HackMD
    • Sharing Link copied
    • /edit
    • View mode
      • Edit mode
      • View mode
      • Book mode
      • Slide mode
      Edit mode View mode Book mode Slide mode
    • Note Permission
    • Read
      • Only me
      • Signed-in users
      • Everyone
      Only me Signed-in users Everyone
    • Write
      • Only me
      • Signed-in users
      • Everyone
      Only me Signed-in users Everyone
    • More (Comment, Invitee)
    • Publishing
    • Commenting Enable
      Disabled Forbidden Owners Signed-in users Everyone
    • Permission
      • Forbidden
      • Owners
      • Signed-in users
      • Everyone
    • Invitee
    • No invitee
    • Options
    • Versions and GitHub Sync
    • Transfer ownership
    • Delete this note
    • Template
    • Save as template
    • Insert from template
    • Export
    • Google Drive Export to Google Drive
    • Gist
    • Import
    • Google Drive Import from Google Drive
    • Gist
    • Clipboard
    • Download
    • Markdown
    • HTML
    • Raw HTML
Menu Sharing Help
Menu
Options
Versions and GitHub Sync Transfer ownership Delete this note
Export
Google Drive Export to Google Drive Gist
Import
Google Drive Import from Google Drive Gist Clipboard
Download
Markdown HTML Raw HTML
Back
Sharing
Sharing Link copied
/edit
View mode
  • Edit mode
  • View mode
  • Book mode
  • Slide mode
Edit mode View mode Book mode Slide mode
Note Permission
Read
Only me
  • Only me
  • Signed-in users
  • Everyone
Only me Signed-in users Everyone
Write
Only me
  • Only me
  • Signed-in users
  • Everyone
Only me Signed-in users Everyone
More (Comment, Invitee)
Publishing
More (Comment, Invitee)
Commenting Enable
Disabled Forbidden Owners Signed-in users Everyone
Permission
Owners
  • Forbidden
  • Owners
  • Signed-in users
  • Everyone
Invitee
No invitee
   owned this note    owned this note      
Published Linked with GitHub
Like1 BookmarkBookmarked
Subscribed
  • Any changes
    Be notified of any changes
  • Mention me
    Be notified of mention me
  • Unsubscribe
Subscribe
# Liquid staking maximalism * At home staking is not capital efficient (without restaking) * A lot of capital is sitting around with an arguably "tiny risk" * at least that's what the market thinks * This is like asking an insurance to keep enough money around to pay *all* claims in cash at any time. It is impractical * Reality: People build solutions to reuse the capital * LSTs significantly disadvantage home stakers * They also build moats using reputational capital and technology * Restaking solutions can bring some advantages to home stakers, but not all * Both of these make proportional slashing irrelevant (the offending party will only provide a small amount of the capital) * There is no easy way to "restake" from a bad provider (because exits are so slow), even if the community decides they are censoring and most ETH holders would prefer "redelegating" * Staking yields are "internal" to the protocol in that they are only a redistribution between stakes and naked ETH holders. However by trying to make "naked ETH" the default for liquidity, we are imposing significant friction on the system that would not be there if most ETH were staked *Goal:* Design a staking system that is more efficient for Ethereum ## Two tiers of staking capital **Tier 1** $C_1$: At risk. This is capital provided by the staker themself. It attracts the higher staking interest $r_1$. It will be fully slashed on misbehaviour. It can only be staked/unstaked through queues that guarantee weak subjectivity does not get too short. **Tier 2** $C_2$: Each position of tier 1 capital can create, by depositing Ether, a liquid staking token. The capital will accrue a lower interest rate $r_2$. The provider collects an adjustable fee from this, the rest accrues to the staking token. It is not at risk and can be withdrawn instantly at any time. It can also be deposited at any time, but only a maximum amount up to $C_2 = g C_1$ can be deposited for a staking position, guaranteeing a fraction of at least $\frac{1}{1+g}$ of tier 1 capital staked. Suggested constants: $g=19$ $r_1$ to be determined algorithmically similar to current staking returns, however bottoming out at a rate slightly higher than $r_2$, e.g. $r_1 \geq 1.05 r_2$ $r_2$ fixed rate to encourage delegation, e.g. $1\%$ ## Analysis The system is opinionated -- by chosing certain parameters, it tries to separate the tier 1 risk capital (that provides economic security) from tier 2 capital (that does not provide economic security, but allows the community to delegate and choose aligned stakers, for example those staking from home (providing decentralization) and in different jurisdictions (providing censorship resistance). Not all parameters will work -- if the difference between $r_1$ and $r_2$ is too big, then people will create new type of LSTs to add more tier 1 capital. A too small difference can be used in discouragement attacks. ### Economic security The economic security of the system is only provided by the tier 1 capital. If $g=19$, this will mean that at most $5\%$ of the Ether supply can provide economic security. At a \$100 billion market cap, that is still \$5 billion and enough to make double spending attacks unlikely. Ethereum does not rely on economic security for other types of attacks, e.g. on validity, and so this is probably good enough security. I think in reality, current LSTs alread massively reduce the economic security. Lido operators do not provide any guarantees beyond ther reputational capital, which can very quickly evaporate in certain situations. Economic attacks can currently be leveraged by a factor of 4 using Rocketpool, and should LEB4 be activated in the future it will be a factor of 8. I do not see why future staking protocol will not go all the way down to only requiring slightly more than 1 ETH staked per validator, which will mean that economic security will become less than in this proposal. ### Censorship resistance Censorship resistance is ultimately guaranteed by the Ethereum community, consisting of the node operators -- if they wish so. Currently, we hope that stakers do not censor, so we do not have to resort to the nuclear options of hard or soft forks. Adding delegation adds another layer of defense, by allowing the community to redelegate to non-censoring providers (at least as long as redelegation is not censored). This is much preferable to resorting to the nuclear option. ### Efficiency This solution does not require large portions of unstaked Ether, because the liquid tier 2 capital tokens are extremely liquid and exchange rates guaranteed by the protocol. Users can freely choose between the tokens, knowing that they are all equivalent, allowing them to vote only with their conscience for what they believe is a reliable provider (who will not attack or censor the network).

