The rollout of eth2, which is scheduled to go live in the coming weeks, presents a historic moment for the industry and a unique opportunity for enterprises to provide their retail or institutional customers the ability to earn rewards in exchange for turning their ETH into a productive, participating asset.
Due to its unique network conditions and the nature of the one-way bridge in the early phases of the protocol, choosing a secure and reliable infrastructure provider that you trust and that will serve both your current and future needs is critical.
Here are three things you should keep in mind when making your decision:
Once Phase 0 goes live, users (or a user’s custodian) will be able to deposit their ETH in the official deposit contract and will be credited with the same amount of ETH on the Beacon Chain to begin validating and earning rewards on eth2. In order to achieve steady security and mitigate complexity in the early bootstrapping phase of eth2, both initial deposits and accrued rewards will be transfer-restricted and non-withdrawable until the launch of Phase 1.5 or later. This one-way bridge is expected to last for at least 24 months, which is also the time commitment you should be comfortable with when choosing your provider.
Once set up, your validators will remain active on-chain until they exit. Exits can be done voluntarily, or involuntarily as a result of maintaining an insufficient balance or incurring slashing. If your provider is unable to maintain secure and reliable infrastructure for you in the longer term, or is forced to cease operations due to insolvency issues, your validators may be required or forced to exit the system. Even if your validators exit, withdrawing your stake and the ability to rejoin will still be restricted until Phase 1.5 or later so your ETH will remain idle.
As a result, it is important to choose a provider that is financially secure, experienced, and capable of making a long-term commitment to providing you with the most reliable eth2 infrastructure available.
On eth2 each validator has two sets of key pairs that are generated during the deposit process. Your private withdrawal key, which you should store with the highest degree of caution and security, is responsible for actioning transfers and withdrawals of your ETH. Your private validator key, on the other hand, is required for signing and proposing blocks on the Beacon Chain. Therefore, your private validator key must be available to your infrastructure provider, but must also be protected from theft, malicious attacks, and double signing risks at the same time.
If you decide to switch your infrastructure provider before Phase 1.5 you will be required to transfer your private validator keys from your old provider to your new one. Transferring your private validator key is a risky endeavour, because this would require your keys to exist in multiple systems at the same time with few guarantees that the original provider deletes them securely.
Because this can expose you to a heightened risk of getting slashed, either as a result of double voting or surround votes (read more about penalties and slashing here), few professional providers are likely to take on this added risk. If a double signing occured, it would be impossible to identify which set of keys is responsible. Getting slashed on eth2 will result in a permanent loss of funds and avoiding this is one of the most important security considerations for participants.
To maintain security and decentralization the eth2 protocol has been designed with anti-correlation mechanisms in mind. The higher the proportion of validators that incur simultaneous downtime or a slashable event, the higher the incurred penalty. As a result, diversification and redundancy through a multi-cloud, multi-region, and multi-client node infrastructure setup is critical for risk mitigation and reward consistency.
We are the world’s premier multi-cloud and multi-region blockchain infrastructure provider backed by leading investors. Our enterprise-grade infrastructure is used by pioneering companies across the blockchain ecosystem, from exchanges and custodians to VCs and financial institutions. Providing our customers secure, reliable, and non-custodial infrastructure is our bread and butter.
Our eth2 product enables the seamless creation, management, and performance review of your eth2 validators over a comprehensive API solution. Moreover, we provide:
Moreover, we are committed to reducing correlated slashing risk using robust security practices. We intend to participate in and leverage community efforts and new technologies to provide HSM support and double signing protection in the future.
Contact us to learn more about running an eth2 validator on the Bison Trails platform or about any of our enterprise offerings in support of eth2.
For custodial staking, use Coinbase's eth2 retail staking solution powered by Bison Trails.
Bison Trails is a blockchain infrastructure platform-as-a-service (PaaS) company based in New York City. We built a platform for anyone who wants to participate in 21 new chains effortlessly.
We also make it easy for anyone building Web 3.0 applications to connect to blockchain data from 33 protocols with Query & Transact (QT). Our goal is for the entire blockchain ecosystem to flourish by providing robust infrastructure for the pioneers of tomorrow.
In January, 2021, we announced Bison Trails joined Coinbase to accelerate our mission to provide easy-to-use blockchain infrastructure, now as a standalone product line. The Bison Trails platform will continue to support our customers. With Coinbase’s backing, we will enhance our infrastructure platform and make it even easier to participate in decentralized networks and build applications that connect to blockchain data.
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