capella goes live. This would indicate that up to 1800 validators (or about 57,600 ETH) could be fully withdrawn each day. As Tripoli As noted, if a queue is formed for activating new verifiers, which is also a queue for all withdrawals, this "two-ended queue will lock the drain limit and the number of valid verifiers at a [fixed] value until one side of the queue subsides".
The chart below (from *Data Always* Forks and Tweaks) simulated how much time it would take to process different percentages of the active Ethereum verifier set of complete exits. The figure assumes a freeze drain limit of 7 or 8 (that is, validator exits match new activations). A further limitation of this analysis is that it is performed at daily step intervals, and it does not take into account the validator exit process, minimum validator retractability delays, or partial retractions.
Figure 11. The number of days it takes to exit a certain share of Ethereum validators (assuming there is a lock-in drain limit, that is, the exit is matched by new deposits). Source: ConsenSys, Data Always
For most ETH pledges, the Shanghai/Capella upgrade provides the first opportunity to change how and to whom they originally decided to pledge. The increased portability of pledges after withdrawals could initiate a massive reallocation event that would significantly alter the distribution of market share across the Ethereum investment industry.
Incumbents and new entrants to ETH Mortgage have all recognised the risks and opportunities presented by withdrawals, and it is clear that the industry will become increasingly competitive. This competition is expected to drive rapid technological and business model innovation, particularly in liquidity pledge agreements.
In this section, we provide a snapshot of the innovations and emerging trends observed throughout the Ethereum pledging ecosystem today, as well as insights into how existing pledge protocols plan to handle withdrawals.
For retail and institutional investors, the threshold for ETH pledge is gradually being lowered. For simplicity, we will assume that a "retail" pledgee is likely to pledge less than 32 ETH and an institutional pledgee (or whale) is likely to pledge more than 32 ETH. In reality, however, there is overlap between these groups.
From Hildobby At the time of writing this report, at around 16.8 m. More than 75% of ETH pledges are made through intermediaries identifiable on the chain. These intermediaries can be liquid pledge agreements (nearly 32% of all pledged ETH), centralized trading platforms (28%), or illiquid pledge pools/service providers (16% of all pledged ETH). The remaining 24% of Ethereum validators are operated by unidentified entities, most likely independent pledgers.
Figure 12. Pledge ETH by category. Source: ConsenSys, Dune Analytics, @Hildobby
Liquidity pledge is usually the preferred form of pledge, especially among retail pledgers. This is mainly due to the simplified, single-transaction user experience provided by the liquidity pledge agreement, as well as the liquidity pledge tokens (LST) that users receive for the ETH they deposit. This LST provides the pledgees with a limited form of liquidity to their pledge positions and allows them to remortgage their pledge positions elsewhere in the DeFi to increase their returns.
For newcomers to ETH pledge, there are some user experience (UX) barriers to even pledging via a liquidity pledge agreement. First, users need to access several different protocol interfaces and rely on data from unfamiliar sources to compare and ultimately choose a provider. Once users pledge, they receive an LST representing the principle amount of their pledge and the accumulated reward. However, these LSTS can be implemented by different vendors, making keeping track of the pledge awards a person earns a cumbersome and confusing process. Early 2023 saw the launch of two exciting ETH pledge products designed to address these user experience issues.
MetaMask pledge provides users with the ability to pledge ETH from MetaMask's portfolio dapp to Lido or RocketPool. The familiar MetaMask interface is accompanied by useful information about Ethereum pledging. In addition to connecting users to top liquidity pledge agreements, MetaMask Pledge's reward tracking interface provides users with an estimate of the rewards they are receiving from their pledge positions.
In addition, other structured products are emerging that offer users access to a basket of diversified LSTS. One such product is Index Coop's diversified staked ETH (dsETH), which is an index made up of Rocket Pool's rETH, Lido's stETH, and StakeWise's sETH2 tokens.
