Blox + Binance Telegram AMA
On February 17, Blox and Binance hosted a Telegram AMA to talk about Blox Staking – Non-Custodial ETH staking, the SSV project with the Ethereum Foundation, CDT, and the upcoming Decentralized Staking Pools 💪
Blox Founder and CEO Alon Muroch took part in the AMA to chat with the community, here’s how it went down!
Binance Questions for Blox
Great question! Blox is the only non-custodial staking service for Eth2. The key difference is that Blox does not keep control over user private withdrawal keys AND private validator keys 🔑 🔑. Keeping custody of your own private keys is extremely important. In case users hand their private keys to a 3rd party their ETH stake might get slashed or their entire stake could be stolen 😥
There were cases in the past in which users got slashed after staking their ETH with a third party. Slashing means losing large amounts of staked ETH and being forced to leave the network. Users should really avoid getting slashed in any way possible as they not only lose money, but also lose the chance to generate rewards from their stake and will not get their ETH back for the next year or so as it is locked up in the network.
In these slashing cases, the services held the user’s validator keys in a centralized fashion, which led to mass slashing events due to technical maintenance errors. With Blox, each user holds his/her own validator key on a personalized remote signer called KeyVault, away from Blox servers and which features built-in slashing protection. This ensures that Blox never has access to any user keys, and that validator slashing risks are reduced, and cannot happen as a group.
I’ve prepared a quick diagram to make it easier to understand:
With Blox Staking, security conscious crypto stakers who might not have the technical knowledge (or patience) to run a validator on their own can take advantage of the ease of use of a staking service while never compromising on handing over their private keys 💪
ETH2 is a very unique piece of technology, you can earn great rewards but we should also look out for:
- Low performance – earning less interest than the network (low risk).
- Penalties – your ETH balance is reduced for low validator performance.
- Slashing – losing a large amount of your staked ETH and getting kicked out of the network. Slashing usually happens when your validator performs a slashable offense such as double signing a block.
Slashings often happen by accident due to technical mistakes. In the case of custodial staking, these mistakes can lead to harsh penalties for all of a service’s users as slashing penalty severity increases the more validators take part in the same event. Blox mitigates slashing risks with built-in slashing protection in KeyVault and due to the fact that validator keys are completely segregated from Blox and one another and cannot incur aggregated slashing penalties like in the case of custodial services.
Blox Staking also solves for the lower severity risks such as low performance and time spent disconnected from the network. In Eth2, a validator needs to be online at all times in order to maximize rewards. Because user validator keys are held in KeyVault, validators using Blox will not suffer from downtimes as could be the case in a DIY setup that experiences internet downtime for whatever reason (power outages etc.).
Other performance risks that can occur due to maintenance errors are also mitigated as our team is handling all of the technical heavy lifting. In the case that updates need to happen, user’s receive notifications to return to the app to “opt-in,” simplifying the process significantly.
As mentioned above, it is the fact that custodial services hold and manage their users’ validator keys grouped together that leads to mass slashing events. With just a simple technical error, ALL of a service’s users can get slashed at the same time 😟. In the cases that occurred to date, the penalty was not so severe (0.5-1 ETH) but in future phases of development slashing penalties are going to increase, we are currently just in a grace period so to speak.
When this occurs, the risks of custodial staking will be even more severe. A staker might lose UP TO HIS ENTIRE STAKE simply due to an error on the part of the service. The penalties grow exponentially, the more validators take part in the same slashing event.. I’ve prepared a graph to show that:
This is why we advocate so strongly for trustless, non-custodial implementations. The job of a staking service should be to alleviate the difficulties associated with ETH staking, not put their users in any kind of danger.
Hope that answers the question, I can’t stress enough how important this is.
That’s actually something I’m very proud of.
Blox recently received a substantial grant from the Ethereum Foundation for developing one of the components in the Eth2 roadmap.
That’s Vitalik’s roadmap and our project with them.
The tech we are working on with the Ethereum Foundation is called SSV (secret shared validators) and it allows private validator keys to be split into a subset of signing keys. The ‘split keys’ can then be distributed between operators which need to reach ⅔ consensus in order to sign a block. This tech will help stakers stay secure and decentralized when engaging with 3rd party staking services. It’s basically the future of staking, we truly believe that a significant part of ETH staking will be done through SSV networks in the near future.
That’s also where the CDT token plays a major role in the protocol.
SSV will allow stakers to split their validator key across multiple services, hence reducing overall risk if any such service incurs problems or downtime, and will also form the foundation of true, decentralized staking pools.
The project is a joint effort with other industry leaders. Most of the development is happening in house currently, but we welcome anyone who wants to join in to contact us on Discord or checkout the github repository to add some code!
Wow… where to begin.
Blox is working on the future of ETH staking alongside the Ethereum Foundation. SSV is planned to be released later in 2021 and our goal is to make sure that a large portion of ALL ETH is staked using SSV technology.
One of the first use cases for SSV will be Decentralized staking pools which will allow users to stake any amount of ETH in a decentralized platform powered by CDT token.
The first step will be to use the grant to expedite development efforts and for smart contract auditing purposes. We will be releasing updates as we go along so stay tuned on our Medium and Docs page for updated information about how the development is going and the use cases that we will be developing alongside it 😎
Live Questions & Answers
We see eth2 staking becoming the biggest defi instrument in the world, to achieve that we believe anyone should be able to stake any amount with ease. We see this happening through SSV pools which are very secure, a product of years of research with the ethereum foundation.
CDT is at the core of the pools protocol (based on SSV tech). We use it for a decentralized oracle to incentivize constant updates to the pool which are crucial for the entire network tokenomics. We are considering using a reverse dutch auction for the reward mechanism.
The 3 biggest components in an eth2 pools network that should be decentralized are:
- the withdrawal address, we use the new EIP 2159 capability to set it to an eth1 address
- the validation infrastructure
All of those components are decentralized in the Blox pools network.
CDT is what drives the pools protocol. We use it for a decentralized oracle rewards system which is crucial for the tokenomics of the pools network.
Great question!! I think by developing a really great product that can compete with centralized services but in a decentralized way. We see that happening with defi, that’s an incredible power of innovation we need to bring to eth2.
Blox staking is very much complimentary. Eth2 is an amazing protocol but it needs great products to be built on top of it to get widespread adoption. For example, smart contracts are amazing but we need companies building stuff to actually make the best of them. The same goes for eth2 staking, as of now it’s a raw piece of tech with a ton of potential. We hope that Blox can make it accessible via decentralized tech such as SSV.
Liquidity is definitely a big part of staking pools, when we launch our SSV network that will be one of the top priorities. As CDT is listed on Binance we hope to have the pool liquidity token listed there as well but that’s up to Binance (ask them :)).
Normal eth2 staking is usually $180/validator/year but we have our early bird promotion on right now so it won’t cost you anything!! If you set up your validator before the promotion ends 🙂
Wow big question. I think the biggest thing is the work we are doing with the ethereum foundation on SSV. That will take time and resources, we hope to have a testnet up and running in 60 or so days. I believe you (the community) should be the judge in terms of CDT, its listings, and so on… I believe that eth2 staking is a huge thing and in it, SSV is an incredible technology + CDT is what drives it. I think we will have an interesting year!
All of our open source tech (wallet, KeyVault, contracts) are audited by the same company that audited the actual eth2 protcol spec. They are called Least Authority and we published their audits in our github and blog posts.