Read the notes below for more details.backgroundCamila Russo (host) - host of DefendMike Silagadze (Guest) - Founder and CEO of ether
Read the notes below for more details.
background
Camila Russo (host) - host of Defend
Mike Silagadze (Guest) - Founder and CEO of ether. fi
Ether. fi - A decentralized and unmanaged $ETH equity mining agreement
Basic knowledge of Ether.Fi and current equity mining
Mike stated that ether. fi is a protocol aimed at simplifying the user rights mining $ETH process. The goal of ether. fi is to make this process more accessible to non-technical users.
Mike stated that users can mine $ETH rights through ether. fi without having to run the verification node themselves. This is particularly beneficial for users who do not want to handle the complexity of verifier key storage and management. Ether.fi uses a secure and unique ECIES implementation, allowing rights miners to share validator keys and retain control over them.
He stated that ether. fi uses multi-layer encryption and security measures to protect users' keys. Even if the key is leaked, ether. fi's smart contract mechanism can still be restored. Most users do not need to handle any complexity related to key management.
Mike stated that ether. fi is the only equity mining agreement where equity miners can retain control of their keys, while other agreements completely abandon custody. This provides security and control for equity miners, allowing them to retrieve their $ETH even if the protocol or node operator encounters any issues.
He added that the control of retaining keys distinguishes ether. fi from other protocols that require users to trust node operators or completely abandon custody.
He believes that composability is another major difference between ether. fi, which involves various methods of re equity mining and building on top of ether. fi.
Mike said that with the increase in the number of $ETH participating in equity mining and the decrease in revenue, it is necessary to find alternative revenue streams to maintain the security of Ethereum. He said that ether. fi addresses this need through innovative methods.
He stated that in the initial stage, equity mining through ether. fi requires a multiple of 32 $ETH. However, a multi-stage roadmap has been planned that allows for equity mining of fractional amounts of $ETH. By the end of June 2023, people will be able to conduct equity mining on the fractional amount of $ETH.
Centralization concerns, Lido, and independent equity mining
Mike talked about centralization concerns in equity mining agreements. He added that centralization may be an issue in equity mining, as if the majority of equity in the network is controlled by a few entities, it may lead to power concentration and potential security risks.
Mike said that unlike Ethereum 2.0, which requires a minimum of 32 $ETHs for equity mining, Lido allows users to equity mine any number of $ETHs. When users engage in equity mining through Lido, they will receive $stETH tokens representing their equity mining and the rewards they receive. These $stETH tokens can be used in other DeFi protocols.
However, Mike expressed concern about Lido's centralization. He said that Lido is controlled by a multi signature wallet, which is a digital wallet that requires multiple signatures to authorize transactions.
Mike introduced the concept of 'OperationSoloStacker' to address these concerns. This is a feature of ether. fi that allows users to run validation nodes themselves. This provides a choice for users who are willing to bear the risks and benefits of managing key security. By providing this option, ether. fi aims to provide a balance between ease of use and decentralization.
He added that ether. fi does not run servers for equity mining. The node operator is responsible for running these servers. Trusted node operators and untrusted individuals running nodes from homes or small offices participate in the network.
Mike stated that ether. fi focuses on building smart contracts and creating a market between equity miners and node operators.
At startup, ether. fi has six trusted node operator partners. Currently, there are 12 independent equity miners and six trusted node operators participating in the network.
Mike said that Ethereum faces the challenge of node distribution, and many nodes are concentrated in specific regions, such as the United States and Europe. The concentration of nodes in Amazon's USEast 1 and other data centers has raised concerns about Single point of failure and potential vulnerabilities.
He added that certain incentive mechanisms, such as low latency for specific activities such as maximum extractable value (MEV), encourage node operators to place nodes in the same location as other nodes. This leads to uneven distribution of nodes, concentrated in a few locations.
L He said that the concentration of nodes in a specific data center would pose a risk to the stability and resilience of Ethereum network. A one-time event, such as a fiber optic line cut or data center shutdown, may result in significant disruptions and financial losses.
Re equity mining and Ether.fi
Mike stated that re equity mining is the process of using the rewards obtained from equity mining to continue equity mining, thereby increasing the total equity mining assets and potential future rewards.
L He said that re equity mining aims to extend Ethereum's trust and security mechanism to other blockchains and services that need active verification. By using the security layer of Ethereum, you can start a new blockchain with certain security at the beginning.