There are of course exceptions, and those with more than 32 ETH may prefer to use a pledge as a service provider rather than a liquidity pledge agreement for the following reasons:
Working directly on the validator carrier (without the middleman) improves security and reliability
Traceability between pledged funds and specific validators
Stronger operational assurance (e.g. SOC2 compliance)
Better control over the exact infrastructure setup for each validator
Better financial and tax reporting
For example, like Codefi Staking Such a pledge vendor promises to improve security and reliability (SOC2 Type II certification) while reducing the highly associated risk of outages. Codefi mitigates these risks with a validator infrastructure that is distributed across multiple cloud providers, geographies, Ethereum clients, and MEV Repeaters.
Like retail users, institutions must compare and choose between multiple options and face an incoherent user experience between different pledge providers.
Other emerging innovations institutions should look out for are LsETH, an institution-focused liquidity pledge token from Liquid Collective, and the Stakefish validation launch from StakeFish. The concept of
Anticipating the risks and opportunities arising from withdrawals, liquidity Pledge companies have been developing upgrades to their core protocol infrastructure. These upgrades are intended to improve their service to users and the wider Ethereum community.
Let's look briefly at the next planned upgrade to the Lido, Rocket Pool, and StakeWise protocol. Then, we'll look at some of the newcomers to the Ethereum pledge space.
Lido is by far the most dominant liquidity pledge protocol on Ethereum, gaining over 29% to date. ETH pledge. For the history of the protocol, Lido had a single, licensed set of validators.
At present, this set of validators from 30 A group of professional validator operators who are able to activate new Ethereum validators with no capital requirements and no margin, provided by the validators themselves. This highly scalable model, combined with StETH's extensive DeFi integration, led to Lido's huge success. However, with Lido's share of pledged ETH approaching one-third of all pledged ETH, it has led to concerns about centralization among prominent figures in the Ethereum community.
Recently, the agreement was announced with Lido V2 as an important step towards further decentralization. At the heart of the Lido V2 are two major upgrades: the withdrawal and pledge routers.
The exact implementation of the Lido on withdrawals has yet to be confirmed, but the agreement has released a proposal for community review and feedback.
In short, Lido proposes a two-step "request-claim process" for StETH holders. Users submit a withdrawal request to the protocol and receive an NFT representing their position in the Lido specific queue. Interestingly, these NFT queue locations will be tradable, allowing users who need immediate liquidity to "jump the queue", perhaps by paying a premium. The protocol then calculates the stETH: ETH redemption rate for each request, retains the amount of ETH needed to satisfy the request, and burns the corresponding amount of stETH.
Liquidity facilitating withdrawals may come from EL incentives, some or all withdrawals from Lido verifiers, new user deposits, or a combination of these sources. Once the reserved ETH is available, users can claim the ETH.
Lido's in-protocol withdrawal queue will be processed in one of two modes. "Turbo" or "bunker" mode. From the user's perspective, the key difference between these patterns is the time they have to wait between submitting a withdrawal request and receiving the ETH. In the event that a large number of Lido validators (over 600) are nerfed, the protocol goes into "bunker" mode. The "bunker" mode is designed to stop withdrawals until all penalties for cuts are accounted for to ensure that redemption calculations for stETH: ETH can be made accurately. In "bunker" mode, withdrawals can be delayed for more than 36 days.
Basically, Lido V2 eliminates the need for a protocol to have a single, privileged set of validators and instead adds several different subsets of validators, called modules. The pledge router is a core part of the infrastructure that will coordinate how new users' deposits to Lidos are allocated to different modules. Initially, the Lido DAO will set a target percentage that each module can support all active Lido validators.
No timeline has been provided for when Lido V2 will go live on Ethereum's main network, though it is expected to roll out in stages. For example, the withdrawal feature may take precedence over the launch of the pledge router in its final form.
