Withdrawals are imminent. This March, Ethereum will be undergoing its first hard fork of the year, bringing much anticipated withdrawals to the mainnet. As developers move into the final pre-launch sequence, by upgrading the public testnets (first Sepolia, then Goerli), we wanted to get you up to speed on this coming Shapella (Shanghai + Capella) upgrade.
If you look at Ethereum’s Beacon Chain today, the way to participate as a validator means you must send at least 32 ETH to the Deposit Contract, or “stake” your ETH. The Beacon Chain follows the contract, querying for changes so that it can process any new deposits. The entire validator lifecycle consists of different states that determine what you can or can’t do as part of the network.
Ethereum only allows a small number of validators to start or stop validating at a time to maintain the stability of the validator set. Once you are part of the “Active” set, you start accruing rewards by voting (”attesting”) every six minutes with the occasional proposal. The majority of these rewards are added to the balance of the validator.
At any point, you might want to stop validating and take out your ETH, in which case you would want to join the voluntary exit queue. On the other hand, you might have been a validator for some time and want to utilize the excess ETH, considering the average validator balance is ~34 ETH.
Withdrawals close the validator cycle and mark the end of the PoS transition that started with the Merge in September 2022. Before then, the two chains were unaware of each other. Specifically, the Execution Layer didn’t communicate at all with the Beacon Chain until they merged. Withdrawals stand opposite to the deposit process, crediting your ETH from the Beacon Chain on the Execution Layer to finally close the cycle.
There are 2 requirements for withdrawals to be processed:
For every block, the network scans the validator set for the first 16 validators that satisfy those two requirements. Then, those withdrawals get processed as part of the block in a gasless transaction.
According to the most recent estimate, ~300,000 validators are on the old credentials, meaning the majority of validators will need to change them (it involves digging for those mnemonics created over 2 years ago). This change can only be done once.
Chorus One developed a tool called “eth-staking-smith” that enables the user to generate those signed messages and easily update their withdrawal address.
The process after that is fully automatic. Meaning, you don’t have to do anything else to start spending those rewards, they will be credited to the withdrawal address without your intervention. If all of those validators properly change their credentials, a complete run through the active validator set would take about 4 and a half days. Meaning, you can expect to receive your rewards to the withdrawal address in that cadence.
Please check the official ETH Withdrawals FAQ to learn more about withdrawal mechanics and enabling withdrawals for your validator.
We have previously elaborated on why staking is the most attractive risk-adjusted source of yield in crypto. We believe in its force to provide value at the base level to stakers, deliver competitive results and guarantee that networks such as Ethereum continue to operate as the backbone of a decentralized financial system.
However, the inability to withdraw staked assets on Ethereum has been a risk consideration that stakers had to make before committing to the task for the past years. Not anymore. This massive unlocking of liquidity is sure to make big waves in the coming months and impact the staking panorama of Ethereum. Staking has also made the news with the recent news of regulations in the United States. As a non-custodial staking provider, we continue to believe in this thesis.
With an increasing number of ETH being staked post-Merge, along with growing adoption of the Ethereum network and a rising ETH price, we believe that 2023 will be an even stronger year for Ethereum staking post-Shanghai. However, we must get ready for some changes.
We made our bet on the Ethereum staking ecosystem last year, when we finally unveiled OPUS: our API and Portal solution to significantly speed up institutional staking operations.
Since then, we have been working on many exciting features, including enabling MEV rewards, with more in the pipeline to be rolled out in the coming months. We plan to support withdrawals in our infrastructure as soon as it's safe after the upgrade, and we are working to create the simplest staking and unstaking process in the market for all kinds of institutional clients.
We have been testing this process and will continue to do so on the available testnets for increased security. We also provide a suite of options including the mentioned update of validator withdrawals addresses and a full Portal to consult all rewards accumulated.
Reach out to sales@chorus.one to know more about how OPUS can help you start staking or offer staking to your customers with minimal setup.