He added that the process involves creating a programmable penalty mechanism where violations can result in the penalized equity mining $ETH. The extracted credentials can be directed towards the smart contract, and if the validator misbehaves, $ETH can be programmatically penalized. Verifiers can use their $ETH to validate multiple blockchains or services and receive rewards for each validation operation.
Mike stated that re equity mining introduces complexity and risks, as Vitalik and others have pointed out. However, economic incentives make equity mining possible.
He added that further equity mining can make the operation of independent nodes more profitable. This encourages the geographical distribution of node operators and contributes to decentralization.
Mike stated that EigenLayer is collaborating with Lido to conduct re equity mining. Local integration with EigenLayer may be more popular as it has lower complexity compared to other solutions.
Mike stated that re equity mining can create conflicting pressures for validators of multiple blockchains or services. If a particular verifier service becomes large and faces problems, it may exert pressure on the Ethereum community to roll back or fork to save the service. This may affect the social consensus of the Ethereum community.
He added that when validators are punished, it directly affects their rights to mine $ETH, but does not necessarily affect overall network security. If equity mining is carried out through the agreement pool, the punishment may affect the entire agreement pool.
L He said that if most Ethereum verifiers mine their $ETH rights into an agreement, and the agreement faces problems or is punished, it may indirectly affect the security of Ethereum itself. However, the lost right to mine $ETH itself will not make Ethereum unsafe.
EtherFan, NFT, and alternative governance models
Mike introduced EtherFan, a unique model in the ether. fi protocol that combines non homogeneous tokens (NFTs) and governance elements.
He said that in EtherFan, users mine their $ETH for equity, and in return, they receive encapsulated deposits representing their equity mining in NFT. This NFT is not only a digital collectible, but also represents the user's rights and interests in mining under the agreement. By using more $ETH for equity mining, the NFT can be upgraded and loyalty points can be accumulated over time. These loyalty points can lead to higher membership levels and higher agreement revenue share.
He said that this model introduces a novel governance approach. EtherFan does not use traditional governance token voting systems, but instead uses these NFTs as "membership cards" for protocol governance. Users can use these NFTs to vote on proposals or elect governance committees for protocols. The structure of this governance model is more like a cooperative, where members make decisions on the development direction of the agreement based on their equity mining and loyalty points.
Mike believes that this model is a novel pattern that lies at the intersection of DeFi and NFT, known as NFTfi (NFT Finance). It attracts users who are interested in NFT, as well as those who are interested in the practicality (such as governance rights) that these tokens can provide. At the same time, it also has a gamified element that may attract users interested in NFT speculation.
Regulatory Challenges in the United States
He said that ether. fi is taking important measures to prevent customers in the United States and Canada from using the agreement due to regulatory uncertainty in these regions. The regulatory environment of Cryptocurrency in the United States is complex and evolving, and the lack of clear guidelines may make the operation of Cryptocurrency projects in the country risky.
L Mike criticized the Standard Model of DAO and governance token, saying that these models are usually in the regulatory gray zone. He believes that ether. fi's model does not involve governance tokens, but rather uses NFTs for governance, making it less likely to be seen as securities and therefore less likely to receive regulatory scrutiny.
He also stated that ether. fi does not raise funds through these tokens. Instead, they are just a $ETH equity mining agreement that includes a member Loyalty program. This is another way for ether. fi to attempt to navigate in a regulatory environment and minimize potential legal risks.
Mike also talked about the extensive impact of US regulation on the Cryptocurrency industry. He believes that the regulatory environment in the United States is driving many innovations abroad and may become a hindrance to the US economy. In view of the current regulatory atmosphere, he suggested not to set up Cryptocurrency companies in the United States.
Future Vision of Ethereum and ether.fi
Mike believes that the majority of the future $ETH supply will be used for equity mining. This is because equity mining is a key part of Ethereum 2.0, which is the process of upgrading the network to the consensus mechanism of equity proof.
In addition, he predicts that the majority of equity mining's $ETH will also be re equity mining. The rewards obtained from equity mining $ETH will be used for more equity mining $ETH, forming a compound interest effect.
As for ether. fi, Mike stated that they have a vision and hope that the agreement will play an important role in the future of equity mining and re equity mining. He mentioned that ether.fi has adopted self limiting guidelines, which will not exceed 22% of Ethereum's verifiers, to demonstrate its commitment to decentralization.
L Mike believes that Ethereum or other smart contract platforms will become the default settlement layer in the world and create a lot of value for $ETH. He believes that Ethereum is a clear leader in the field of smart contract platform, and is willing to bet on its continued success
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