Atlas upgrade for Rocket Pool
November 2021, Rocket Pool Introducing minipools into the Ethereum pledging ecosystem. The minipool reduces the capital requirement to operate an Ethereum validator by 45%. To operate a Rocket Pool minipool requires only 17.6 ETH (16 ETH deposit, plus 1.6 ETH worth of RPL collateral), The usual requirement is 32 ETH.
What makes Rocket Pool different as a liquidity pledge provider is that its set of validators is unlicensed, meaning that anyone who meets the minimum margin requirements can operate a mini pool. This margin requirement is critical to the health of the agreement and the competitiveness of rETH tokens, as it aligns the incentives for mini-pool operators and rETH token holders. If a mini pool is cut, the loss of the operator's 16 ETH margin and RPL collateral worth 1.6 ETH will occur before any rETH token holder. This design incentivise mini-pool operators to do their best and ensure that rETH token holders are 110% insured on their pledged funds.
Rocket Pool's high margin requirements prevent it from scaling as quickly as its competitors' license verifier sets. Throughout its history, the agreement has seen multiple instances where the rETH deposit pool has reached its maximum capacity (currently 5,000 ETH). This forces potential depositors to wait for the new mini Pool to be activated by the group of unauthorised validators, to buy rETH on the secondary market, or to pledge with a Rocket Pool competitor.
In the coming months, Rocket Pool plans to launch its highly anticipated Atlas . Upgrade. The upgrade is designed, among other things, to handle withdrawals and improve the scalability of the protocol.
Liquidity to support the drawdown will come from the deposit Pool of the agreement, as well as a portion of ETH to achieve liquidity through a portion of the drawdown of Rocket Pool verifiers.
Since mini-pools operate without permissions, the protocol has no ability to force carriers to quit and draw their validator balances. In the event that RETH redemptions deplete the liquidity of the deposit pool and partial withdrawals, the agreement will rely on arbitrage opportunities in the open market to incentivize mini-pool operators to exit and fully draw down their validators.
It is speculated that if rETH cannot be converted into ETH through the liquidity provided by the agreement, users will turn to the secondary market, and the excessive supply of rETH in the secondary market will cause it to trade at a discount. Once this discount becomes attractive enough, rational mini Pool operators should be incentivize to buy 16 rETH at a discounted rate, burn it through Rocket Pool's smart contract, and exit/withdraw their mini pool. Doing so allows them to pocket the difference between the rETH: ETH rate of the smart contract and the discount rate of the rETH on the secondary market.
In order to scale up more efficiently, Rocket Pool's Atlas upgrade will reduce the minimum margin requirement for mini pool operators, from 16 ETH and 1.6 ETH worth RPL, to 8 ETH and 2.4 ETH worth RPL. This will reduce the capital requirement to operate an Ethereum validator by 67.5%, from 32 ETH to only 10.4 ETH. This will also enable current mini pool operators to split their 16 ETH mini pools into two 8 ETH mini pools, effectively tripling the rETH casting capacity of each mini pool operator.
In addition, the Atlas upgrade will also provide an opportunity for independent pledgers with 0x00 certified verifiers to join the agreement by updating their verifier's certificate to Rocket Pool's smart contract. By doing so, solo actors will be able to divide their 32 ETH validators into four ETH mini-pools and eight ETH mini-pools. This will enable them to support the minting of 96 rETH, greatly increasing the ability of the agreement to meet the needs of new rETH and also increasing the earning potential of independent pledgers.
Due to the anticipated substantial increase in the capacity of the agreement to support rETH demand, the rETH deposit pool will be increased from 5000 ETH to 18000 ETH. It would also help deepen the liquidity provided by the agreement, making rETH redemptions possible.
No timeline was provided for the launch of the Atlas upgrade, but it is expected around the time of the Shanghai/Capella upgrade.
StakeWise is currently the fifth most popular liquidity pledge protocol on Ethereum. Historically, the primary StakeWise product was the StakeWise Pool, which, like Lido, features a licensed validator group, as well as a 10% commission on the pledge award earned equally between the StakeWise DAO and the validator group.
