The Evolution of Solo Staking

Daniejjimenez
SafeStake
Published in
9 min readFeb 25, 2024

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How isolated solo staking nodes will morph into a finite set of large, distributed validators — by Daniel Jimenez and Chris Isaac (@ethstak3r.eth)

Ever since staking on Ethereum has been available, solo staking has been the gold standard for keeping the network secure and decentralized. But a recent post from Ethereum’s creator might change all that forever…

Running an Ethereum validator to help secure the network, above and beyond monetary interests and gain, is certainly one of the most noble motives driving solo stakers to run their own nodes.

But, running a solo staking node comes with its fair share of challenges and risks, and operators must possess above average technical knowledge to configure their hardware and software correctly, generate and store private keys, and perform other tasks to ensure their node and validator is secure, runs properly, and avoids being slashed.

It is safe to say that the main challenges and risks of running a solo staking node are: the 32 ETH minimum requirement, slashing, inactivity penalties, and key storage/security.

1. The 32 ETH Minimum Requirement

To earn rewards by running a validator that secures the Ethereum network, a staker must first have 32 ETH. At current prices, this puts running a solo staking node out-of-reach and pushes most stakers toward one of many liquid staking services that subtract from Ethereum’s decentralization.

2. Slashing and Penalties

Slashing warning on the Ethereum Launchpad

As you can see from this warning on the Ethereum launchpad, stakers who try to cheat the system or act in a malicious way toward the network or other participants risk having their validators slashed. Depending on the severity of the offense and the number of validators taking part in the same offense, slashing will result in the validator losing some or all of its deposit and being forcefully exited from the network.

Additionally, if a validator is unable to perform its duties, it will not be slashed, but it will incur small penalties for failing to attest. However, a validator will be slashed if it participates in something called a double attestation, when the validator key runs on two or more machines simultaneously.

In most cases, a double attestation is the result of a solo staker attempting to create a fault-tolerant environment via redundant nodes to keep their validator online in the event of a hardware malfunction. However, this could happen by mistake, if a solo staker accidentally deploys the same key on two different DVT platforms, for example. Either way, intentional or not, the result is the same.

3. Key Storage & Security

Key storage warning on the Ethereum Launchpad

Here, the launchpad aims to ensure that solo stakers understand that 1) key storage and security is solely their responsibility; and 2) if they are unable to locate the private key (mnemonic phrase) in the future, they will not be able to withdraw their deposit and earnings unless they provide a withdrawal address when creating the validator.

Additionally, secure key management is paramount for solo stakers to avoid vulnerability to attacks or theft of Beacon Chain withdrawal credentials.

In many cases, these challenges and risks are enough to deter many stakers from running a solo node.

Solo Staking Nodes

Standard solo staking node (validator) architecture

The double attestation factor that forces Ethereum validators to run on single nodes makes them prone to single points of failure. Even with enhancements proposed by some Staking as a Service (SaaS) protocols, attempts at recreating these isolated systems while reducing their single points of failure will likely prove to be an inadequate proxy for the decentralizing benefits that only solo staking seems to provide.

And, there is another factor that exists in addition to large staking services, that also subtracts from Ethereum’s decentralization and increases the opportunities for block censorship, and that is the overuse of certain execution layer (EL) and consensus layer (CL) clients.

So, how do we keep Ethereum decentralized and secure, while making staking accessible to as many as possible?

Encourage more solo stakers? Reduce the staking threshold?

Actually, the rather surprising answer to both questions appears to be “no.”

Recently, Vitalik Buterin, Ethereum’s co-founder and a major ongoing contributing developer, posted that he believes the best way to solve these issues is by ensuring all ETH staking happens via DVT-based staking pools.

A portion of Vitalik Buterin’s post focusing on DVT

As you can see, Vitalik proposes to eliminate solo staking and increase the minimum deposit for validators to 4096 ETH, while decreasing the maximum number of validators to 4096. While it may sound contradictory at first, when one explores it more, this plan actually makes perfect sense to achieve Ethereum’s goals. This, of course, rests on the very important caveat that all staking pools are DVT-based, ensuring both staked ETH and staking rewards are more evenly distributed, and not concentrated only in the hands of large, centralized players.

Here, it is extremely important to note that Vitalik’s vision will not happen overnight. Solo staking will not go away tomorrow, or anytime soon for that matter, and it is unlikely that the 32 ETH minimum requirement to run a validator will change in the very near future. However, it is always a good idea to stay up-to-date with what’s going on with Ethereum and its planned upgrades so you’re sure to make the most informed decisions.

So, if solo staking isn’t disappearing anytime soon and stakers still need 32 ETH to run a validator, what’s next?

Solo Staking via DVT

The DVT that Vitalik is referring to stands for Distributed Validator Technology. In general terms, DVT securely divides a validator’s private key into multiple key shares and distributes those shares to multiple nodes that will attest on the validator’s behalf. In the case of SafeStake, nodes are managed by independent and decentralized professional operators on a permissionless network.

By using the key shares instead of the private key itself, DVT protocols allow multiple nodes to run Ethereum validators by consensus, keeping them online 24/7/365 and available to perform duties, thus minimizing penalties. With DVT, validators become distributed, running on multiple nodes for fault tolerance and security, while avoiding any risks of a double attestation (slashing).

What is SafeStake?

