Insights —

User Profile

Has a strong high-level ecosystem knowledge base, but not particularly technical.

Actively seeking and researching relevant information through various mediums.

Interested in Validation for the Rewards and ROI.

Holds 32 ETH+ and plans on running multiple validators.

First time helping secure a Decentralized network. Has not mined on Ethereum previously and most likely not participated in an existing PoS network.

Wants to experiment and use this as a unique learning opportunity, is mindful but not overly concerned about the lock-up period.

May currently underestimate the educational requirements, personal resources, and overhead required to run and manage a beacon node and validator client on Eth 2.0.

Prioritizes network security and decentralization.

Interestingly, those looking to participate in Staking do not seem to consider DeFi as a favorable alternative due to the systematic differences, varying risk profiles, and differing incentive models involved.

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Educational Needs

With the introduction of PoS and a breadth of new systems in Eth2.0, we naturally introduce a laundry list of novel concepts and terminology that need to be introduced and taught to the users for them to be able to succeed as validators. Interview candidates expressed their concerns with existing Validator documentation often being targeted to the wrong demographics and being difficult to navigate while attempting to locate information when things do go wrong. Areas of educational topics with participant quotes regarding their need for respective information are presented below:

Hardware Requirements: Most users expect to use local devices to run and manage their nodes / validator clients. Considering the fact that a large percentage of participants feel that a personal computer and Raspberry Pi would be the ideal solution implies that there is a certain degree of preconceived notions when it comes to topics relating to the necessity to sync to an ETH1 chain, security, and operational risks with running on personal devices and more. In addition, users may be overestimating the reliability of having persistent internet connectivity. Guidance on the best setup that maintains core principals of decentralization is required.

“What Hardware to use and whether I could set up a cheap machine through e.g. AWS or similar to ensure it stays online.”

Lock-up Period: Participants need better indications of how long the lock-up period is, both from a financial and operational standpoint as they cannot voluntarily exit the system and then restart later. Their stake will be stuck until phase 1 or longer.

“When will be able to withdraw ETH 2.0 tokens? This will affect my decision on when to begin staking. i.e. What is the lock up period?”

Deposit Contract: The irreversible one-way nature of the deposit contract and the key generation process is a novel concept. Additionally, there is a very high-risk factor for potential phishing attacks. Sources highlighting trusted interfaces and service providers is required.

“Would love EF to push out a single page as a source of truth.”

Locked-up Ether (bETH /ETH2.0?): The locked-up Ether should not technically be considered another asset class. However, due to the nature of the lock-up phases, service providers will naturally see an opportunity to provide liquidity on the staked ETH. Many have begun to refer to the staked ETH as beacon ETH or “bETH”, while others are referring it to as “ETH2.0” which can become a problematic concept for new participants to grasp, additionally, other services providers such as Rocketpool intend to introduce their own liquidity mechanisms such as “rETH” etc further complicating matters.

“How will bEth earnings be converted to regular ETH?”

Client implementations: All the clients will have different programming languages, performance, security, tooling, usability, stability, and even differing rewards/penalties based on how widely the client is being utilized on the network and what type of optimizations have been done for attestations. Participants will need a source of truth to gain unbiased information and perspective on what client might be optimal for their use and why they should consider diversification among clients.

“Key differences between clients and how rewards differ from client to client.” “Which client is reliable? I don’t want my deposit being slashed.” “Understanding uptime/performance of different clients before network starts”

Syncing to the ETH1 chain: Most users do not yet realize that in order to become a validator you are required to run or connect to an existing ETH1 node.

“Do we need to be running a Ethereum 1.0 node to switch to staking?”

BLS Key pairs: Introduction of new Key generation mechanisms. Key management will be nuanced with a Signing key for validator activities and a Withdrawal key required to exit the system. Additionally, existing software wallets and hardware wallets do not currently support BLS Keys.

“Key Generation. Key Management. Which keys to store and how they are used to exit the system?”

Beacon Node requirements: 49.5% of participants expressed that they did not know if they should run their own beacon node. More resources are needed on the requirement for running and maintaining a beacon node and for what purpose.

