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Eth 2.0 Staking with Alchemy’s Mike Garland

Notes from a 1.5 hour webinar by Mike Garland from node operator Alchemy on Eth 2.0 staking, hosted by Jehan Chu of Kenetic Capital.

The post Eth 2.0 Staking with Alchemy’s Mike Garland appeared first on Bits on Blocks.

Republished by Plato

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In early June, Mike Garland from node operator Alchemy gave a 1.5 hour presentation on Ethereum 2.0 staking, hosted by Jehan Chu of Kenetic Capital. I thought it was interesting so I took some notes. Errors and omissions are my own.

Eth 2.0 rollout

  • Eth 2.0 Rollout will be in 3 phases:
    • Phase 0 – Beacon Chain – July 2020
      • Validators and basic Proof of Stake functionality
      • No smart contracts, no accounts
      • Staking rewards start when the threshold number of validators are reached
    • Phase 1 – Sharding – 2021
      • Addition of 64 “Shard Chains” for scalability
    • Phase 2 – Accounts and contracts – 2022
      • Remainder of the “normal” Ethereum functionality – smart contracts, etc.

Promises of Eth 2.0

  • Promises of Eth 2.0
    • Scalability (send more transactions through the network without paying tons of gas or waiting a long time)
      • Sharding is the main mechanism.
      • Eth 1.0 – 14tx/s and getting slower and more expensive
      • Eth 2.0 – up to 7,500tx/s and scales with the number of shards
        • (Visa processes 1,700tx/s)
      • Reminder: Phase 0 of Eth 2.0 will have 0 tx/s. No transactions. Initial beacon chain is for staking only. No transfers, state changes, or smart contracts. Eth 2.0 only becomes “useable as expected” in Phase 2.
    • Accessibility (make sure the features are available to all users, not just miners or those with lots of compute power)
    • Security (greater security of the chain, related to staking decentralisation)

Proof of Stake vs Proof of Work

  • Proof of Work mining is more energy hungry than gold digging: 14 MJ/$1 of BTC vs 5MJ/$1 of gold!
  • Proof of Stake is more energy efficient (no mining), in theory more decentralised (no specialised hardware required), more secure (more diverse set of miners so 51% attacks are more unlikely) than Proof of Work.

The role of validators

  • Validators
    • Vote on the validity of the next block (called “attesting”)
    • Can propose new blocks to be voted on
    • Can earn rewards for successful participation in the network
    • Can be punished in two ways:
      • Slashing: Large fines, and kicked out, for appearing to attempt to cheat (whether accidentally or with intent to cheat)
        • eg voting for multiple blocks at the same height
      • Penalties: Small fines for downtime / unresponsiveness

Validator lifecycle

  • Validator lifecycle: Initial deposit → Pending → Active → Exiting or Slashed → Exited.
    • Spend most of your time in “Active” state: Proposing on blocks, voting on blocks etc
  • Initial Deposit
    • Deposit of ETH is made to a specific contract on Eth 1.0 Network.
    • Validator remains in “depositing” state for approx 7.5 hours to avoid any potential of block reorgs (due to probabilistic nature of Eth 1.0 PoW).
  • Pending State
    • Deposit is recognised by Eth 2.0 chain
    • Validator is officially recognised by Eth 2.0
    • If the deposit is at least 32 ETH, validator joins a queue / waiting list. Mininum wait estimated at 25 mins if the queue is empty, up to days/weeks if the queue is full. This helps slow entry/exit of validators.
    • Eth 2.0 wants to have a stable validator set, so only small number of validators can start/stop at one time.
    • At the front of the queue, the validator can become active.
  • Active State
    • Validators spend most of their time here.
    • As an active validator, you must attest to blocks, else there are (small) penalties.
    • Attest at least once every 6 minutes (once every epic)
    • Occasionally can propose blocks if you want.
    • Validator will remain active unless:
      • Funds drop below 16 ETH
      • Validator asks the network to stop (voluntary exit)
      • Validator is caught cheating (specific types of cheating)
  • Exiting State
    • Validator joins a queue to exit
    • Exiting validators must continue to behave as active until exited, and are still subject to penalties while in the exit queue.
    • Validators cannot stop attesting immediately, without penalty
      • Reduces “hit and run” types of fraud
  • Slashed State
    • Occurs if a validator is caught cheating
    • Validator is immediately fined 1 ETH
    • Labelled as a cheater, forced to exit and marked for additional penalties
    • Slashing can occur even when exiting, or in retrospect when exited
  • Exited State
    • End of lifecycle, no more need to attest or propose
    • 1 day delay before funds can be collected
    • If validator was slashed, Fund delay is increased to 36 days, and after 18 days, validator will be penalised an additional amount based on how many other validators were slashed.
  • Exited for Slashing
    • If 1/3 of the validator set are slashed at the same time you lose 100% of your stake. If it’s just you, it’s like 4% or something then straight line up to 100% at 33% of validator set.
      • Note: this is counterintuitive so will say again. The more validators that are implicated in a cheating event, the more each validator is punished. The opposite of “safety in numbers”.
  • Slashed funds redistributed to other “healthy” validators (at a guess based on other staking mechanisms)
  • Penalties – differ under circumstance. Eg if multiple validators go offline at once, they’re punished more than if only one goes offline. Attempt to prevent centralisation of technologies, centralisation of clouds etc. You are incentivised to run on a different cloud provider vs others.