Import from clipboard

Advanced permission required

Your current role can only read. Ask the system administrator to acquire write and comment permission.

This team is disabled

Sorry, this team is disabled. You can't edit this note.

This note is locked

Sorry, only owner can edit this note.

Reach the limit

Sorry, you've reached the max length this note can be.
Please reduce the content or divide it to more notes, thank you!

Import from Gist

Import from Snippet

or

Export to Snippet

Are you sure?

Do you really want to delete this note?
All users will lost their connection.

Create a note from template

Create a note from template

Oops...
This template has been removed or transferred.


Upgrade

All
  • All
  • Team
No template.

Create a template


Upgrade

Delete template

Do you really want to delete this template?

This page need refresh

You have an incompatible client version.
Refresh to update.
New version available!
See releases notes here
Refresh to enjoy new features.
Your user state has changed.
Refresh to load new user state.

Sign in

Sign in via SAML

or

Sign in via GitHub

Help

  • English
  • 中文
  • 日本語

Documents

Tutorials

Book Mode Tutorial

Slide Example

YAML Metadata

Resources

Releases

Blog

Policy

Terms

Privacy

Cheatsheet

Syntax Example Reference
# Header Header 基本排版
- Unordered List
  • Unordered List
1. Ordered List
  1. Ordered List
- [ ] Todo List
  • Todo List
> Blockquote
Blockquote
**Bold font** Bold font
*Italics font* Italics font
~~Strikethrough~~ Strikethrough
19^th^ 19th
H~2~O H2O
++Inserted text++ Inserted text
==Marked text== Marked text
[link text](https:// "title") Link
![image alt](https:// "title") Image
`Code` Code 在筆記中貼入程式碼
```javascript
var i = 0;
```
var i = 0;
:smile: :smile: Emoji list
{%youtube youtube_id %} Externals
$L^aT_eX$ LaTeX
:::info
This is a alert area.
:::

This is a alert area.

Versions

Versions and GitHub Sync

Sign in to link this note to GitHub Learn more
This note is not linked with GitHub Learn more
 
Add badge Pull Push GitHub Link Settings
Upgrade now

Version named by    

More Less
  • Edit
  • Delete

Note content is identical to the latest version.
Compare with
    Choose a version
    No search result
    Version not found

Feedback

Submission failed, please try again

Thanks for your support.

On a scale of 0-10, how likely is it that you would recommend HackMD to your friends, family or business associates?

Please give us some advice and help us improve HackMD.

 

Thanks for your feedback

Remove version name

Do you want to remove this version name and description?

Transfer ownership

Transfer to
    Warning: is a public team. If you transfer note to this team, everyone on the web can find and read this note.

      Link with GitHub

      Please authorize HackMD on GitHub

      Please sign in to GitHub and install the HackMD app on your GitHub repo. Learn more

       Sign in to GitHub

      HackMD links with GitHub through a GitHub App. You can choose which repo to install our App.

      Push the note to GitHub Push to GitHub Pull a file from GitHub

        Authorize again
       

      Choose which file to push to

      Select repo
      Refresh Authorize more repos
      Select branch
      Select file
      Select branch
      Choose version(s) to push
      • Save a new version and push
      • Choose from existing versions
      Available push count

      Upgrade

      Pull from GitHub

       
      File from GitHub
      File from HackMD

      GitHub Link Settings

      File linked

      Linked by
      File path
      Last synced branch
      Available push count

      Upgrade

      Danger Zone

      Unlink
      You will no longer receive notification when GitHub file changes after unlink.

      Syncing

      Push failed

      Push successfully