However, in response to increasing centralization risk within the ecosystem, StakeWise Lab proposed a significant protocol upgrade in September 2022. This upgrade is called StakeWise V3 and can be considered in two parts, or tiers, Stakewise v3.
Figure 13. User stakeholder history in StakeWise V3S Source: StakeWise
Vault and VLT tokens
The first layer involves a market of "vaults" or deposit pools that provide the pledgee with complete control over their ETH. Each vault is essentially its own pool and can be set up unconditionally by anyone from an independent pledgee to a professional verifier operator. The creator of the vault can customize some of the parameters of the pool, including who can deposit into the pool, who can participate as a verifier operator, and the fee structure of the vault. Users can browse available vaults through the StakeWise user interface, and pledge at any one (multiple) that meets their requirements. To help users make an informed decision, each vault is evaluated against a set of transparent criteria and assigned a score on the StakeWise user interface.
When the pledgee deposited money into a specific vault, they were issued a corresponding number of VLT tokens in return. VLT tokens are repriced ERC-20 tokens, which means that their value relative to ETH increases as the vault earns pledge rewards. VLT tokens are unique to the vault that issued them and accumulate rewards based on the performance of that particular vault's verifier set. This means that only VLT tokens issued by the same vault are interchangeable.
Excess pledged ETH (osETH)
The second layer of StakeWise V3 is the introduction of osETH, the protocol's liquidity pledge token. VLT token holders can save their VLT tokens by depositing them into: The mortgage contract "comes to mint osETH, or over-pledged ETH. It is worth noting that the value of the osETH token that can be minted will always be less than the value of the VLT token deposited. Like the pledged debt Position (CDP) in the MakerDAO system, each osETH miner will have a unique loan-to-value metric that reflects their utilization of the VLT when minting the osETH. The maximum allowable loan-value metric is expected to be approximately 90%, reflecting the amount of VLT tokens that a miner can monetise and still receive the pledge incentive for them to pledge 100% of the ETH to a specific vault.
Like the VLT token, the osETH is a repriced ERC-20 token. However, unlike VLT tokens, osETH tokens are not tied to the verifier of a particular vault. Instead, the osETH token accumulates awards at an average rate of all validators across all vaults in the StakeWise v3 system. While this eliminates traceability between a user's deposit and a particular set of validators, it means that all osETH tokens are replaceable and widely available across DeFi.
StakeWise V3 is not yet available on the Ethereum mainnet.
A number of additional liquidity pledge protocols, each with unique and interesting products, have been launched or are scheduled to launch on the Ethereum mainnet in the coming weeks and months. Let's explore some noteworthy agreements.
Frax Finance, issuer of the famous FRAX stablecoin, now on EthereumfourthThe most popular liquidity collateral product. Over the past 30 days, the total value of Fra x lock-in has increased, according to DefiLlama.40%The protocol's demise in the Ethereum pledge space is due to the excess rewards that holders of sfrxETH (pledged Frax ETH) have received relative to other LSTS over the past few months. As of February 23, 2023, the average award rate for sfrxETH over the last 30 days was ~7.4%, is a full two percentage points higher than market leader Lido's s tETH.
This is why sfrxETH offers such a high reward rate:
Before casting sfrxETH, users must store ETH into the protocol and cast frxETH (Frax ETH). All ETH in exchange for frxETH is pledged by the Frax protocol. However, frxETH does not accumulate pledge bonuses like Lido's stETH or Rocket Pool's rETH. Instead, it is tied to ETH by the protocol at a 1:1 redemption rate. From here, frxETH holders have two options to choose from: Holders of frxETH tokens can start accumulating pledge rewards by depositing their frxETH into Vault ERC-4626 and minting sfrxETH. Like other LSTS, sfrxETH accumulates pledge rewards. In addition, frxETH holders can deposit their frxETH on Curve.frxETH/ETH Liquidity pool to receive rewards paid in CRV, CVX, and FXS tokens.