Minimum requirements to run a validator

  • One validator one vote (not one coin one vote, which is what many other PoS protocols do)
  • 32 ETH is the minimum stake to be considered a valid validator.
  • Your income from validating is based on the number of validators you run, not the amount of coins you have on each validator.
  • If you have more than 32 ETH you can get slashed more than 32 ETH. So no reason to stake more than 32 ETH per validator.
  • Essentially, you just want to run as many validators as you can in lumps of 32 if you are trying to maximise yield per ETH staked.
  • Staking won’t happen unless more than 100k ETH are staked (threshold).

Validator setup

  • 3 components of a basic validator setup
    • Beacon Node = Stores Chain State (think Eth full nodes).
    • Validator = Node registered with Eth 2.0. Doesn’t need to store the chain. Lightweight, need to trust a Beacon Node.
    • Signer = Connects to or is part of a Validator

Implications

  • Validators have are disincentivised to stake more than the minimum of 32 ETH (can be slashed for full amount, so minimise the amount at risk).
  • Cheating or unintentional cheating can be very expensive. Eg accidentally double signing (running hot hot and one goes down etc).
  • So, to get the most juice, run more validators.
  • A fund holding 100k ETH = Need to run 3,125 validators! Significant burden on infra. With sharding, this could get hairy – up to 64x particularly on Beacon nodes.
  • Infra will be expensive.
  • Rewards: Up to 11% annual staking returns (if staking 32 ETH on a validator. If stake eg 64 ETH on one validator, then rewards would be max 5.5%)

What’s next?

  • First multi-client testnet of Eth 2.0
  • Beacon Chain rolling out as soon as July
  • Start preparing early!

Alchemy

  • Alchemy’s goal will eventually be to make it easy for retail investors who have at least 32 ETH to easily become a validator.

Cloud costs

  • ETH full node might cost $500/mth on cloud providers, most of that is on storage.
  • Validator (not beacon node) estimated at sub $100 monthly costs.

My thoughts (not part of the presentation)

  • To be a profitable validator, your revenue needs to exceed your costs.
  • Your annual revenue per validator is (based on 11% interest) 11% x 32 ETH = 3.52 ETH.
  • So your profit is 3.52 ETH less costs of running a validator (cloud / hardware costs, management time etc)
  • Let’s say your cost is $100 / mth, = $1,200 per year (mentioned in the presentation)
  • To break even, 3.52 ETH needs to equal $1,200
    • This implies a break-even price of $1,200/3.52 ETH = $340 per ETH
    • Plus you need to account for the risk of getting slashed.
    • If ETH is below $340, it’s not financially worth you staking.
    • Obviously this number is sensitive to your costs of running a validator node. If your costs are half that (eg $50/month) then you will be profitable at $170/ETH
  • There is a price of ETH below which it becomes loss-making to validate (just like Bitcoin).
  • The real winners are the cloud providers!