About Chorus One
Chorus One is one of the biggest institutional staking providers globally operating infrastructure for 35+ Proof-of-Stake networks including Ethereum, Cosmos, Solana, Avalanche, and Near amongst others. Since 2018, we have been at the forefront of the PoS industry and now offer easy enterprise-grade staking solutions, industry-leading research, and also invest in some of the most cutting-edge protocols through Chorus Ventures. We are a team of over 50 passionate individuals spread throughout the globe who believe in the transformative power of blockchain technology.
For more information, please visit chorus.one
Cryptocurrencies can be used in three kinds of yield-bearing activity. These have cumulative trust assumptions -
We believe staking yield is the most attractive risk-adjusted source of yield in crypto for two reasons:
Proof-of-stake ecosystems do not have an anchor in the real world. This means that the staking yield rate denoted in native terms is completely decoupled from any kind of factor in the wider economy. For staking, endogenous capital (e.g. ETH) is the only factor of production.
This is a difference to proof-of-work (PoW) systems, where electricity and hardware costs serve as an unbridgeable anchor to the real economy, directly affecting a miner’s yield rate. It is also different from most CeFi and DeFi yield sources, which depend more heavily on user activity.
The above implies that staking can be an uncorrelated yield source for two kinds of investors — those that are bullish long-term and denominate their holdings in native units, and those that are hedged against the price risk of the staked asset.
The token price risk may be hedged out through on- or off-chain solutions. The former case has the advantage of transparency, reflected in an improved counterparty risk assessment and iron-clad terms. With some of the largest lending desks in the space embroiled in a liquidity crisis, this is a significant factor. Validators are ideally positioned to execute on-chain hedging, as they directly interface with the staking yield source and thus no custody transfer, i.e. additional risk, is required to interface with a hedging solution.
One increasingly popular on-chain hedging solution is a “staking yield interest rate swap”. This allows validators to swap token-denominated staking yield for a stablecoin, typically USDC, locking in a stable and predictable income for a staking client. The associated risk is very minor as neither the validator nor the swap counterparty takes custody of the principal — the worst case, a counterparty default, would reduce to the price risk on the yield earned on the staked notional. Chorus One can leverage Alkimiya, the leading protocol for on-chain capital markets, to execute this type of hedge.
A second way to hedge is by using the staking yield to finance classic options-based strategies. For example, a zero-cost collar options package may incorporate the staking yield in a way that enables an asymmetric pay-off.
Chorus One is invested in & advises a range of solutions optimizing staking yield for return (i.e. MEV) and risk (i.e. hedging). Reach out to us at sales@chorus.one to learn more about how these can be tailored to fit your use case.
About Chorus One
Chorus One is one of the biggest institutional staking providers globally operating infrastructure for 35+ Proof-of-Stake networks including Ethereum, Cosmos, Solana, Avalanche, and Near amongst others. Since 2018, we have been at the forefront of the PoS industry and now offer easy enterprise-grade staking solutions, industry-leading research, and also invest in some of the most cutting-edge protocols through Chorus Ventures. We are a team of over 50 passionate individuals spread throughout the globe who believe in the transformative power of blockchain technology.
For more information, please visit chorus.one
We are excited to announce that we have onboarded Gnosis Chain as validators. Gnosis is one of the first Ethereum sidechains in existence and has kept close to its values from inception. Gnosis Chain is EVM-based and secured by over 100k validators around the world. It hosts a very diverse validator set and it is propped up by the community governance of GnosisDAO to ensure it remains credibly neutral at a much lower price point than Ethereum mainnet. It powers an ecosystem of DApps including POAP (Proof of Attendance Protocol, the original NFT protocol), Dark Forest (a fully decentralized strategy game, built with zkSNARK technology), Giveth (public goods, peer-to-peer direct funding platform), and much more.
