EthStaker

Candid take from an ex-staker, with an equally candid reply by @sassal.eth. I was never a fan of LSTs and how their hodlers reap the benefits of staking without actually putting in the work, while diluting the solo stakers.

Exited all my validators, and I think it's worth discussing: Ethereum has an incentive problem.

1/🧵

Quit

Independent Ethereum educator, angel investor and advisor. 

Founder of /thedailygwei.

Candid take from an ex-staker, with an equally candid reply by @sassal.eth. I was never a fan of LSTs and how their hodlers reap the benefits of staking without actually putting in the work, while diluting the solo stakers.

https://x.com/0xquit/status/1870581266640511387

Aviator, diver, Etherean, nexialist, PhD in aviation ∩ climate science | Host of /diving /ethfinance /eth-staker /geopolitics /science /singapore /thomas

EVM. ETHFinance. Home Staker. Believer in decentralisation. 

If only we could technically quantify how much every staker contributes to decentralization — and incentivize based on that.

This would enable diminishing returns to running multiple validators (as solo whales and LST operators do).

But, technical pipe dream unfortunately

I made a post on Reddit some time ago that phiz picked up that I sadly can’t find now. It basically says „we as solo stakers are a different kind of breed and it‘s not just (measurable) incentives that motivate us and keep us going“. 

At the same time running a validator from home helps keeping the decentralisation edge which hopefully leads to a unique position in the money competition and hence might be the foundation for a bigger premium. So it’s not just ideology, but also hard to quantify results in moneyness.

I was looking at solo staking multiple times.
But at the end, the math just doesn't make sense. 
It's much easier and more flexible for me to use an LST.

https://chainleft.art

Dad, data scientist, blockchain native artist.

Power consolidation=evil.

I probably have more at stake too and I got 2.3% APY in the past 30 days.

Volume-wise, it’s enough that it covers the cost of hardware and electricity and then some, but percentage wise it’s not enough to justify the opportunity cost relative to alternative “risk-free” investments. My own justification is altruism to the network (@sassal.eth’s point in the replies), but I understand people who prefer to exit and reinvest elsewhere.

What would the APY be without LST dilution? It’s hard to say, because a higher APY would attract more solo stakers, and thus decrease the APY again to some equilibrium, maybe even the same as we have now.

I see this as another trilemma of trying to retain both large solo stakers (sensitive to APY) and small solo stakers (sensitivity to recouping their CapEx), while at the same time LST hodlers benefit from ~equal APY with zero CapEx, no accountability to performance, and freedom to exit instantly

I think it's not an incentive problem. If you own as much ETH as Quit, you have more at stake in the security of the chain than plebs, so you don't get the complain that your rewards are diluted because plebs found a way to get rewards too.

There is nothing more powerful in this world than words.

https://x.com/sassal0x/status/1870644103702327597

𝒞𝒾𝓋𝒾𝓁 𝑒𝓃𝑔𝒾𝓃𝑒𝑒𝓇—𝒮𝓀𝑒𝓉𝒸𝒽.𝐹𝓊𝓃—𝒻𝓇𝒾𝑒𝓃𝒹𝓁𝓎 𝓃𝑒𝒾𝑔𝒽𝒷𝑜𝓇𝒽𝑜𝑜𝒹 𝓃𝑜𝑜𝒷🌴

Looks like we do have common interests! (I co-mod /eth-staker here)

Literally casted the same thing earlier, lol if it do happens we find interests in the same things then I’m made

This has derivative markets all over it. And derivative markets are est. ~1quadrillion currently, 10x global GDP. 

And ofc, derivative markets also have their risk.