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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

Kraken Daily Market Report for February 27 2021

Republished by Plato

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Overview


  • Total spot trading volume at $1.43 billion, down from the 30-day average of $2.1 billion.
  • Total futures notional at $388.7 million.
  • The top five traded coins were, respectively, Bitcoin, Cardano, Ethereum, Tether, and Polkadot.
  • Strong returns from Cardano (+12%), Algorand (+12%), and Polkadot (+11%).

February 27, 2021 
 $1.43B traded across all markets today
 Crypto, EUR, USD, JPY, CAD, GBP, CHF, AUD 
XBT 
$47003. 
↑1.4% 
$445.1M
ADA 
$1.3931 
↑12% 
$387.5M
ETH 
$1475.3 
↑2.1% 
$222.3M
USDT 
$1.0003 
↑0.02% 
$131.7M
DOT 
$34.820 
↑11% 
$103.0M
USDC 
$0.9999 
↑0.0% 
$26.8M
LINK 
$26.326 
↑4.6% 
$23.4M
LTC 
$173.66 
↑1.9% 
$22.5M
XRP 
$0.4446 
↑3.8% 
$21.8M
XLM 
$0.4365 
↑8.7% 
$21.6M
ALGO 
$1.0888 
↑12% 
$10.6M
ATOM 
$19.947 
↑5.4% 
$9.11M
XDG 
$0.0500 
↓0.9% 
$8.72M
UNI 
$23.479 
↑1.6% 
$8.25M
BCH 
$490.82 
↑1.2% 
$7.79M
KSM 
$230.39 
↑6.5% 
$6.77M
XMR 
$215.72 
↑5.5% 
$6.53M
XTZ 
$3.6639 
↑5.4% 
$5.41M
FLOW 
$20.012 
↑1.3% 
$5.13M
GRT 
$1.7118 
↓1.2% 
$4.08M
DASH 
$216.23 
↑4.7% 
$3.95M
AAVE 
$337.48 
↑4.1% 
$3.89M
EOS 
$3.7541 
↑5.7% 
$3.27M
TRX 
$0.0473 
↑4.7% 
$2.97M
YFI 
$32452. 
↑4.2% 
$2.76M
SNX 
$19.217 
↑6.6% 
$2.54M
QTUM 
$5.3802 
↑3.8% 
$2.51M
BAT 
$0.5291 
↑0.4% 
$2.18M
DAI 
$1.0009 
↑0.0% 
$2.16M
FIL 
$37.896 
↑7.9% 
$2.12M
OMG 
$4.5904 
↑3.3% 
$2.09M
NANO 
$5.2985 
↑2.9% 
$1.92M
SC 
$0.0100 
↑1.6% 
$1.91M
ICX 
$1.5462 
↑4.0% 
$1.8M
OXT 
$0.4816 
↑5.1% 
$1.5M
WAVES 
$9.8523 
↑3.1% 
$1.44M
ZEC 
$122.20 
↑3.3% 
$1.21M
COMP 
$416.39 
↑4.5% 
$1.16M
CRV 
$2.0184 
↑4.9% 
$1.06M
LSK 
$3.0572 
↑1.5% 
$990K
KEEP 
$0.3181 
↑3.4% 
$932K
MANA 
$0.2537 
↑1.7% 
$894K
KAVA 
$3.6796 
↑3.3% 
$847K
KNC 
$1.7402 
↑7.1% 
$583K
ETC 
$11.270 
↑5.0% 
$564K
REP 
$31.950 
↓0.4% 
$557K
STORJ 
$0.6360 
↑9.2% 
$507K
ANT 
$4.1877 
↑1.6% 
$497K
PAXG 
$1747.2 
↓0.04% 
$476K
BAL 
$37.645 
↑6.4% 
$383K
REPV2 
$27.355 
↑5.2% 
$221K
MLN 
$36.848 
↓1.1% 
$210K
GNO 
$126.07 
↑2.1% 
$160K
TBTC 
$49741. 
↑0.3% 
$155K


#####################. Trading Volume by Asset. ##########################################

Trading Volume by Asset


The figures below break down the trading volume of the largest, mid-size, and smallest assets. Cryptos are in purple, fiats are in blue. For each asset, the chart contains the daily trading volume in USD, and the percentage of the total trading volume. The percentages for fiats and cryptos are treated separately, so that they both add up to 100%.

