Validators

Ethereum ‘re-staking’ protocol EigenLayer launches on testnet

The re-staking collective aims to address Ethereum validator economic incentives.

A new protocol that allows Ethereum validators and stakers to “re-stake” their assets onto other emerging networks has just launched on testnet.

The mainnet launch of the EigenLayer protocol is not expected until Q3, however, and testing will be phased in three stages to onboard various participants into the ecosystem. The first stage is using Ethereum’s Goerli testing network.

The project has some serious backing and announced $50 million in a Series A funding round in late March led by crypto venture firm Blockchain Capital, along with Coinbase Ventures, Polychain Capital, Electric Capital and Finality Capital Partner.

EigenLayer aims to become a decentralized marketplace for Ethereum node operators and validators to earn fees on additional services. It allows them to restake assets they received in exchange for staking Ether on platforms such as Lido (stETH) and RocketPool (rETH). The assets can be reused to validate and secure other networks, such as sidechains or non-EVM blockchains.

According to the white paper, EigenLayer also has plans to enable restaking for ETH withdrawn from the Beacon Chain following the Shapella upgrade.

“Ethereum validators can set their beacon chain withdrawal credentials to the EigenLayer smart contracts, and opt-in to new modules built on EigenLayer.”

The protocol aims to address issues with validator economic incentives. EigenLayer founder Sreeram Kannan said that facilitating the moving and re-staking of ETH onto other networks would incentivize validators and stakers with additional yields and allow smaller networks to grow securely.

In late March, Ethereum co-founder Joseph Lubin said that “[t]he Eigen Labs team is at the forefront of some of the most exciting work happening in Ethereum.”

Related: MetaMask Institutional unlocks solo ETH staking marketplace

“Eigenlayer is a new paradigm for fostering protocol-centric innovation through a programmatic, decentralized trust marketplace,” he added. High praise, but it’s worth noting that Lubin’s Ethereal Ventures fund has invested in EigenLayer.

There are currently 17.9 million ETH staked on the Beacon Chain, according to the Ultrasound.Money tracker. At current prices, this is valued at around $33.6 billion, which is more than the entire market capitalization of USDC. It represents almost 15% of the entire Ethereum supply.

Magazine: ‘Account abstraction’ supercharges Ethereum wallets: Dummies guide

Secret Network validator shuts down nodes after leadership turmoil

An internal conflict at the privacy-focused Secret Network has resulted in at least one validator throwing in the towel.

A major validator for the privacy smart contract layer-1 blockchain Secret Network has announced that it will no longer provide nodes and support for the network.

On Jan. 29, major validator Smart Stake announced that it would shut down its Secret Network validator nodes on Feb. 21.

Smart Stake cited “complex/stressful validator operations, cost/effort of validator ops, and recent events,” as reasons for withdrawing its services.

Smart Stake is a staking and validator service provider that supports several networks, including Crypto.com, Polygon, Cosmos, and until recently, Secret Network.

The move comes amid revelations by Secret Labs founder Guy Zyskind, regarding the Secret Foundation’s financial transparency.

On Jan. 28, Zyskind made public allegations that the foundation and its founder and CEO, Tor Bair, “sold a substantial amount of USD worth of SCRT,” —  the native token for the Secret Network — in late 2021.

“Tor cashed out a significant portion of these proceeds,” he alleged.

Zyskind also mentioned a $4 million inflow for the foundation in its Q4 2021 report but did not mention the withdrawal.

“This action was not disclosed in any financial reports provided to the community by the Foundation, which was introduced by Tor as a nonprofit organization on several occasions.”

Bair, however provided his version of events on the Secret governance forum on the same day. He stated that the withdrawals were part of his share of vested tokens.

“Instead of paying out my vested tokens in December 2021, I converted my vested portion of tokens to USD at the OTC price and Secret Foundation distributed these funds as a dividend.”

He added that “this information is verifiable in our 2021 tax filings, which have been previously reviewed by Labs, and I have previously disclosed this information to them.”

The ongoing internal leadership conflict has rattled at least one network validator provider and the ecosystem’s community.

Related: Secret Network resolves network vulnerability following white hat disclosure

SCRT prices have remained immune from the internal imbroglio, consolidating around the $0.80 level for the past week. However, the token is down 92% from its October 2021 all-time high of $10.38 and Bair’s $7 sale price.

Ethereum may now be more vulnerable to censorship — Blockchain analyst

With Ethereum validators being required to stake 32 ETH, Ethereum could become more centralized and susceptible to censorship from governments.

Ethereum’s upgrade to proof-of-stake (PoS) may make it more vulnerable to government intervention and censorship, according to the lead investigator of Merkle Science. 