Source: https://bitsonblocks.net/2020/06/28/eth-2-0-staking-with-alchemy-mike-garland/

Blockchain

Legacy Records, The First Record Label Paying Music Artists In Crypto

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From painters to digital artists to musicians, crypto continues to find integration across artistic mediums. Music continues to be a field that is ripe for revitalization, from a business standpoint. Accordingly, a number of different musicians have been releasing songs and albums as NFTs. Now, we have what’s being reported as the first official record label looking to get involved. The label looks to have artists join the ranks of other musicians getting involved in crypto.

Two-Pronged Approach

In a press release issued to start this week, Legacy Records CEO Keishia McLeod said it came down to “either get involved or get left behind”. McLeod cited unique income stream opportunities for artists and closed by saying that “this is the future, not a trend”. McLeod has stated previously her intent to drive the label to be at the forefront of leveraging emerging technology in music.

There are two major buckets contributing to Legacy’s approach. The first is the most notable, as the label will become the first to offer artists an opportunity to receive their advance and royalty payments in the form of crypto. The second is to engage artists with NFTs, allowing fans to participate in auctions for unique content. The label’s specific plans around NFTs, and number of artists seeking to get paid in crypto, have not yet been disclosed.

Related Reading | The “Hottest” NFT: Max Denison Pender Creates And Destroys A Self-Portrait In A Volcano 

As the crypto market grows, both artists and businesses are getting involved | Source: CRYPTOCAP-TOTAL on TradingView.com

Legacy Music’s Broader Business Growth 

Las Vegas-based Legacy Records, not to be confused with Sony’s Legacy Recordings, will look to take advantage of the potential press buzz from the announcement. However, in tandem with the release, the label also announced a to-be-name music distributor who has also agreed to pay Legacy Records artists in bitcoin. The label also merged with New Jersey entertainment lawyer Navarro Gray’s ‘The Gray Firm’, to provide legal guidance around digital execution.

McLeod has noted previously that the label has desired being a mainstay in revolutionizing the way music artists do business. In a January interview with the LA Tribune, McLeod cited Netflix’s impact on the film industry, adding that “we haven’t seen that yet in this industry, but it’s coming. We’re going to be a large part of making that happen”.

Related Reading | Reviewing Topps MLB’s First Swing At NFT Tech

Music Artists Emerging Into Crypto

Legacy’s roster has the potential to join a growing list of music artists that continue to engage with crypto and NFTs. Last month, we wrote about long-time hip-hop artist Eminem partnering with Nifty Gateway to release original instrumental beats. Saturday Night Live promptly had a sketch explaining the digital collectibles parodying Eminem’s “Without Me”.

Other musicians engaging with NFTs include DJ Premier, 3LAU, The Weeknd, Linkin Park’s Mike Shinoda, and more.

Each week, our team recaps the week’s NFT action with ‘NFTs In A Nutshell‘ – covering everything NFT, from sport, music, and more.

Featured image from Pixabay, Charts from TradingView.com

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://bitcoinist.com/the-first-record-label-paying-music-artists-in-crypto/?utm_source=rss&utm_medium=rss&utm_campaign=the-first-record-label-paying-music-artists-in-crypto

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Blockchain

XRP, Dogecoin, Chainlink Price Analysis: 17 May

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Dogecoin required to counter bearish conditions before a jump above $0.569 resistance. Lastly, Chainlink needed to push above $45.5 to trigger a bullish comeback after a descending triangle breakdown.

XRP

Source: XRP/USD, TradingView

Gains made over the last three days were impressive especially considering a bearish broader market, but sellers returned at $1.52-resistance. At press time, the cryptocurrency traded within the channel $1.52-$1.31 and reflected a degree of equilibrium between the buyers and sellers. For those hoping to make profits from a volatile XRP market, ADX’s movement dimmed expectations. Since mid-April, ADX has been on a steady decline and a period of consolidation seemed likely.

RSI hovered in the neutral territory around 50. A symmetrical triangle awaited a breakout to the upside and the Fibonacci tool presented a few target levels above the 200% extension level north of $3 (not shown).

Dogecoin [DOGE]

Source: DOGE/USD, TradingView

On the daily timeframe, Dogecoin showed some sideways movement as bulls prepared for the next upswing. The channel between $0.523 and $0.373 was bolstered by the 20-SMA (blue) and formed a reliable buy zone should another dip occur.

