Implications of Moving Towards a Low Issuance Environment in Ethereum Staking

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Discussion on competitive landscape between different staking types, network effects, economies of scale, potential benefits for solo stakers, targeting to maintain real issuance yields, the necessity of MEV capture, and how targeting can enhance staker profits. Graphs illustrate benefits of targeting over non-targeting in a competitive staking environment, emphasizing the importance of staking as a service for chain security. Debate on specialists handling security vs. a distributed approach, comparison with DeFi platforms, restaking activities, expansion of staking services, equalizing validators, and challenges faced by solo stakers.

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

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