Speaking to Cointelegraph following the Ethereum Merge, Coby Moran, a former FBI analyst and the lead investigator for crypto compliance and forensic firm Merkle Science, expressed his thoughts on some of the risks posed by Ethereum’s transition to PoS.

While centralization issues have been broadly discussed leading up to the Merge, Moran suggested the prohibitive cost of becoming a validator could result in the consolidation of validator nodes to the bigger crypto firms like Binance, Coinbase and Kraken.

In order to become a full validator for the Ethereum network, one is required to stake 32 Ether (ETH), which is worth around $47,000 at the time of writing.

A pre-Merge report from blockchain analytics platform from Nansen earlier this month revealed that 64% of staked ETH is controlled by just five entities.

Source: Nansen

Moran continued to say that these larger institutions will be “subject to the whims of governments in the world,” and when validator nodes identify sanctioned addresses they can “be slashed rewards and then eventually kicked off the system,” with businesses prevented from interacting with them:

“Either you will comply and you will siphon off that sort of interaction […] or you run the risk of being fined, being scrutinized, or potentially being sanctioned yourself.”

Vitalik Buterin spoke about this risk in an Aug. 18 developer call, suggesting one of the forms censorship could take is validators choosing to exclude or filter sanctioned transactions.

Vitalik went on to say that as long as some validators do not comply with the sanctions, then these transactions would eventually be picked up in later blocks and the censorship would only be temporary.

On Aug. 8, crypto mixer Tornado Cash became the first smart contract sanctioned by a United States government body.

Related: Rep. Emmer demands an explanation of OFAC’s Tornado Cash sanction from Sec. Yellen

In reaction, various entities have complied with the sanctions and prevented the sanctioned addresses from accessing their products and services.

The development has had a large effect on the Ethereum community, with EthHub co-founder Anthony Sassano tweeting on Aug. 16 that he would consider Ethereum a failure and move on if permanent censorship occurs.


Ethereum’s Bellatrix upgrade hiccups jangle nerves, but it’ll be right on the night

The Bellatrix upgrade was the last major upgrade before the Ethereum Merge, which will transition the network’s consensus mechanism to proof-of-stake.

The Bellatrix upgrade preparing Ethereum for the Merge was successfully completed on Tuesday. However, concerns were raised over an almost one in ten missed block rate across the last 600 slots.

The Bellatrix upgrade updated Ethereum consensus layer clients at epoch 144896 on the Beacon Chain prior to the upcoming Merge scheduled for sometime next week.

However, 5% of the validators dropped offline during the hard fork, which contributed to the 9% missed block rate, according to Gnosis co-founder Martin Köppelmann. This led some observers to question the network’s readiness for the big switch to proof-of-stake (PoS).

Köppelmann added that the 9% figure was 1700% higher than the historical missed block rate of 0.5%. The issue may be related to the 25.6% of clients that Ethernodes cites as “not ready” for The Merge.

Percentage of Ethereum Clients that are Merge ready. Source: Ethernodes.

Partner of Cinneamhain Ventures Adam Cochran said he hoped the “big spike” in missed blocks would get debugged before the Merge proper, adding that “we really don’t want to be seeing unexpected issues at this late stage.”

But, not everyone is concerned. Anthony Sassano, founder of the Daily Gwei said that having only 5% of validators falling off the network was actually an “an amazing result” and confidently stated “there’s not actually much that can go catastrophically wrong.” with the Merge:

“I would say that the ‘worst case scenario’ would be if the chain just halts because the switchover from PoW to PoS didn’t work at all – this would then require some sort of coordinated human intervention to fix.”

“Though if we see things like validators dropping off the network due to configuration issues, missed blocks/slots or some clients having major bugs, these things wouldn’t be cause for major concern as they are relatively easy to recover from,” he added.

Related: 74% of Ethereum nodes ‘Merge ready’ ahead of Bellatrix upgrade

The Bellatrix upgrade is one of the last steps prior to the Merge and enables Ethereum consensus layer clients to execute transactions on the Beacon Chain.

The Ethereum Merge will transition the network to a PoS consensus mechanism, which is set to make the network more efficient and secure.

Ethereum community splits over solutions for transaction censorship

Social slashing and even a user-activated soft fork have been suggested as possible responses to the threat of transaction censorship on Ethereum.

The Ethereum community has been divided over how to best respond to the threat of protocol-level transaction censorship in the wake of the United States government sanctions on Tornado Cash-linked addresses. 

Over the last week, Ethereum community members have proposed social slashing or even a user-activated soft fork (UASF) as possible responses to transaction-level censorship on Ethereum, with some calling it a “trap” that will do more harm than good and others stating its necessary to provide “credible neutrality and censorship resistance properties” on Ethereum.

