[Temperature Check] Zero ETH Club
Introduction
With the introduction of Stakehouse LSD Networks to the Ethereum ecosystem, the amount of optionality has drastically increased for ETH stakers. Many irrational actors and collectives of positive actors could serve the ecosystem well if only they had more validators. The Zero ETH Club can be an opportunity for those who are already significantly helping the decentralization of Ethereum; They could acquire more validators for the Ethereum network in exchange for quality node operation.
This Temperature Check won’t go into all the nuances and details of the Zero ETH Club, but rather is exploring the idea and to gauge interest.
Motivation
The primary urgency behind this temp check is the need to decentralize Ethereum and empower more node operators. As of March 7, 2023, 41.15% of staked ETH remains in the hands of three market participants. This is an exceptionally large amount of Ethereum blockspace. The simplicity of staking makes it easy for the everyday user to see some of the rewards of ETH staking while forgoing the true benefits of blockchain ownership.
If this trend continues, we will see the fate of many Ethereum users in the hands of an ever-growing few. This is why Stakehouse was created to allow anybody to stake a fractional amount of ETH and have a claim on that ETH in a specific validator.
If there are thousands of quality node operators out there, why are users without the technical knowledge of running a validator asked to forgo ownership and give blockspace to a select few?
Let’s get ETH staking to the mainstream.
Objective
- Find DAO aligned actors who can find quality node operators for the Zero ETH Club.
- Onboard credible node operators for 1,000 validators through community leaders.
Structure
Background
In most liquid staking protocols outside of Stakehouse, node operators are permissioned and liquidity adding is permissionless. In Stakehouse LSD Networks both of these participants can be permissionless. There are parameters available that allow users to gatekeep who is allowed into an LSD Network. This can be done in various ways, but let’s focus on ECDSA address gatekeeping.
Details
If node operators were permissioned, they could be prequalified and receive validators to run for 0 ETH. Rather than permissioning these node operators as Blockswap DAO, it could be beneficial to empower the Ethereum community as Zero ETH Club Representatives. These Representatives could receive rewards in BSN tokens as being a steward of facilitating the connection of quality node operators to Stakehouse. These tokens could be on top of any revenue streams implemented. For example, Representitives could require node operators to join the Representitive’s particular LSD Network which charges a commission.
Node operators who would receive validators for 0 ETH can receive 20% of all MEV collected rather than 50%. This would be similar to offering a node running service with automated accounting. If they are a proven node operator then they likely already have a node setup. Those providing liquidity could deposit via a bespoke Zero ETH MEV staking pool. In exchange, they would receive collateralized SLOT tokens.
The campaign could be run for 120 days after its launch. Any remaining tokens after the campaign concludes shall be returned to the DAO.
Participants
Representatives can put forward proposals to the DAO for their acceptance into Zero ETH Club. Once accepted they can have node operators apply and approve their ECDSA addresses. Qualified node operators can then receive validators for 0 ETH. It would make sense to front-weight the club by granting more BSN to more ambitious Representatives. The DAO can create a BSN emissions strategy to encourage node operators and liquidity providers to join.
BSN DAO
- Create a sub committee to manage Zero ETH Club.
- Distributes BSN tokens.
Zero ETH Club Committee
- Whitelists Representatives.
- Whitelists LSD Networks.
Zero ETH Representative
- Able to whitelist ECDSA addresses to get validators for 0 ETH.
- Receive BSN tokens for well-run validators.
- Must submit a proposal to be approved by the ZEC committee.
Node Operator
- Receives validators to run for 0 ETH.
- Collects 20% of MEV proportional to their asset allocation in the LSD Network (normally 50% for node operators).
- Must have a validator staked in LSD Networks to qualify.
Liquidity Providers
- Deposit ETH in exchange for collateralized SLOT tokens.
- Receive 30% of MEV proportional to their amount of the LSD Network.
- Receive BSN tokens for their contributions.
Zero ETH Club Representatives
The DAO could allow a maximum of 5,000,000 BSN to Representatives to bring validators into the protocol. These could be distributed on a per validator basis and take into account the amount of staking rewards accrued over 6 months. This could be on a sliding scale with the first validator worth more tokens than the second etc. Rewards are only distributed after a group is fully complete. These tokens could be vested for an additional 3 months after the campaign. The idea is to ensure that validators are running optimally. If a validator has a negative yield it should not be worth any tokens.
Liquidity Providers
A special note should be made for liquidity providers. On the surface, it might seem like they are forgoing rewards compared to generic MEV Stakers. That said this is the easiest way for them to gain access to collateralized SLOT tokens. Collateralized SLOT can have a much farther-reaching impact in DeFi as they are directly tied to the blockspace ownership of the validator. They would be the beneficiaries of any type of restaking activities in their proportion such as Eiegenlayer, Relayers, Light Clients, etc. It is like owning a validator but having somebody else run it for you. Because these DeFi protocols are not built yet, it would make sense to have a specialized incentivization for them.
The DAO could give 20,000,000 BSN across the first 1,000 validators in. Tokens would become available after the validator is staked and on a sliding scale where the first ETH is worth more tokens than the second etc. Each group must be fully completed prior to tokens being awarded.
Node Operators
Zero ETH Club allows node operators access to additional revenue through validators. They are already collecting a portion of MEV that they generate with no upfront staking investment beyond the node. Therefore, it does not seem prudent to allot BSN tokens for Node Operators specifically for this campaign. That said, there may be other BSN emissions for node operators in which they could potentially participate.
0 ETH Club Flow Diagram
Misbehavior
Any misbehavior of the node operator would be managed by the Zero ETH Club Representative who allowed them in. If a validator is offline for two weeks, sets the wrong LSD Network fee recipient address, or has other infractions, a notification can be sent to the Zero ETH Club Representative who invited them. From here, the Zero ETH Club Representative has a few options.
- Contact the node operator and see what the issue is.
- Rotate the validator to a different node operator.
- Eject the validator and initiate a Rage Quit.
If a Representative is not taking an active role to encourage quality node operations the committee can step in and determine the next steps.
Proposal
The DAO incentivizes and encourages notable Ethereum community members to create LSD Networks and find node operators.
- The DAO allocates 25,000,000 BSN for Zero ETH Club bootstrapping.
- Create emissions for Representatives and liquidity providers.
- The campaign can run for 120 days after it’s started with all undistributed tokens returned to the DAO.
- The DAO empowers core contributors Blockswap Labs to outline, create, develop, deploy, provide support, etc for the Zero ETH Club.
- Establish a method for Representatives to make proposals, set criteria, and apply by filling out a questionnaire.
Defining Success
Success will be defined as a more decentralized Ethereum. This will be achieved by empowering individuals and giving them the best option as the easiest option. That isn’t to say that home staking isn’t the best route for the network, but rather that not everyone can afford the number of validators they could successfully run. The DAO can also find faster adoption of its protocols and more DAO members with a vested interest in Blockswap protocols.
Conclusion
This is a Temperature Check. That means it is open to community feedback before implementation. If you have ideas on how to improve this flow or know potential representatives please share your thoughts and ideas.