Since frxETH holders have two competing options for earning substantial rewards, the number of sfrxETH holders is likely to be less than the number of frxETH coiners. As a result, the pledge rewards earned by the agreement are distributed among fewer users, and sfrxETH holders may experience a higher cumulative reward rate than other LSTS.
Currently, core members of the Frax team are believed to operate all validators supporting Frax pledge products, howeverThere is no documentation on the subject.
Geode Finance, like the StakeWise V3 vault layer, is intended to provide an unlicensed infrastructure that allows anyone to create a public or private pledge pool with customizable parameters. Public pledge pools accept deposits without permission, while private pledge pools only accept deposits from approved entities. Each pool is governed in a self-sovereign manner and will issue its own LSTS (known as G-derivative in Geode systems).
G-derivatives can be implemented as ERC-20 (re-fix or re-price), or ERC-721 (NFT).
Stader Labs Plans to launch a multi-pool liquidity pledge agreement with non-access, access and DVT-enabled pools (once the technology is mature). The fixer is issued ETHx, the protocol's LST, which is a repriced ERC-20 token. Anyone providing a minimum security of 4 ETH can operate a validator without a privilege pool. However, the set of validators for the license pool will be community curated and will not require a carrier deposit. Stader proposed a 10% fee on the pledge awards earned by verifiers of this agreement, highlighting their ability to build DeFi ecosystems around their LST as a key distinction.
Diva Labs Plan to offer a liquidity pledge agreement with a single deposit pool into which the pledge can deposit their ETH in exchange for divETH, a repositioned ERC-20 token. The key difference with Diva, however, is that its verifier bank will consist entirely of validators running DVT software. This should make each validator more resilient and promote diversity and decentralization of validators. However, by offering a DVT-based solution exclusively, Diva's mainnet launch may be delayed as the technology continues to mature. Diva anticipates that validator operators will be required to bind at least one ETH to participate.
Finally,Swell Network A protected mainnet release of the protocol's new architecture is planned for April 2023. The first iteration of Swell's new architecture will feature a group of licensed verifiers, made up of professional node operators. The pledge will be issued swETH, a repriced ERC-20 token, and will be charged a 10% fee on the pledge reward earned.
Here, we look at two middleware technologies in the Ethereum validator stack that have the potential to improve the resilience of validators and the decentralization of networks in the coming months and years. That's Distributed verifier technology (DVT), and the relocation primitive for EigenLayer.
Distributed validator technology
Distributed validator technology (DVT) is a technique that assigns the responsibilities of a single validator to a set of distributed validators. The goal of assigning validator execution on multiple nodes is to increase the elasticity (security, liveliness, or both) of the validator, as opposed to running the validator on a single machine. As long as at least one validator in the DVT setup is working, the others can go offline, underperform, or even be hacked without serious or any penalties.
A dedicated research group at ConsenSys is working onDVT formalizedWork. At the same time,Obol laboratoryAnd SSV networkDifferent versions of the DVT protocol are being implemented, and there are currently common test networks.
The concept of repledge has gained significant traction in recent months. In particular,EigenLayer It proposes to extend the crypto economy security provided by the Ethereum Verifier network to services other than the Ethereum protocol itself. Functionally, the repledge of Consensus Layer ETH will require Ethereum verifier to set their withdrawal credentials to EigenLayer smart contracts. From here, the pledge can opt in, providing authentication services and cryptocurrency economic security for applications built on top of EigenLayer. Opt-in will involve accepting additional as defined by the applicationReduction standardIn exchange for increased pledge incentives.
More recently, Sreeram Kannan, founder of EigenLayer Point out, there are two types of security that a sufficiently decentralized verifier network can provide: economic security, and decentralized security.
