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Serious Questions/Concerns about staking

Hi there, I’ve invested small amounts and mined ethereum for a while now. I really like the coin, and, I’m excited for some of the changes coming with the upcoming PoS changes. Keyword: some.

First, I had always thought ethereum was “for the common man” and held onto gpu (as opposed to asic or w/ever bitcoin is doing now) mining so normal people could do it. I thought the whole point of decentralized finance was it kinda gives the power back to the people instead of banks or corporations. But the 32 ETH currently necessary to become a solo validator is currently valued at approximately 81,600 canadian dollars (and keep in mind eth is actually down nearly 5% atm). I don’t understand how or even if this is more decentralized/for the people than GPU mining; my 1660s rig which I already had for gaming cost far, far less than that (not apples to apples I know but I want to make a point here). And of course, then there’s slashing. As I understand in order to facilitate the change to PoS and reduce energy and computational use, validating has mathematically become a lot simpler, requiring the stake as collateral to provide security thay way instead, being deducted or “slashed” when a mistake or malicious action occurs. I don’t know a single person (although I could name many banks and corporations!) That can afford an $80,000 investment with any sort of risk to lose it like that.

Of course, there are also staking pools, but do they not provide a unique/vulnerable target for people with malicious intent? Simply join a pool, stake their much smaller share, do whatever you were gonna do, and most of the losses you would experience are pawned off to the pool and others in your staking pool instead. It also allows for wayyy more scam potential in pools, doesn’t it? The biggest risk with mining is pretty much that they just don’t pay out your share; with staking you have to give them money before you can even validate, what’s to stop them from just walking away with it?

How is all of this being combatted? Is it? Do these negatives not outweigh the positive of the energy reduction and increase in validation speed? Knowing all of this, how is staking/validating safe? How is it worth it? Can you even make enough to recoup the $80,000 (and I cannot stress that amount enough) investment for solo validation? If you stake in a pool have they done anything about this? Have you prepared for any of this? Has anything bad happened so far?

Thanks for any help/answers, I’d really like to get into staking once the blockchains are merged but I think these are serious issues and I haven’t found a satisfactory explanation/countermeasure for them yet.

What do you think?

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3 Comments

  1. It seems like your main issue with staking is that it requires a $80k investment to solo stake, and are concerned about getting a fast ROI through staking.

    I would argue that using a validator pool to stake ETH is not more or less secure than solo staking on average. A single validator’s security is only as good as that person’s IT skills and infosec ability. I actively encourage certain people (you know who you are) to use centralized exchanges (CEXs) because they have a high chance of screwing up. If you’re willing to put in the time and effort of getting it right, then solo staking is encouraged because of decentralization from CEXs.

    Smart contract risk for large pools like Kraken’s is low. CEX staking is basically IOUs for your staked Ether, but some decentralized pools also do not hold your withdrawal or ETH2 wallet keys so they have no ability to steal your Ether and payouts are automated. If you’re terrified of the idea of having smart contracts automating payments trustlessly, you should read about how Ethereum functions and how non-custodial staking pools work.

    Also some people can’t even afford 1660s or the electricity cost of mining from a GPU but they can now stake fractions of ETH on pools in PoS. On the other end of the spectrum, those with a large chunk of ETH are now on the same playing field as those who had economies of scale in PoW mining (the guys buying warehouses for thousands of GPUs, buying electricity from backdoor government deals mining millions of $ in ETH). Only now they don’t have to use crazy amounts of electricity. In aggregate, all those people staking fractions of ETH will also be using .1% of the previously needed electricity cost.

    Ethereum was overpaying for security for far too long. But if ROI and profit is something you’re mostly concerned about, just take a look at [Justin Drake’s MEV spreadsheet](https://www.reddit.com/r/ethstaker/comments/n1yye2/justin_drake_says_eths_apr_with_fee_rewards_is/). MEV will earn stakers far more (15-70% – we don’t know what it’ll be) than what’s currently listed as the APY once the Merge goes through. How that fee is paid out varies from pool to pool, so if you are concerned about uncertainty on whether you’ll collect MEV, the only guaranteed way to do so is to solo stake.

  2. Regarding the amount of ETH needed, as far as I know, PoS was always part of the plan. PoW made it easier and fair for people to get involved with mining, and get ETH before PoS. I believe the number used to be even higher, like 1000 ETH, but it went down to 32 ETH, and this was talked about from around 2017-2018. Many OG Ethereans bought the ICO, or after it started (it used to be about $10 when it got listed on Coinbase, so $320 per validator). This was all publicly known, so anybody who was able to look far ahead in the future, and was involved with the community expected all of this, and bought accordingly this entire time, especially during the bottoms of 2018/2019 at $80. I think it’s fair that forward thinkers, and those who have been in the community the longest are able to contribute “work” or their stake to secure the network. That’s also basically the idea behind the security of the network, making it harder for mischievous actors to buy up ETH as the price goes up and attack the network.

    The good thing though, is that anybody is able to stake a fraction of the 32 ETH, whether that’s through exchanges, protocols like Lido, or something decentralized like Rocket Pool. Can’t do that with Bitcoin. I mean you can with mining pools, but you probably won’t easily break even.

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