SafeStake is a unique and vertically integrated implementation of DVT that is being rolled out in three stages. Everything SafeStake does has been built into the protocol from the ground up. While there may be outward similarities between SafeStake’s web UI and others in the space, that is where the similarities end. With SafeStake, there is no need for any third-parties, additional programming, or integrations, and currently there is no SDK. SafeStake has been programmed to do everything it needs to in all three stages safely, securely, and with stakers in mind out-of-the-box.

In SafeStake Stage 1, solo stakers with 32 ETH or more that want to earn rewards by running a validator are able to do so easily and without risk using our secure, decentralized, non-custodial web interface.

With SafeStake, only three (3) out of four (4) nodes
are needed to produce a signature for the Beacon Chain

In Stage 1, users generate and retain custody of their private validator keys throughout the entire process. Key security is our top priority and keys are never sent to the SafeStake network or stored on our servers.

SafeStake Stage 1 is currently in its final stage of testing on Holesky and is expected to launch on Ethereum mainnet sometime in March.

SafeStake Stages 2 & 3 will introduce liquid staking, mini-pools, and pooled validators, along with automatic Distributed Key Generation (DKG) and lower ETH staking thresholds.

SafeStake uses only the most advanced cryptography to securely and automatically split a validator private key into encrypted key shares and distribute the shares to operators in the committee. No additional action is required from the stakers or operators.

Additionally, unlike standard solo staking, SafeStake does not require that users have technical expertise to keep nodes active. Once they deploy their validator on the SafeStake network and choose the operators that will attest for it, stakers can sit back, relax, and earn staking rewards while the protocol and operators take care of the rest.

Advantages of Staking with SafeStake

Written in Rust (vs. Go)

  • supports client diversity — operates on top of the minority client Lighthouse
  • better performance and security
  • single node supports 150–200 validators

Utilizes Hotstuff for Operator Committee consensus (vs. iBFT or qBFT)

  • offers higher levels of validator performance in both normal conditions (4 out of 4 ops attesting) and when only 3 out of 4 ops are attesting (1 node offline or compromised)
  • minimizes validator penalties

Built-in, fully automatic Distributed Key Generation (DKG)

  • NOT a third-party or add-on solution
  • becomes enabled in SafeStake Stage 2 to handle private key generation for pooled validators
  • Works AUTOMATICALLY:
  1. “Initiator” operator (running hardware node) makes 4 ETH deposit to create mini-pool and chooses 3 other ops to manage the validator with them >
  2. protocol automatically initiates DKG >
  3. key generation ceremony happens automatically >
  4. operators in committee each receive one key share

Built-in liquid staking (Stages 2 & 3)

  • LSD/liquid staking pool w/ 1:1 stETH
  • Stage 2 — increases ETH staking accessibility — lowers ETH staking threshold to 4 ETH
  • Stage 3 retains the “initiator” role and further decrease the staking threshold for solo/retail stakers to 0.1 ETH

No Oracles Needed

  • We have initiated innovation from the ground up, realizing that the current RocketPool protocol relies on an oracle to control and secure the mini-pool assets. SafeStake’s unique design runs the DKG scheme from the very beginning, during the operator committee setup, ensuring no single party can control the mini-pool assets and eliminating the need for oracles.

To summarize, SafeStake is a turnkey staking solution for solo/retail stakers AND an added layer of decentralization for large, centralized liquid staking services!

Stage 1 works with any Ethereum validator by importing the keystore file using the ultra-secure drag-n-drop web interface.

  • Stage 1 — import keystore file, pay operator fee, sit back and relax!
  • Stage 2 — deposit as little as 4 ETH, sit back and relax!
  • Stage 3 — deposit as little as 0.1 ETH, sit back and relax!

Operators running nodes for staking services (SaaS) can simultaneously run their nodes on SafeStake to decentralize validator operations and earn additional rewards that increase as more validators choose them.

Staking services and node operators always have the ability to choose how they would like to interact with SafeStake’s DVT functionality — with or without our liquid staking protocol — by choosing to be an “initiator” operator (4 ETH deposit) or standard operator (run node only — no ETH deposit).

Final Thoughts

It is clear that something needs to be done about the centralization and inequality issues present in the current ETH staking ecosystem.

Large, centralized staking services are dominating the landscape and choking out solo stakers by earning the vast majority of MEV rewards, while becoming a potential threat to the network by controlling huge amounts of staked ETH.

DVT, via Layer 2 platforms like SafeStake, offer a potential solution to increase decentralization, reduce censorship, and allow the maximum number of people to participate in securing the network by staking small amounts of ETH into a finite set of large distributed validators.

As time progresses, it will be interesting to watch how DVT, and the various players behind the specific DVT implementations, influence the future of staking.

CALL TO ACTION: TEST DRIVE SAFESTAKE
Right now, you can get ready for SafeStake’s launch on Ethereum mainnet by test driving our DVT platform on Holesky. Run a validator or operator node today and be ready for the future of decentralized Ethereum staking!

Until next time, happy staking!

About SafeStake

SafeStake is a pioneering technology company focused on revolutionizing Ethereum staking. With its cutting-edge, decentralized Distributed Validator Technology (DVT), SafeStake provides an ultra-secure, fault-tolerant environment for Ethereum validators, maximizing staking rewards and minimizing penalties. SafeStake is committed to driving the growth, innovation, and decentralization of the Ethereum network while ensuring the security and prosperity of its participants.

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