Economic security is provided by the existence of enforceable discount conditions on the pledged assets. In short, consider two crypto economies. One is guaranteed by an entity that has bet $10 billion on assets that could be axed for bad behavior. The other is guaranteed by 10, 000 different entities, each pledging $1 million in reducible assets. In both cases, the economic security provided by the guarantor is the same, amounting to $10 billion.
Decentralised security, however, comes not from the value of pledged, reducible assets, but from the fact that the pledged entities are sufficiently distributed and unlikely to collude. For the first time, this feature of decentralized security can be measured and rewarded by the services that require it, by EigenLayer's reprovisioning of the EigenLayer. That way, both decentralized bonus pools and solo payers have the opportunity to reap rewards from apps built on top of EigenLayer, while their more centralized peers won't be able to participate.
While there are so many benefits, there are also some risks associated with repledging. Authenticators who opt in to provide security for protocols other than Ethereum increase the risk that the ETH they pledge will be inadvertently axed. The risk to Ethereum could be significant, especially if a large enough percentage of Ethereum's active verifier community opts in to provide verification for a single protocol. The EigenLayer team and others may be doing a more comprehensive risk analysis of the problem.
In addition, EigenLayer's proposal to establish a "board" with the power to veto haggling decisions made by the EigenLayer service has raised concerns among some members of the Ethereum community. The argument in favor of the commission is that it can prevent a mass bargaining event, or series of events, if these bargaining actions could put Ethereum at risk. The counter-argument is that "committees" could pose a risk of centralisation, undercutting much of the effort to date to decentralise each layer of the Ethereum technology stack. It remains to be seen who might make up the proposed committee and how those people would be selected and serve on it, either in or out of office.
After Ethereum switched to share warrants, new ETH issuance dropped.88%This astonishing decrease in ETH circulation, coupled withEIP-1559 , resulting in the most deflationary moment in Ethereum's history (see Figure 14).
Figure 14. Net supply of Ethereum after merger. Source: ConsenSys, Glassnode
It has also spawned a new wave of liquidity pledge agreements, providing users holding fewer than 32 ETH with an easy way to combine their deposits with others, or "pool." Once the value of the pool exceeds 32 ETH, users can collectively fund a new validator and receive a pledge incentive in proportion to their deposit. After depositing money into the pool, the user receives a liquidity pledge token (LST), which is aERC-20 Tokens, which represent principal pledged by the user, as well as cumulative rewards over time.
In addition to providing liquidity to exit a pledge position more easily, LSTS can be used in DeFi as a pledge asset, so holders can compound the pledge returns they earn. These valuable features of LSTS have contributed to their continued popularity in recent months.
The adoption of LST on Ethereum has led to strong growth in pledged ETH on the network. Over the course of 2022, ETH pledged increased by 80% to 15.9 million. At the time of writing, ETH is distributed in more than 525000(see Figure 15)
Liquidity pledge providers are the largest contributors to pledged ETH and already account for nearly 32% of the total ETH pledge market, up from 20% in early 2022 (see Figure 16). The largest liquidity pledge provider is Lido, which alone accounts for more than 29% of all ETH pledges on Ethereum.
Figure 15. ETH Pledges for all verifiers. Source: ConsenSys, Dune Analytics, @Hildobby
Figure 16. Cumulative ETH sources of deposits by deposit provider. ConsenSys, Dune Analytics, @Hildobby
As mentioned above, all pledged ETH and accumulated consensus tier rewards remain locked until the Shanghai/Capella upgrade. This means that although the liquidity pledge token represents a claim on the underlying ETH, there is no mechanism to redeem it. As a result, the Shanghai/Capella upgrade is expected to reduce liquidity risks associated with pledging ETH, which in turn has some impact on the DeFi ecosystem.
