On 26 September, Amor Sexton, Blockdaemon’s COO, joined a panel at the prestigious European Blockchain Convention, hosted in Barcelona, on the topic of, “The State of Staking Infrastructure.”
This discussion covered a wide swathe of topics related to staking, ranging from how technical staking compares to other DeFi activities, the key focus for regulators, approaching protocol upgrades, scaling opportunities, and more.
With an institutional emphasis, some of the key insights shared by the panel are outlined in further detail in this blog.
Staking involves locking up a specific amount of cryptocurrency to support and secure a blockchain network that uses a Proof of Stake (PoS) consensus mechanism. Participants, known as stakers, commit their tokens to validate transactions and maintain network integrity. In return, they secure rewards, usually in the same cryptocurrency they staked. For example, on Ethereum, validators must stake 32 ETH by depositing it into a smart contract to participate.
While staking focuses on network security, other activities like yield farming, liquidity mining, and running masternodes aim to generate rewards through decentralized finance (DeFi) platforms.
A key takeaway from the panel was the regulatory focus on protecting investors while maintaining innovation, balancing a tailored, risk-based approach to unlock the potential of staking while minimizing risks for participants.
The approach spans across a number of key areas:
The panel discussed the implications of Ethereum’s Pectra upgrade, expected in Q1, 2025. Pectra combines the upgrades of the Execution and Consensus layer, "Prague" and "Electra."
Pectra is designed to improve user experience (via. smart accounts), reduce network congestion, and to achieve more efficient staking. Pectra also introduces features like peerDAS and increased blob counts, aiming to scale capacity for Layer 2 solutions, enabling higher usage at lower transaction costs.
Regarding institutional staking, two aspects in particular are relevant - Maximum Effective Balance (Max EB) and Execution Layer Triggerable Exits.
The Max EB proposal allows validators to stake any amount between 32 and 2,048 ETH, enabling auto-compounding of rewards. This removes the need to stake in fixed increments of 32 ETH, enhancing capital and infrastructure efficiency. It benefits solo stakers by allowing organic growth of their stakes, improving decentralization without being disadvantageous to larger institutional stakers. Consolidating validators could also reduce the total number on the network, aiding future scalability improvements.
This proposal lets stakers initiate exits directly through the execution layer, eliminating the need to go through staking providers. It reduces dependency on third parties, mitigates potential risks, and gives liquid staking protocols more control over their node operator sets, removing business continuity concerns and removing the need to store pre-signed exit messages.
Following the discussion of Pectra, the panel also discussed key opportunities with regards to staking:
The panel discussed the Node Operator Risk Standard (NORS) as a positive development for the industry. NORS provides third-party certification to ensure node operators meet enterprise-grade standards for Ethereum validator risk management. Developed collaboratively by industry experts, including Blockdaemon, and with KPMG as the first NORS Qualified Assessor, NORS enhances security and simplifies staking due diligence for institutions.
Blockdaemon offers a comprehensive staking solution, including a dashboard, reporting, APIs, and in-app staking capabilities.
Blockdaemon was an early infrastructure provider for EigenLayer, actively participating in their Node Operator Working Group and becoming one of the first to support their EigenDA AVS launch.
Blockdaemon has also added single-click support for Eigenlayer as part of a significant upgrade to the staking flow design in the Blockdaemon app. The new UI makes it easier and more intuitive than ever to stake and restake using the Blockdaemon app.
To learn more, book a call with the Blockdaemon team today.