The heated debate comes after Ethereum miner Ethermine elected not to process transactions from the now U.S. sanctioned Ethereum-based privacy tool Tornado Cash, which has prompted members of the Ethereum community to worry about what would happen if other centralized validators did the same.

The Ethereum community is also debating the effectiveness of social slashing to combat censorship on the Ethereum network, as the strategy could lead to a chain split with some validators processing transactions on the censorship-less chain and the others validating only the OFAC-compliant chain.

Social slashing is the process whereby validators have a percentage of their stake slashed if they don’t correctly validate the incoming transactions or otherwise act dishonestly.

This may become a significant issue if regulators require major centralized staking services like Coinbase and other major centralized pools, which together stake more than 50% of Ether (ETH) in the Ethereum Beacon 2.0 chain to only validate OFAC-compliant chains.

Founder of Cyber Capital Justin Bons argues that slashing “is a trap” that “represents a greater risk than the OFAC regulation” and will not be a viable solution to tackle censorship at the protocol level.

In a 21-part Twitter thread on Monday, Bons said that social slashing exchanges may “deprive innocent users of their deposits,” which would “violate their property rights.”

Bons also said that too many validators complying with law enforcement on Ethereum would “lead to a chain split,” at the point at which “censors start ignoring or do not attest blocks that contain OFAC violating TXs.”

Founder of Ethereum podcast The Daily Gwei Anthony Sassano wrote on Twitter on Saturday that “collateral damage is inevitable in social slashing […] it’s worth it to protect Ethereum’s credible neutrality and censorship resistance properties.”

Meanwhile, Geth developer Marius Van Der Wijgen shared a similar sentiment stating that preserving censorship on the Ethereum network should be the Ethereum community’s highest priority:

“If we allow censorship of user transactions on the network, then we basically failed. This is *the* hill that I’m willing to die on.”

“If we start allowing users to be censored on Ethereum then this whole thing doesn’t make sense and I will be leaving the ecosystem. […] I think censorship resistance is the highest goal of Ethereum and of the blockchain space in general, so if we compromise on that, there’s not much else to do, in my opinion,” he added.

Related: Tornado Cash ban could spell disaster for other privacy protocols — Manta co-founder

Crypto researcher Eric Wall added that to date, censorship resistance has served as a core property on the Ethereum network and that while we’re seeing some censorship on the front end, “it’ll only get bad if censorship starts happening side Ethereum itself.”

The Tornado Cash sparked censorship debacle has plagued the Ethereum community for over a week now.

Helium network team resolves consensus error after 4-hour outage

The network downtime affected token transfers and miner rewards, but not devices during the 4-hour outage caused by a failure in the Consensus Group.

The Internet of Things (IoT) blockchain Helium shut down for about 4 hours on Monday due to validator outages from a software update, causing delayed transaction finality.

During the outage, devices transferring data over the network were not affected, but miner rewards and token transfers were left pending. The team resolved the issue by skipping the blockchain forward by one block and resuming normal functions.

At 10:20 am EST, the Consensus Group stopped producing blocks at block height 1435692 on the Helium blockchain, according to a status update. Lacking network consensus, token transfers could not be completed, and new blocks were not being produced.

Helium is an IoT network that uses physical radio hotspots to allow users to connect to their devices from anywhere there is radio coverage. On the Helium network, a Consensus Group consists of 43 validator nodes randomly chosen in fixed intervals to provide network consensus.

In the postmortem for the event, Helium engineers cited two reasons validators stopped creating consensus on the network.

First, an issue with a Friday software update for validators contributed to the problem. The v1.12.3 update was designed to provide support for the 5G Mobile subnetwork and its MOBILE token.

Additionally, a “local network outage” was also to blame. In the project’s Discord channel, Helium moderator Digerati explained that a high concentration of validators randomly chosen as the Consensus Group at the time of the outage was running on the same Amazon Web Service (AWS) network, which experienced technical difficulties.

AWS is a global cloud computing and data storage service that can be used to enhance computer networks like Helium.

A Helium community moderator explains an AWS outage affected validators.

Compounding the problem was the failure of an auto-skip feature that should have chosen a new Consensus Group automatically. The team stated that “a known issue prevented the auto-skip feature from working as expected.” However, it is not clear what the “known issue” is that the team referred to.

Although the network could not choose a different Consensus Group, it was designed with the ability to skip the blockchain a block forward “to mitigate situations such as these,” according to a 10:56 am ET announcement from the team.

Related: Cloudflare outage affects multiple crypto exchanges

By 1:45 pm EST, new block production started with block number 1435693. The team said it worked closely with validator operators to ensure they were synced correctly and released a new software update.

HNT is down 4.1% over the past 24 hours, trading at $8.76, according to CoinGecko. It is down 84% from its November 2021 all-time high.