As we prepare for Swell’s upcoming launch and settle into a post-Shapella world, we are joined by Sili from InfStones – one of Swell’s Node Operators – to discuss how we see the liquid staking sector evolving, and how InfStones counters the intrinsic risks.
In case you missed it, here are the top five questions from the event:
1. What should be considered when staking Ethereum for the first time?
It is of utmost importance to do your research in the market prior to staking on the Ethereum network.
That includes thinking about how long you want to stake your ETH for, as well as whether you want to stake independently – running your own node infrastructure – or through a liquid staking pool such as Swell.
With native staking you need to consider the queues to enter and exit the validator set, consistent monitoring of your validator, as well as maintaining system upgrades.
With liquid staking pools, you must consider which Node Operator you will be staking with and if they maintain a high effectiveness rating.
2. Is there a way to monitor the uptime of your validator with InfStones?
An effective way of monitoring the uptime of your validator is through Rated Network, a third party source. With Rated Network, you are able to monitor each provider and protocol that runs validators on the Ethereum network.
It is also an effective way to research the Node Operators and their performance before entrusting them with your ETH.
3. What are the risks of staking with a liquid staking protocol?
There are a number of risks that are associated with staking through a Liquid Staking provider that a user must consider prior to staking their ETH.
- Liquidity depth: It is important to consider who you are entrusting to run the nodes. Since LST is a layer of abstraction, it is subject to price risk, also known as depegging, where the assets can be sold below market value. The game theory surrounding this point is a little different now that the Shanghai upgrade is complete, as ETH is no longer locked and users do not need to exit their position through the secondary liquidity market. You will be able to redeem on a 1:1 basis as protocols begin to implement withdrawal functionality.
- Slashing risks: The slashing risks associated with liquid staking protocols are no different from running your own validator. Liquid staking can minimize exposure to slashing because the risk is shared among the operators and delegators in the pool. At Swell, we are implementing the use of a diverse set of institutional grade Node Operators that have an excellent record of uptime and performance across a range of network metrics.
- Smart contract risks: When staking your ETH through a staking provider, you run the risk of the smart contract being hacked. At Swell, security is our priority and we have utilized the leading blockchain security auditor, Sigma Prime, to review the security aspects of our contracts prior to launch.
4. How does InfStones manage risks to minimize slashing events?
As an institutional-grade Node Operator, InfStones manages the risks of staking in a number of ways.
One such risk management tactic is diversifying our client setups by running validators in different cloud environments. This way if something unfortunate happens on platform 1, we can migrate to a new cloud environment to keep the validator running, ensuring that there is no downtime.
From a technology perspective, Distributed Validator Technology (DVT) is another layer to the Ethereum network that diversifies the risks associated with staking. By using DVT we can set up multiple clusters of Node Operators, and if there is a technical issue, the validator will remain online because of this technology.
5. How do you see the staking sector evolving now that Shapella is live and the Ethereum Shanghai upgrade is complete?
At InfStones, we believe that liquid staking is a natural step for Ethereum staking because we have seen that native staking for an ecosystem this powerful is not enough.
Liquid staking is a gateway to diversifying DeFi products, and can also be a gateway for more institutions to participate in the ecosystem.
The team at InfStones are excited to see how the future of Ethereum liquid staking continues to evolve!
Thank you to everyone for attending!
.png)