Gnosis has a long history of working alongside Ethereum, although Gnosis Chain is technically a new blockchain. It first specialized in prediction markets, decentralized exchanges, and wallet solutions, and joined expertise with xDAI Chain in 2021 to provide fast and inexpensive transactions. This newer chain has some great features including a block time of 5 seconds (making it ideal for everyday payments), a native stablecoin, a low-fee system (gas fees cost .01 xDAI per 500 transactions), Ethereum compatibility/interoperability, and much more. Gnosis Chain already successfully went through its Merge upgrade and on December 08, 2021, became a full Proof-of-Stake network.
Gnosis Chain runs on a dual-token framework: xDAI, which is a wrapped version of MakerDAO’s algorithmic stablecoin DAI, is the payment coin of the network. By using a stablecoin for payments and calculating gas in xDAI, Gnosis Chain can keep fees extremely low. On the other side, GNO is the staking and governance token for GnosisDAO, allowing validators and delegators to secure the chain. Currently, there are 342k GNO staked for on-chain voting, making Gnosis Chain the third most decentralized blockchain after Bitcoin and Ethereum. Chorus One is thrilled to support Gnosis Chain in our quest to expand the PoS economy.
Block Explorer: https://gnosisscan.io/
Validating Rights: The minimum requirement to run a validator is 32 mGNO (1 GNO). Gnosis follows Ethereum’s Proof-of-Stake rewards system. You can learn more here.
Staking yield: 15.78%
Slashing: Staked tokens are subject to slashing.
To stake GNO or to set up a whitelabel validator, reach out to sales@chorus.one
Climate change is not a new phenomenon and no country is spared from its pangs. Governments & institutions have been slow in tackling it and the results are for everyone to see. The devastating hurricanes in the Atlantic, the extended droughts in the West, and the horrific floods in South Asia are all examples of the increased intensity of natural disasters due to climate change. Though there has been a gamut of initiatives that have promised to fight climate change, one of the most promising ways has been the use of carbon credits.
Carbon credits are a type of environmental commodity or certificate that companies and individuals can trade that represent carbon dioxide that’s kept out of the atmosphere by some act of conservation like reforestation. By putting a price on carbon emissions, carbon credits can help to internalize the costs of climate change and encourage businesses and individuals to find ways to reduce their emissions. Additionally, carbon credits can be traded on a market, which allows for the flexibility to find the lowest-cost emissions reductions and to reward those who are able to achieve the largest reductions. But the carbon credit market has long suffered from issues like lack of transparency, double counting, and/or creative accounting.
Tokenizing these carbon credits on the blockchain is obviously a better solution since the credits can’t be sold/traded once they’re retired, the data is publicly verifiable, and immutable too. That’s why Chorus One collaborated with Regen Network, a platform that originates digital carbon assets unlocking regenerative finance in the world of web3 to offset our carbon footprint for the years 2021 and 2020. We run and operate nodes for Proof-of-Stake networks that are extremely energy-efficient compared to, say, Bitcoin, but that’s not the end of it. We calculated our approximate CO2 emissions for the last 2 years by estimating our team’s device usage, travel to company retreats and conferences, emissions by the data centers we utilize, etc.
This also contributes to the Cosmos ZERO Carbon Campaign, an Interchain Foundation initiative for the entire Cosmos ecosystem to achieve net-zero carbon emissions for their network validator node infrastructure and operations.
CosmosZERO is the first all-ecosystem governance process, and not only keeps Cosmos at the cutting edge of competitive advantage with protocol governance leading the way across the ecosystem to offset our carbon but also is helping usher into the IBC ecosystem the new asset class of interchain carbon credits, which many believe will be uncorrelated with the crypto cycles —
Gregory Landua, Co-founder, Regen Network
We arrived at a total of 130 tons and used the Regen Marketplace to retire an equivalent amount of CO2 via The Mai Ndombe REDD+ Project and The Kasigau Corridor REDD Project. Regen Marketplace was recently launched and allows individuals and institutions to buy, sell, and retire on-chain ecological assets in a few clicks. You can view Chorus One’s portfolio of retired eco credits here.
We hope to encourage more organizations to retire their carbon offsets on-chain. At the end of the day, we have to remember that this planet is the only one we have and we have to do our part to protect it.