Figure 1: Largest trading assets: trading volume (measured in USD) and its percentage of the total trading volume (February 27 2021)

Figure 2: Mid-size trading assets: (measured in USD) (February 27 2021)

Figure 3: Smallest trading assets: (measured in USD) (February 27 2021)


#####################. Spread %. ##########################################

Spread %


Spread percentage is the width of the bid/ask spread divided by the bid/ask midpoint. The values are generated by taking the median spread percentage over each minute, then the average of the medians over the day.

Figure 4: Average spread % by pair (February 27 2021)



.


#########. Returns and Volume ############################################

Returns and Volume


Figure 5: Returns of the four highest volume pairs (February 27 2021)


Figure 6: Volume of the major currencies and an average line that fits the data to a sinusoidal curve to show the daily volume highs and lows (February 27 2021)



###########. Daily Returns. #################################################

Daily Returns %


Figure 7: Returns over USD and XBT. Relative volume and return size is indicated by the size of the font. (February 27 2021)



###########. Disclaimer #################################################

The values generated in this report are from public market data distributed from Kraken WebSockets api. The total volumes and returns are calculated over the reporting day using UTC time.

Source: https://blog.kraken.com/post/8076/kraken-daily-market-report-for-february-27-2021/

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Blockchain

Inverse Finance seizes tokens, ships code: Launches stablecoin lending protocol

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Shortly after culling its community of inactive members, one of decentralized finance’s (DeFi) strangest experiments is launching a new stablecoin lending product.

On Wednesday Inverse Finance revealed the Anchor Protocol, a money market built around DOLA, a protocol-native synthetic stablecoin. Based on “a modified fork of Compound,” in a blog post Inverse Finance founder Nour Haridy compares Anchor to Synthetix, which issues credit in the form of synthetic assets back by overleveraged collateral, and Compound, which issues credit in the form of crypto asset loans also backed by overleveraged collateral.

Ultimately, Haridy sees these models as providing the same utility.

“Lending and synthetic protocols both offer the same service: credit. Anchor brings the gap between them by combining them into a unified borrowing protocol.”

Anchor aims to accomplish this with a unique architecture that always treats the DOLA token as “$1 collateral that can be used to borrow other assets regardless of DOLA’s market conditions or peg.” Users deposit collateral, mint DOLA, and then can use DOLA to take out loans in other crypto assets or simply earn yield on DOLA. 

“For over-collateralized borrowers and leveraged traders, we offer them a one stop shop where they can share their collaterals across their synthetic and token borrowing positions, allowing higher capital efficiency and higher leverage,” says Haridy.

Haridy envisions Anchor will use DOLA for protocol-to-protocol lending similar to Cream’s Iron Bank, for undercollateralized lending (long a prize in DeFi), and for the protocol to “lend itself” credit to pursue yield farming opportunities.

No dead weight

Perhaps more interesting than Inverse’s development at the protocol layer are the moves they made earlier in the week at the governance layer. 

In what may be a DeFi governance first, On Saturday Feb. 20, Inverse community members put forth two governance proposals to seize INV — Inverse’s currently non-transferrable governance token — from inactive community members. On Thursday Feb. 25, the proposals passed, and not everyone was happy with the result.

Haridy says that the timing was intentional — right as Anchor, a protocol that might generate revenue for the DAO, prepares to launch, the community sheds freeloaders. 

“We needed to weed out our dead weight to reclaim some tokens for re-distribution to new active members soon. We also created an INV grants committee with the power to reward contributors and add new members to the DAO. Additionally, when free riders are removed, active members become more incentivized to contribute because they get a larger piece of the pie.”

While the unprecedented move may seem harsh, it’s also simply applying to governance the kind of aggressive style that put Inverse Finance on the map in the first place. By forcing token holders to participate under the threat of seized tokens, it’s helped with the development of Anchor as well. 

“This is a collaborative effort among many DAO members starting from ideation to development to internal reviews and testing,” says Haridy.

The next step for Inverse will be getting Anchor off the ground, and preparing for a world in which INV becomes tradable. Haridy says there’s a growing consensus in the community for tradability. This would mean that the DAO would give up the power to seize tokens, which could alter Inverse’s community landscape.

Haridy, however, seems unfazed by the looming shifts, already preparing the next innovation.

