Original link: https://www.hellobtc.com/kp/du/05/3946.html
Author: Terry / Source: Vernacular Blockchain
Author | Terry
Produced | Vernacular Blockchain (ID: helloBTC)
The amount of Ethereum 2.0 pledged exceeds 12.6 million, a record high: According to a report on May 16, the analysis platform Nansen data shows that the pledged amount of Ethereum 2.0 has exceeded 12.6 million, accounting for 10.4% of the total circulation, a record high. The amount of Ethereum pledged on the Lido platform exceeded 4.1 million, accounting for 32.5% of the total amount of Ethereum 2.0 pledged, which also hit a record high.
On March 26, Ethereum core developer Tim Beiko summarized the content of the latest core developer meeting, including the progress of the merged testnet Kiln, the difficulty bomb, the Shanghai upgrade, the progress of the Ethereum execution layer, and more.
On April 13, Ethereum merger leader Tim Beiko responded on social media: The Merge will not be completed in June and is expected to be completed within the year. Not only does this mean a real shift in Ethereum from PoW to PoS, but it also means the so-called “Ethereum 2.0” is accelerating.
01
What is The Merge?
As recently as January of this year, the Ethereum Foundation announced that in preparation for the merger, the expressions “Ethereum 1.0” (ETH1) and “Ethereum 2.0” (ETH2) would be phased out and replaced by “execution layer” and “consensus layer” , there is no doubt that this is literally preparing for the arrival of Ethereum 2.0 in the final normative sense.
And in early December 2021, Vitalik Buterin published an article titled “Endgame” (the final stage), putting forward the view that all blockchains will eventually converge in the future, and at the same time listed a kind of decentralization that allows block verification and tools that happen in a censorship-resistant way.
In short, the beacon chain of Ethereum currently runs separately from the mainnet. Although the beacon chain runs in parallel using the PoS consensus mechanism, the current Ethereum mainnet continues to be protected by the PoW consensus mechanism.
The Merge is where the two systems finally come together – when ready, the Ethereum mainnet will merge with the beacon chain, and the mainnet will bring the ability to run smart contracts and the full history and current state into the PoS system.
That is, after the merger, the existing Ethereum mainnet client (“execution client”) will continue to host the Ethereum Virtual Machine (EVM), and verify and broadcast exchanges, but will stop participating in proof-of-work (PoW) mining, And waive the responsibility for consensus on the blockchain head (top block).
Instead, this consensus will become the responsibility of the “consensus client”, which is responsible for packaging the exchanges from the “executing client” together with the information needed for consensus into “beacon blocks”, which constitute the beacon chain. “Miners” will be replaced by “validators” who need to deposit ETH into an Ethereum smart contract (aka staking):
The ETH staked by the validators will be used as collateral to incentivize them to do the validating work correctly. Validators who fail to perform verification work (for example, because they are offline) or engage in malicious behavior will cause a portion of their staked ETH to be destroyed. On the other hand, validators will be rewarded with ETH if they behave properly.
This marks the end of the Ethereum PoW consensus mechanism. It also means that once the merger occurs, the stakers will verify the Ethereum main network. The entire Ethereum network no longer needs GPU mining, and the previous miners may invest in the new PoS system. .
02
What impact might The Merge have?
According to an information session hosted by ConsenSys, three researchers working on the merging technology believe that the merging of the Ethereum mainnet with the PoS beacon chain reduces network energy usage by at least 99.95%.
The blockchain consists of three parts: consensus layer, execution layer and data availability layer. Merging is an upgrade to the consensus layer, but the gas fee is paid to the execution layer.
This means that The Merge will change the PoW consensus to POS, the PoW chain will not produce new Ethereum, the new Ethereum will only be produced from PoS, which will reduce energy usage but will not affect Gas cost.
According to current data estimates, after The Merge is upgraded to the PoS mechanism, about 600,000 ETH will be added to PoS every year. The number of EIP-1559 destroyed in one year is about 4.7 million.
This means that the net destruction of Ethereum will be greater than the net output from now on, which is -4.1 million pieces. Combined with the current number of about 120 million pieces of Ethereum, Ethereum will not only be issued every year in the future, but will also be in a state of deflation:
(0.6M POS – 4.7M burn)/118M = -3.5%
This will undoubtedly have strong support for prices from the supply side. At the same time, with the advancement of Eth2 and the upcoming implementation of the London upgrade, facing the expectation of destruction, coupled with the demand for PoS, ETH will undoubtedly become more scarce, which is the most powerful boost to the currency price at the demand level.
At the same time, although the current pledged APR is about 4.5%, the income will continue to decline as the total number of ETH pledges increases, but not long ago, Jacob Franek, a core contributor to the Web3 startup accelerator Alliance, tweeted that Coinbase expects the annualized income of ETH pledges. Rate (APR ) will rise to 9-12% after The Merge.
In fact, from this point of view, the behavior of staking at least 32 ETH to obtain rewards can be simply analogized to “Ethereum graphics card mining” in the new situation – every 32 ETH can be compared to a mining machine, and the rewards generated by staking are It is mining output.
03
Ethereum Staking Track at a Glance
However, before participating in Ethereum staking, we need to clarify some unique mechanism designs in Ethereum staking, because this is directly related to the specific participation methods that we can choose in the market.
