Introducing The rETH V2 After The Ethereum Merge
The Merge Background
We have all witnessed Ethereum’s Merge (The Merge) occur successfully on September 15, 2022. Post-merge, the consensus layer of Ethereum is switched to Proof of Stake from Proof of Work. This Merge will greatly improve the efficiency of the Ethereum Execution Layer.
Additionally, the PoW consensus layer is decommissioned while the Beacon chain in Proof of Stake starts operating. The Beacon chain acts as a host for all the dApps in the Ethereum ecosystem to provide validations and security for all the transactions executed. This indicates that StaFi rETH dApp is also currently running on the Beacon chain.
Unstaking and redemption are not currently supported at the time of writing. However, it will be enabled after the Shanghai Upgrade following The Merge.
The Merge is the most important upgrade for the Ethereum ecosystem. Thus, we are excited to upgrade the rETH dApp V1 into V2 to optimize UI/UX and match increasing demand from the community after The Merge.
rETH V2 Introduction
The Merge, in summary, is the change of its consensus layer while its execution layer still remains unchanged. Therefore, StaFi rETH users don‘t not need to change any of their operations on rETH dApp when The Merge occurs (in theory). However, the StaFi team would still like to upgrade the current rETH dApp V1 to optimize the contract execution and improve the UI/UX for stakers as well as original validators. Most of these upgrades are aimed at lowering the entry barrier when onboarding new users.
The development work of rETH V2 has been ongoing for months. We have also recently completed the security audit from PeckShield. We are currently awaiting the final launch of the V2 interface which is scheduled to arrive in the next few weeks. Consequently, we will consider launching new incentive programs to support the peg of rETH returning to parity.
The main upgrades of rETH V2 are as follows:
1. Enhanced UI/UX for stakers and validators
We will optimize the UI/UX in V2 to provide an improved staking interface for stakers, validator onboarding process and validator dashboard.
The validator interface has the biggest upgrades made in order to make it more user-friendly for original validators to deposit ETH, upload files, manage nodes, and view staking rewards in different nodes.
With our improved V2 dashboard, both stakers and validators may easily view all related staking statistics.
2. Furtherly lower down the ETH deposit amount to run a ETH2 node on StaFi
In order to further lower down the required ETH deposit amount for original validators, we are introducing two new types of original validators, solo validators and trusted validators.
1)Solo validator is the permissionless original validator who will not require governance from the community to obtain ETH allocations from StaFi to run the ETH2 nodes.
2)Solo validators will still need to deposit 4 ETH per node before getting ETH allocations from StaFi.
3)When the unmatched ETH amount in StaFi Staking Pools is more than 28 ETH, solo validators immediately obtains the 28 ETH allocation from the StaFi rETH pool after depositing 4 ETH into the pool, thus successfully running one ETH2 node.
1)Trusted validators are reliable institutional validators invited and permissioned by the StaFi Foundation (permissions will be provided to the StaFi DAO in the future).
2)Trusted validators will be whitelisted to onboard with no required ETH deposit, and will obtain 32 $ETH allocations per node.
3. Reducing validator gas fee when deploying a ETH2 node on StaFi
In V2, the gas fee of deploying an ETH2 node for validators will be reduced by optimizing the ETH matching mechanism and process. It will not require the matching of pool addresses and validators any longer, which will result in lower gas fee need by validators to onboard on StaFi.
4. Support multiple deposit Tx and files upload Tx in a time
In rETH V1, the validators are required to deposit ETH and upload the validator files one by one, which is time consuming and inconvenient especially when validators are looking to run multiple nodes on StaFi ETH staking pool.
Therefore, we will optimize the process to support depositing multiple amounts of 4 ETH and validator files simultaneously. This will allow validators to setup multiple nodes with a few clicks. However, we will also be limiting the total amount of ETH2 nodes that an original validator is allowed to operate on StaFi to avoid the centralization of validator voting power. The initial number of maximum nodes per validator address will initially be determined by the StaFi Foundation. However, this will be decided by StaFi DAO on-chain governance in the future.
A validator will be able to create 10-20 nodes in the first stage depending on gas consumption. The maximum amount of uploaded files at a single time could be increased in the future if there is such demand from our validators.
5. Integration of Distributed Validator Technology(DVT) (SSV.network / Obol)
StaFi will cooperate with Ethereum DVT projects such as SSV and Obol to provide the choice of using professional ETH2 validator services for our community members who would like to run the ETH2 nodes on StaFi but do not have enough related expertise.
With the integration of these DVT projects, StaFi validators may decide between running the ETH2 nodes all by themselves or by using SSV or Obol to run the nodes, which could make original validators more decentralized, scalable and efficient.
6. Addition of priority fee distribution mechanism
After The Merge, StaFi rETH original validators may have the chance to be awarded priority fee which are the tips paid by the transaction senders. Priority fee will be received in a multi-sign address controlled by the StaFi DAO and will be distributed in the same way as staking rewards: StaFi DAO charges 10% commision, validator charges another 10% as commision, the remainder will be split between solo validators who deposit 4 ETH per node and liquid stakers proportionally.
rETH original validators that are found not using the receiving address designated by StaFi DAO will be black-listed from running any validators on StaFi. Simultaneously, their deposited ETH will be deducted as a penalty to compensate liquid stakers.
7. Addition of auto re-stake feature to compound staking rewards
StaFi will re-stake rewards received from the priority fee to compound staking rewards for liquid stakers after The Merge. After the withdrawal function is enabled (after the Shanghai Upgrade), validators will be able to re-stake the rewards received from the validation rewards, priority fees and MEV rewards to compound staking rewards.
The Merge is not the final destination of Ethereum. rETH V2 is not the end, instead it is a new beginning. The next hard fork of Ethereum may enable the withdrawal function of staked tokens on ETH2. We will support the redemption function as soon as the Shanghai Upgrade arrives.
There are many innovations worth exploring, such as the MEV rewards and decentralization of the ETH2 nodes. Co-concurrently, we will also be adding reward reduction mechanisms to original validators to compensate potential losses of the liquid stakers’ benefits when the downtime and slashes occur from the staking rewards and deposit of original validators..
StaFi aims to improve and explore these innovations continuously to enhance the security and yield generation for our users.
StaFi is the first DeFi protocol unlocking liquidity of staked assets. Users can stake PoS tokens through StaFi and receive rTokens in return, which are available for trading, while still earning staking rewards. rToken is a synthetic staking derivative issued by StaFi to users when users stake PoS tokens through StaFi rToken App . rTokens are anchored to the PoS tokens staked by users and the corresponding staking rewards. rTokens can be transferred and traded at any time.