“Clarify Incentivization and de-infura-ization of beacon nodes.” “Finally decide if connect to node or host by myself”.

Eth 2.0 Economics: The system economics are complicated and ever-evolving. Participants will require clear insights into how things will mature and how they can optimize their participation based on varying circumstances.

Some sort of stats regarding returns. Like how much ROI would I get if there are these many validators in the network etc.

Rewards and ROI: Rewards are tied to the overall amount of ETH staking in the network. Rewards are the main motivating factor for people to be interested and willing to participate in the validation process. Therefore, participants should have a clear indication of what type of returns and benefits they should receive for early participation and how that will impact them moving forward.

“What can be done with staking rewards in Phase 0 e.g. can they be used to stake? Are staking rewards based on the total value currently locked (including previous rewards), or only the 32Eth initially staked? That is, can rewards be used to generate any value (prior to a 2 way bridge or Phase 2)?”

The risk profile of participation: Participants do not yet have a clear indication of risks involved with validation and staking in Phase 0. Guidance should be provided upfront in an easy to understand manner and the related consequences highlighted appropriately for people to evaluate before choosing to participate.

“Is there a possibility that I lose my investments if anything goes wrong or can you rewind the system.” “Would want to fully understand slashing and what risks I take on by running my own validators in that regard”.

Validator Duties & Guides: ~75% of participants wish to fully participate in the validation and management process. This will be the first time most of them will be actively taking part in securing a decentralized network and will have varying degrees of understanding. Guides are needed that explain the nature of the duties involved, the benefits, risks, and provide guidance toward best practices to follow and how to troubleshoot issues.

“I am a non-dev, but I have an Avado and plan to run a validator and stake. However, I am not sure regarding the “security” of my network. Things like VPNs and network security are like another language to me. I could have a huge security issue (network or device) and I don’t think I would know.”

Slashing vs Penalties: Participants often confuse the concepts of slashing/penalties and the nuances of what are actual Slashable events and what events are instead simply penalized and to what extent.

“Under what circumstances my stake could get slashed. For example, if the machine freezes or my router breaks and I’m on vacation?” “How likely will it be that a staking pool would get slashed”.

dPoS vs PoS: Participants still have a varying understanding when it comes to the nuances related to Validating and Staking on Ethereum and how it differs from other Delegated PoS networks.

“How can I stake without running an own node, validator etc. I would like to delegate like in cosmos or tezos with my ledger or trezor.”

Staking vs Validation: The term Staking is utilized in the blockchain eco-system with quite a few different implications. Unlike delegated PoS networks, only validators that actively participate in consensus receive rewards in the Ethereum PoS Network. Unless using external services, participants need to not only post ETH as collateral / Stake but also perform active duties.

“Understand staking mechanisms, so I know what I’m committing to”.

Phases: Since the various development phases have large implications for validators and how they are able to actively participate, there is a need to ensure that the information being presented about the progression and implications is easily accessible and simple to understand for non-developers who are not actively following the development work being done. Estimations of development phases are always difficult and often unable to effectively map to the real-world consequences of systems, but are nonetheless required as a frame of reference for people looking to decide to participate.

“I need more clarity surrounding the transition from ETH1 to ETH2 (especially in regards to a potential Eth2 Phase 1.5) and how this will affect my validating abilities.”

Terminology: Approximately 40% of participants expressed having staked on other PoS networks in the past and therefore have a certain frame of reference when dealing with key terminology which may be utilized under different circumstances in other networks. We need to be mindful of providing appropriate context when referring to key terminology about Ethereum and how it is used amongst interoperable systems.

“Being certain I know all the terminology for validators, nodes, clients.”

Experimentation / Testnets: Participants want to experiment and learn in a low-risk environment before committing to the network.

“I would like to run my setup for a while first. To know everything will run properly when it’s time for phase 0.” “I don’t have programming background. So far interaction with testnets make me worried about staking more than a few validators for the sake of supporting the community’s work”

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Fears and Anxieties

When asked about the greatest Fears and Anxieties respondents had with participating in Phase 0 of Eth2, most of the replies fit under the following categories: Client / Validator Management, Security, Usability, Exposure of Funds, Ethereum Phase progression / Lock-in, and Errors.