As mentioned earlier, breaking above $0.569 resistance could trigger another rally in the DOGE market. Steering clear of $0.73-resistance would heighten the chances of DOGE touching $1. However, bearish conditions still presided and had to be countered first before any talks of an upswing. Awesome Oscillator noted bearish pressure after a series of red bars. MACD line remained below the Signal line but a bullish crossover could signal the onset of an uptrend.

Chainlink [LINK]

Source: LINK/USD, TradingView

Chainlink broke south from a descending triangle and a single candlewick dropped as low as $35.1- representing losses of 14% from the bottom trendline. Now below its 50-SMA (yellow) on the daily timeframe, bearish sentiment could lead to another sell-off towards $31 for LINK. On the other hand, some buying volume was noted on the 4-hour timeframe. A pickup in volumes and buying pressure could lead to a resurgence above $45.5 and this would likely push LINK beyond $50. A broader market recovery could act as a catalyst for such a price swing.

Meanwhile, RSI’s lower highs confirmed weakness after LINK formed a peak at $52.9. Even though Chaikin Money Flow dipped over the past couple of days, the index was still well above the half-line as capital inflows outmatched outflows.


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Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://ambcrypto.com/xrp-dogecoin-chainlink-price-analysis-17-may

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Speculation Tesla Dumped Its Bitcoin Holdings Denied By Musk

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Elon Musk puts to bed rumors that Tesla has sold its remaining Bitcoin holdings. The comments came following his second attack on the leading cryptocurrency. This time, he called out the dominance of Chinese mining pools in a now-deleted tweet.

Bitcoin continued from its weekend slide with another drop today, currently down 5% at the time of writing. Given Musk’s apparent influence on markets, some insist he exercises more restraint on social media.

Tesla Has Not Dumped Its Bitcoin

Last week, the Tesla boss announced his firm would no longer accept Bitcoin as payment for its EVs. The reason he gave was a growing concern about the use of highly polluting coal by miners.

This coincided with a mass sell-off in which Bitcoin was hit particularly hard, closing the day down 13% to $49.5k.

Today, Musk tweeted that Bitcoin is highly centralized due to the small number of mining pools that control the network. He maintains that coal is a significant power source for miners, despite counter claims that the network runs mostly on renewable sources.

“A single coal mine in Xinjiang flooded, almost killing miners, and Bitcoin hash rate dropped 35%. Sound decentralized to you?”

In amongst the responses, @CryptoWhale suggested that Tesla will sell their Bitcoin holdings. Adding that, if that happened, Bitcoiners would only have themselves to blame. He was referring to the outpouring of hate directed at Musk.

Musk replied to the tweet with a response of “Indeed.” Some publications interpreted this as confirmation that Musk had already dumped his Bitcoin holdings.

But in a semblance of grace, Musk put the record straight by saying Tesla has not dumped its BTC holdings.

“To clarify speculation, Tesla has not sold any Bitcoin.”

However, with everything that has gone on since last week, is it only a matter of time before Tesla sells up?

Musk Should Be Aware Of His Influence In Moving Markets

Key crypto figures have rallied together in support of Bitcoin. Michael Saylor announced a $15 million BTC buy adding to MicroStrategy’s already substantial war chest, while Jack Dorsey tweeted a message of support in improving its green credentials.

However, @PlanB took a less nuanced approach by accused Musk of deliberating trying to destroy Bitcoin. The comment came in a poll asking his followers whether Musk has derailed Bitcoin from meeting expectations per the stock-to-flow model (S2F).

S2F refers to a predictive model based on scarcity over time. PlanB, who adapted it for Bitcoin use, puts the price of BTC at a minimum of $100,000 by year-end.

The Managing Partner and Co-founder of Nexo, Antoni Trenchev, said Musk should “wake up” to his influence in moving markets.

“He has to wake up to the reality that with his following, even single-worded tweets can move markets.”

But as some would suggest, he is already well aware of his clout in that regard.

Bitcoin daily chart YTD

Source: BTCUSD on TradingView.com

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://bitcoinist.com/speculation-tesla-dumped-its-bitcoin-holdings-denied-by-musk/?utm_source=rss&utm_medium=rss&utm_campaign=speculation-tesla-dumped-its-bitcoin-holdings-denied-by-musk

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