At least 32 ETH. Deposit at least 32 ETH (or a multiple of 32) into the deposit contract when participating in the pledge, which is undoubtedly a high capital threshold for most users;
Slash punishment. Slash penalty means that the staking node is punished for not complying with the protocol (basically around the technical operation and maintenance level), that is, deducting at least 32 ETH pledged in the node, if the node due to the accumulation of Slash penalty causes the pledged ETH Token to drop to 16 Below the number of coins, the node will automatically withdraw from the network;
It can be seen from the above that the small amount of ETH cannot participate, the technical threshold of the verification node, and the liquidity of the pledged Token are issues that need direct attention to participate in the pledge . At present, the targeted ETH staking services on the market can basically be summarized as “two major problems. Class Four Modes”.
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Managed
The biggest advantage of hosting is that it encapsulates the technical thresholds for node construction and maintenance, and ordinary users don’t have to worry about hardware and software settings, slash penalties, and so on.
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fully managed
Fully custodial users do not need to worry about the operation and maintenance of the verification node. The custodian agency will handle all node affairs. The user only needs to transfer the ETH participating in the pledge to the custodian agency, and the custodian agency will 100% manage, operate and maintain the validator node for the user. And take profit from the pledge income.
Users can also pledge small amounts (less than 32 ETH), because the custodian can help small pledgers make up 32 ETH to participate in the pledge.
However, in the same way, during the pledge period, the user no longer has control over the asset, and once it is attacked, the user’s assets will face greater risks. The details such as punishment cannot be known to the user.
It is not known whether the custodial assets are used for pledge or not. The most fear is that “we are interested in the income, but others are concerned about the principal”. Therefore, for the “complete custody” plan, the credit and brand of the custody institution are very important. .
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Staking pool hosting
On the basis of full custody, the pledge pool solution not only supports small-amount (less than 32 ETH) pledges, but also solves the liquidity problem caused by long-term lock-up of pledge deposits.
The most representative is naturally the Ethereum Staking-related services of major CEXs such as Binance, OKX, etc. The basic mode is to operate and lock ETH on the corresponding interface of the trading platform, and the minimum quantity requirement is only 0.1 low level, which is equivalent to We lock the position on the trading platform, and the trading platform collects the Tokens of the platform users to lock the position through the official channel.
The biggest advantage is one-click fool pledge, no need for at least 32 ETH, and liquidity is also given in the form of centralized guarantee.
In addition, not only CEXs, but also special Ethereum staking protocols such as Lido Finance and Rocket Pool can also allow users to obtain staking income without locking ETH. The solution is similar – 1:1 issuance of stETH to make up for liquidity (Take Lido as an example):
Lido deposits ETH into the Ethereum smart contract and receives stETH as a receipt. The balance of the stETH Token is adjusted over time to reflect the distribution of staking rewards generated by the contract.
At present, from the perspective of user deposit balance, the top two ETH liquidity pledge service providers are also Lido Finance and Rocket Pool, of which Lido occupies an absolute dominant position. As of May 16, it has exceeded 12.6 million Ethereum The number is outnumbered.
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Unmanaged
Non-custodial is decentralized, and the difference from custody is the difference between DEX and CEX, that is, the control of ETH assets is always in their own hands.
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self-built node
It is the most direct non-custodial form for users to run the client and maintain the node by themselves, but it requires strong technical strength and node operation and maintenance experience.
Therefore, the advantage is that users have complete control over the self-built nodes, and there is no centralization risk of centralized hosting, but the disadvantage is that it requires higher funds and professionalism, and it is difficult for ordinary users to participate .
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semi-custodial
After the wallet on the beacon chain is created, two sets of keys are generated, which are the withdrawal key and the validator key:
Withdrawal keys that allow us to withdraw your ETH and rewards when the (Beacon Chain) withdrawal function starts (maybe 1 year away);
Validator Key, the signing key that the validator software actually needs to use when validating the beacon chain.
The withdrawal key and the verifier key do not have to be controlled by the same entity, which provides greater flexibility for the service form of ETH staking, and is also the core idea of semi-custodial solutions represented by imToken and others:
Compared with the self-built node solution, the “semi-custodial” solution allows the separate custody of the verifier key and the withdrawal key, thereby helping users solve the problem of operating and maintaining nodes by introducing a third-party node service provider, that is, asset control and ownership. It is still under the control of the user.
This kind of design is actually similar to EOS, DOT, ATOM, IRIS, etc., which are entrusted to professional nodes, but the asset control is still in their own hands. The disadvantage is that at least 32 ETH is also required, and the capital threshold is high, but the advantages are also very great. obvious:
The asset control and ownership are owned by the user, and the service provider cannot control the user’s principal and income. The pledged funds completely correspond to the verification nodes on the Eth2 chain, the node status is transparent and visible, and the online rate and income level can be tracked in real time.
04
summary
Overall, the vernacular blockchain summarizes the characteristics and advantages of these “two categories and four modes” as follows:
If I could sum it up in one sentence, it would be:
For the vast majority of ordinary users with long-tail needs, based on their own professional technical capabilities and capital threshold restrictions, the custodial type is definitely the first choice , and it is considered liquidity. Among them, pledge pool > full custody.
In addition to the long-tail demand, users with sufficient funds themselves do not have the technical strength and experience in node operation and maintenance, so semi-hosted > self-built nodes ; even if they have technical strength and experience in node operation and maintenance, from a cost perspective, It is also semi-hosted > self-built nodes (of course, those who have feelings, regardless of cost, are not afraid of trouble, friends say otherwise).
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