“This will significantly change the existing incentives and may reduce participation. Fortunately, there’s some work on a new alternative governance model that’s been happening internally to address this problem.”

Source: https://cointelegraph.com/news/inverse-finance-seizes-tokens-ships-code-launches-stablecoin-lending-protocol

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Blockchain

3 reasons why Reef Finance, Bridge Mutual and Morpheus Network are rallying

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As new institutional and retail investors enter the cryptocurrency space on a daily basis, large-cap top performers like Bitcoin (BTC) and Ether (ETH) attract the lion’s share of investor’s attention as they are the well-known ‘secure’ blockchain projects. 

Once these new investors get a taste of the mainstay cryptocurrencies and how to navigate the volatile markets, their attention soon turns to smaller cap coins as they search for the up-and-coming projects that could be the next big thing.

Currently, CoinMarketCap shows that there are 8,475 tokens and more are added daily. This makes it difficult to keep up with the latest developments and find solid projects with real-world potential.

With that in mind, here are some interesting projects that have been gaining strength over the past few weeks. 

MRPH/USDT

Morpheus Network (MRPH) is a blockchain platform focused on logistics and supply chain optimization through the use of its SaaS middleware platform which is integrated with emerging technologies.

Supply chain managers are able to use the platform to create a digital representation of their network as information collected is transformed into actionable data, with all steps in the supply chain being notarized on the Morpheus blockchain.

MRPH was trading at a price of $0.412 on Jan.15 before an influx of trading activity lifted the token more than 920% to a high of $4.44 on Feb.8.

MRPH/USDT 4-hour chart. Source: TradingView

The rapid rise in price was due in part to the fresh attention the project received from several well-known YouTube influencers and recent verifiable MRPH partnerships, such as China’s Qingdao Maple Leaf International Trading Co. and the possibility of a partnership with Coca-Cola in Latin America.

Speculations aside, the Morpheus platform currently has more than 100 integrations with industry-leading service providers including DHL, FedEx, SWIFT, Oracle, and Salesforce. With significant real-world partnerships and the attention of cryptocurrency influencers, MRPH has strong fundamentals and is likely to gain more attention from investors.

BMI/USDT

Bridge Mutual (BMI) is a more recent arrival to the decentralized insurance space but it has quickly garnered the attention of investors.

The insurance platform offers coverage for stablecoins, centralized exchanges and smart contracts. It also allows users to provide insurance coverage, determine insurance payouts, and recie compensated for taking part in the ecosystem.

BMI’s initial decentralized exchange offering (IDO) was conducted on Jan. 30 with a token price of $0.125 and it was first listed on Uniswap for $1.03. Since listing, BMI has rallied by 540% to a high of $5.46 on Feb. 3. Currently, BMI trades at $3.24 following the downturn in the market that began on Feb. 21.

BMI/USD 1-hour chart. Source: CoinGecko

Decentralized insurance has thus far been dominated by Nexus Mutual (NXM), but BMI’s arrival offers a fresh challenger to a field with growing demand due to the risky nature of investing in DeFi platforms.

REEF/USDT

Reef (REEF) is a Polkadot-based DeFi platform that aims to offer cross-chain trading powered by a yield engine and smart liquidity aggregator that enables automation of the exchange process.

One issue Reef developers hope to provide a solution for is high gas fees on the Ethereum blockchain that are currently making DeFi unusable for many community participants. The team also hopes to help connect liquidity pools from separate networks, avoiding the need for multiple accounts which can be difficult to keep track of.

REEF/USDT 4-hour chart. Source: TradingView

Work on the project began in the second half of 2020 with the completion of its IDO on Sep.30. Following its listing on Binance and Uniswap in late December of 2020, REEF price bottomed out at $0.0067 on Jan.13 and has since increased more than 750% to a high of $0.054 on Feb.11.

DeFi remains one of the hottest growth areas in the cryptocurrency sector and Reef is well-positioned to capitalize on its continued growth. As the Polkadot ecosystem grows its user base and provides solutions that provide relief from high Ethereum transaction costs, cross-chain functionality projects like Reef stand ready to benefit as decentralized finance goes mainstream.

Source: https://cointelegraph.com/news/3-reasons-why-reef-finance-bridge-mutual-and-morpheus-network-are-rallying

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