Client / Validator Management:

“Losing the stake due to hardware failure/power etc ie: long offline period.” “Client is not reliable” “Unsure about reliability of internet connection” “Sync issues” “Stability of the software”

Security:

“Unknown major vulnerabilities.” “Hack occurs while ETH is locked up” “Vulnerabilities of deposit contract” “Lack of understanding risks on home network security”

“An attack on my private keys.”

Errors:

“I won’t be able to do anything to fix a problem. So far all I’m able to do is copy paste the command line instructions and seems to work. But no clue what to do if need to upgrade or if any problem.” “Mostly related to technical proficiency and doing something wrong. I think most people are the same. Make it idiot proof!”

Usability:

“Validator goes offline and aren’t properly informed. Also managing multiple validators if the UX sucks.” “My only concern is lack of CLI experience”. “Mixing up all the keys and withdrawal keys of several validators”.

Exposure of Funds:

“Price of ETH 1 remains higher than the price of ETH 2, creating little incentive to convert from ETH 1 to ETH 2.”

“ Losing all 32 eth due to factors outside of my control”

“Overcommitting and needing access to the locked funds before it becomes available”

Ethereum Phase Progression / Lock-in:

“If phase 1 and later are delayed a ton, will ETH 1 remain the de-facto chain for a significant time after phase 0 release, and are my funds permanently stuck on the beacon chain until activity picks up there?” “One way bridge means a significant chunk of my holdings might be inaccessible for 1 to 1.5 years, being unsure how far out Phase 1 / 2 are.”

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Competition to Decentralization

Staking on exchanges and Staking as a service providers are intrinsically counter-intuitive to decentralization. With many creating services that facilitate custody solutions, pooling of tokens for leverage, and exchange functionality. Barriers to entry to act as a validator need to be on-par to that of the user experience with using Exchanges, Pooling, and Staking as a service. However, these services are necessary to filter out and facilitate individuals who may not have the resources or facilities to effectively participate in validation, causing needless losses to their funds and unreliable nodes.

Results showcase that most respondents who are actively following the space for Phase 0 are not interested in utilizing Staking as service providers, however that requires that the UX allows anyone interested to easily become an active participant and understand the benefits of maintaining system decentralization. Additionally, participants are far more likely to choose to participate in Staking pools over Staking as a service.

“Why should I stake? I need incentives other than the return. Explain to me what I am helping”.

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Staking / Validator User Experience

There is a clear need to focus on end-user interactions and help craft mental models that allow users to easily understand and contextualize the benefits, risks, and duties required with participation in Eth 2.0 Staking without having a deep technical knowledge of the protocol and implementations.

Participants do not currently have a good indication of the key differences between the various client implementations, with only 9.9% of respondents expressing their confidence. Users state Security as the main consideration when choosing a client, User Experience and Stability follow closely behind. Although, most individuals are interested in participating in staking due to the ROI, the anticipated differences when it comes to reward generation amongst the different clients is not one of their leading concerns when choosing which client to utilize. Additionally, most users do not yet know the intricacies of the Economic models behind Eth 2.0 and how specific client resource consumption and attestation optimizations have an impact on resultant rewards. With only 30% of participants choosing Rewards as a decision point for clients, it would seem that they instead consider the security, performance, and stability as better indicators of their ROI due to the risks associated with Penalties and Slashing on the client-side.

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Validator Tooling

Understandably, not many of the client implementers have begun to work on helping participants overcome and navigate the technical challenges and risk factors associated with validation and staking independently. Therefore, most of the UX/UI innovation is coming from the staking service providers or staking pools which currently stand to capture the lion’s share of the participation market.

Participants also state that they would be far more likely to utilize a well designed GUI over a CLI for managing their nodes and validator clients, to circumvent user errors from their end which in turn would potentially expose their Staked Ether to penalties.

More granular insights around Validator UIs and tooling will be shared in upcoming posts.

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