Ethereum Staking Risks and Trust Dynamics

17min Snip

00:00

Play full episode

Summary

Transcript

Episode notes

A comprehensive discussion on the risks associated with different Ethereum staking methods, focusing on minimizing trust assumptions in Layer 2 solutions and evaluating potential risks within roll-ups. The chapter highlights the complexities of trust, decentralization, and slashing penalties in Ethereum, emphasizing the need to balance risks with optimal rewards for stakers. Additionally, it explores the impact of staking percentages on rewards, pooling demand, and the potential future integration of staking in traditional ETFs.

Hasu and Jon bring on Ansgar and Caspar from the Ethereum Foundation to discuss the ETH staking endgame.

Ansgar and Caspar recently published two controversial research posts which included a proposal to change Ethereum’s issuance curve. They are concerned that the current ETH staking economics could lead to nearly 100% of ETH being staked, with much of that in LSTs. They propose reducing issuance and targeting a lower stake rate.

We go deep in this episode on PoS economics, liquid staking, restaking, economic security, centralization concerns, and much more.

Timestamps:

(00:00) Intro

(00:25) Possible Changes to ETH Staking?

(00:49) Overview of Current ETH Staking

(16:32) LSTs & Staking Rate Increasing

(21:36) Nominal vs Real Yield

(23:22) Tax Implications of Staking

(27:57) Staking Demand & External Revenue

(35:33) Stake Ratio Targeting

(36:21) Is 100% Staking Bad?

(40:05) Can ETH LSTs be Money?

(55:24) Would Any Changes Make a Difference?

(01:04:05) Stake Targeting

(01:10:20) Will Targeting Centralize Validators?

(01:22:53) Fiat Money Parallels

(01:25:16) MEV & Restaking Revenue

(01:30:52) Electra Proposal to Change Issuance

(01:46:01) Security Budget & Economic Security

(01:53:40) Validator Set Quality

(01:55:10) Incentives to Maximize Validator Decentralization

(02:19:00) PoS vs PoW Political Complexity

Twitter:

Hasu - https://twitter.com/hasufl

Jon Charbonneau - https://twitter.com/jon_charb

Uncommon Core 2.0 - https://twitter.com/UCC2_xyz

Ansgar - https://twitter.com/adietrichs

Caspar - https://twitter.com/casparschwa

Referenced Materials:

Endgame Staking Economics: A Case for Targeting - https://ethresear.ch/t/endgame-staking-economics-a-case-for-targeting/18751

Electra: Issuance Curve Adjustment Proposal - https://ethereum-magicians.org/t/electra-issuance-curve-adjustment-proposal/18825

Properties of issuance level: consensus incentives and variability across potential reward curves - https://ethresear.ch/t/properties-of-issuance-level-consensus-incentives-and-variability-across-potential-reward-curves/18448

Disclaimer: The material and information presented in this podcast is for general informational purposes only and should not be considered investment advice. The views, thoughts, and opinions expressed in this podcast are solely those of the speakers and are not the views of any entity or other person with whom the speaker is affiliated, including, without limitation, DBA Crypto, LLC. The “DBA Crypto” name and all forms thereof are the sole property of its owner, and its use does not imply endorsement of or opposition to any specific organization, product, or service.