The first is that long-term validators are likely to extract ETH in large quantities, and they will be eager to redeem their accumulated rewards. However, the distribution and withdrawal mechanisms of validators suggest that sales pressures may be more limited. Most long-term verifiers can be identified on the chain by their 0x00 credentials, which accounts for 58% of all verifiers. (See Figure 17). According to DataAlways, the average long-term verifier has 2.47 ETH rewards, totaling about 770 ETH (about $1.3 billion). This represents approximately 0.6% of ETH's market value, excluding the initial pledge, and could have a significant market impact if sold immediately.
However, only 16 validators can exit per block, and only 0x01 qualified validators (not long-term holders) are eligible to exit. That means the flow of long-term holders exiting positions is likely to be gradual. In addition, CL awards redeemed by liquid pledge providers such as Lido are more likely to be used to activate new validators as pledge demand increases.
Figure 17. Number of validators by credential type. Source: ConsenSys, Dune Analytics, @DataAlways
Another possible development is the growth in the use of liquidity pledge providers, driven by reduced liquidity risk in pledged ETH. The liquidity risk has arguably been offset by the secondary market, where holders of pegged tokens can trade them as ETH on decentralized trading platforms. However, the pledged tokens continue to trade at a discount and have historically deteriorated during times of market distress. Lido's LST, stETH, traded as low as -7% relative to ETH after Terra's collapse in June 2022, and -5% after FTX's fall in November 2022 (see Figure 18).
Figure 18. Comparison between Lido stETH and ETH. Source: CoinMarketCap
Being able to redeem pledge tokens directly with underlying ETH is a very desirable feature, even for those who have pledged with liquidity pledge agreements. Over the past three months, all top liquidity pledge providers have seen an increase in pledge token supply and the number of unique holders, with Lido seeing a 37 percent increase in the number of stETH holders. Meanwhile, Coinbase offers a liquidity pledge solution through its centralized trading platform and has seen the number of holders of its token cbETH more than double over the same period. This suggests that a large proportion of non-local web3 participants are likely to pledge their ETH holdings prior to the Shanghai/Capella upgrade. This trend also suggests that we are likely to see an increase in market segmentation among suppliers as new users with varying degrees of expertise and risk profiles begin to engage in pledging.
Figure 19. Key Indicators of top liquidity Pledge Tokens (ETH). Source: ConsenSys, Nansen: ConsenSys, Nansen
Finally, we expect to see an increase in pledged ETH flowing into the DeFi protocol. The vast majority of liquid pledged tokens are not currently used in DeFi, with 29% of stETH and only 0.65% of cbETH currently in decentralized trading platforms and lending pools. The reason may be related to the increased risk of depositing LSTS for additional rewards across protocols. For example, a pledge against stETH is subject to stETH/ETH price risk and may fluctuate, exposing the user to liquidation. More secure redemption liquidity pledge tokens for ETH after the Shanghai/Capella upgrade may result in higher utilisation across DeFi.
Figure 20. Supply sources of LST held in the DeFi contract. Source: ConsenSys, Nansen
The gap between the DeFi usage of Lido, Coinbase, and Rocket Pool's LST is most likely a function of how integrated they are in the ecology. Lido has established itself as a leader in liquidity pledges, with its stETH tokens backed by more agreements than cbETH and rETH. But as the usage of the entire LST increases, we may have more protocols supporting these tokens, which then opens the door to higher trading volumes and overall growth in ecology.
In the above section we look at the technical details of the drawdown process, the impact of drawdown on the ETH pledge market and DeFi. Now we'll focus on what the Shanghai/Capella upgrade means for investors, depending on where they are in their investment journey and what services they use.
If you are a MetaMask user, you can pledge ETH to liquidity pledge providers Lido and RocketPool through MetaMask. Once the drawdown feature is enabled, you will be able to withdraw the ETH you have pledged with these vendors, whether you have pledged directly with them or through MetaMask.
MetaMask will support withdrawals for these services as soon as Lido and RocketPool finalize their specifications and enable withdrawals. If you withdraw directly from Lido or RocketPool, there may be some delay between applying for withdrawal and getting ETH back. MetaMask users can get ETH faster by exchanging their tokens - Lido's stETH and RocketPool's rETH.
In this post-consolidated world, there is a growing demand for simple pledge services that will ultimately secure Ethereum. MetaMask Staking provides an intuitive way for everyone to jump in and get rewarded with ETH staking.
If you use Codefi Staking, either by user interface or API, you will be able to extract the ETH you are staking after the agreement is upgraded. Users who have accumulated consensus layer rewards on the validator will automatically receive a validator balance in excess of 32 ETH as a result of the "skimming" operation (see section Withdrawal section above for more details).
Once the withdrawal function is enabled, we expect more ETH holders to pledge as the risk of this activity is reduced. With the ability to unpledge ETH, users who might want to pledge, but are worried about being locked out, can now participate. As a result, we expect more ETH to be pledged, EthereumPledge rateWill increase.
As to whether some of the pledges will switch from their current pledge provider to another provider. We expect that the pledge will evaluate their current supplier based on historical safety, reliability, incentive performance and expense.
Codefi Staking aims to enable everyone, anywhere, to pledge in a decentralized network. We strive to achieve this goal by providing the most reliable and secure pledge solutions, as well as an easy-to-use pledge experience.
If you are an independent pledgee running your own validator, it is important to make sure to test the withdrawal program before you launch it on the main net. You'll have multiple opportunities to do this, in the form of a test net that the core developers will launch.
Prior to the hard fork upgrade, customer teams, including those at Besu and Teku, will upgrade the Goerli and Sepolia test nets to support withdrawals. Once that happens, Besu and Teku will have versions ready and users will be able to test the withdrawal process on those networks. You will need testnet ETH and testnet Validator to test on these networks.
It is important to note that only the pledge who has the 0x01 withdrawal voucher will be able to withdraw their ETH. About 311K verifiers still have the old-style 0x00/BLS credentials and need to send messages through their nodes that change to 0x01 before their withdrawals can occur. So make sure to check your withdrawal voucher before starting the process.
On the Besu side, there are some small EVM changes that smart contract developers need to be aware of.
If you are running Besu Teku Client, be sure to be on Twitter and Discord Follow all communication about the team's release. In addition, pledges looking to test features should continue to monitor announcements from the EthStaker community and Ethereum Foundation (EF). EF also hosts community calls to provide useful information about upcoming upgrades and changes. This is a great place for the pledgees and users to address issues directly to the core developers.
The Taifang Roadmap is committed to developing the Ethereum blockchain as the foundation for our digital future. Last September, The Merge Unifying Ethereum's execution layer and consensus layer marks the completion of Ethereum's transition to proof of equity. This upgrade brings stronger settlement finality assurance, prepares for on-chain sharding, and significantly reduces the number of cases. ETH issuance and energy consumption.
Soon, the Shanghai/Capella Upgrade will offer a withdrawal service. In other words, it will enable ETH that is "locked" in the consensus layer's validator balance to be extracted and credited to the Ethereum execution account. This upgrade represents a significant liquidity event for Ethereum, with implications for every pledge, the liquidity provision of ETH, the competitiveness of the Ethereum pledge industry, and the pace of business models and technological innovation in the Ethereum pledge space.
Ethereum's next planned upgrade is the Cancun-Deneb upgrade, which is expected to be delivered later in 2023. This upgrade will be available. Ip-4844, which is an important step in expanding Ethereum. Ip-4844 introduces a new Ethereum transaction type, "blobs" that accept data. It should extend Layer 2 rollup on Ethereum and help reduce transaction fees incurred by users of these extension schemes.
The content of future upgrades, and the order in which they will be implemented, is still to be decided. However, Ethereum's rapid growth should only continue to accelerate as core Ethereum developers become more skilled at deploying test infrastructure and more talented contributors enter the field.