Today we’re covering eth2’s launch, the first slashing, the surprising message in the network’s first block, initial participation metrics, and our look ahead at what comes next.
Congratulations to the entire Ethereum community on an uneventful and highly successful genesis! Eth2 launched without issues on Tuesday, December 1st, 2020 at 12:00:23 UTC and the network has continued making blocks and finalizing since.
The first slashing occurred on December 2nd, 2020 at 10:14:11 UTC, less than 24 hours after eth2 launched. Validator 20,075 made 213 attestations, but when it came time to finally propose a block, it proposed two different blocks and was slashed for that offense (called equivocation).
The two blocks they proposed agreed on the parent block of each proposal, but included different things inside the blocks. This implies that the validator attempted to over-optimize for liveness by having their validator keys on multiple machines that had slightly different attestations pools. At Bison Trails we’ve seen this across several protocols at this point, which is why we design our architecture to reduce the chances of slashing by prioritizing double-signing prevention over downtime because the penalty for double-signing is higher.
Digging into the slash, the offense was committed in slot 6,668 and was caught in slot 6,669. This quick catch shows that the slashing client functionality is working as intended. The community should keep an eye on this metric, as more validators join the network, because it’s important that offenses continue to be caught quickly as the number of participants rises.
The slashed validator only lost ~.25 ETH instead of a minimum of 1 ETH because the base slashed amount was significantly decreased for the early days on the network. However, if there are more slashings in the coming days, there can be an additional punishment due to the correlated slashing mechanism.
The most important punishment for this validator, however, is not the slashed ETH, but the missed rewards. This validator has been forcefully exited from the protocol (they will fully exit the system in 36 days). At that point, they will also know their final balances after all penalties have been applied. They cannot rejoin the network until Phase 1.5, which is several years away, meaning they will not be able to earn any rewards until then.
Taking into account this inability to earn future rewards and the opportunity cost of their ETH laying idle and unproductive for years increases their total economic losses by several orders of magnitude.
The proposer at slot 6,669 was a StakeFish validator that earned .0625 ETH ($37) for whistleblowing and reporting the slashing. The amount awarded is proportional to the slashed validator’s effective balance (which in this case was 32 ETH). This makes this StakeFish validator the largest validator by ETH balance on the network at the moment! The rest of the slashed ETH was burned, decreasing the total amount of outstanding ETH.
Lastly, who is the operator of the slashed validator? Taking a look at the eth1 address they used to initiate this validator, we can see they spun up a total of four validators, implying they are an “enthusiast.” But upon further exploration of the parent address of their ETH, we can begin to paint a fuller picture. They are an Ethereum whale who appears to have acquired their ETH in 2016. They are a very active DeFi participant, interacting with Uniswap, Aave, Curve, Compound, and several stablecoins. While we can’t know their motivations with certainty, it appears that they believe in eth2 and wanted to support it, have a degree of technical comfort, and could have participated with much more ETH if they chose to.
1. Unlike the Bitcoin genesis block or the block marking the latest halving, the inscription in eth2’s first block after genesis did not appear to have larger cultural significance. The message of the first block in eth2’s first slot: “Mr. F was here.” The signer’s full username is Mr. Fahrenheit, a reference to the Queen song, and he is an enthusiast who once received Vitalik’s autograph. There’s something beautiful about this because graffiti permeates history and simple messages left by explorers are forever enshrined on historical landmarks like pyramids or tombs. Mr. F, and many like him, who helped launch eth2, are pioneers and will forever be part of this historic moment.
2. Genesis occurred 23 seconds past noon because of a quirk arising from a technical requirement. The selection of the exact genesis timing is based on two considerations: meeting the minimum threshold and min-genesis-time. The algorithm builds a sample eth2 genesis state at each eth1 block by taking the deposit threshold and adding the genesis-delay to the eth1 timestamp. The first eth1 block that builds a valid genesis state is the trigger. Timing genesis for noon precisely may have been preferable, but would have required a more complex algorithm on what proved to be a somewhat brittle process during testnets and was considered to be not worth the effort. H/t to Danny Ryan for this fascinating tidbit.
3. Eth2 launched with 21,063 validators (representing 674,016 ETH or ~$400m), significantly more than the minimum 16,384 validators (524,288 ETH) required by the deposit contract’s threshold. However, the deposits have not abated and are continuing to increase. At this time, there is 926k ETH in the deposit contract and roughly 6,000 validators are waiting to join the network. Only 4 validators can be added or removed per epoch (900 validators per day) so it will take almost a week for those currently in the activation queue to begin participating.
4. The participation rate was of particular interest at launch as the network needed 66% of validators to be online and attesting to be able to finalize. At Epoch 0, 82% of validators were online allowing finalization. The number then quickly rose to 85% and then 88% as people completed their troubleshooting and brought their validators online. The participation rate is currently sitting at around 96%, which is good, but still short of the desired 100%. A rate of 96% means that almost 1,000 validators are currently offline and not participating in eth2, meaning they are losing ETH to penalties!
5. The initial network participation is still fairly centralized among a small number of large depositors. Elias Simos, Protocol Specialist at Bison Trails, analyzed the distribution: as of Tuesday morning there was 855k ETH deposited by 2632 eth1 deposit addresses, with a Gini coefficient (a measure of inequality) at over 86%. To illustrate the relative concentration, the top-10 depositors are responsible for 43% of ETH deposited, while the top 10% of depositors are responsible for 83% or so of the total deposits! This uneven distribution is totally normal for a young protocol and as Vitalik points out, eth2’s metrics are already starting to improve, including the coveted Nakamoto Coefficient (a measure of decentralization).
Having been through many protocol launches at this point, I believe the best thing now is a well-deserved break. Researchers, client teams, stakers, and many other people in the Ethereum ecosystem worked for years to launch eth2 and grinded especially hard in recent months. Now is a time to rest, recover, and regroup, before beginning the next tracks of work.
From our vantage point, the eth2 network is functioning well and we do not expect to see turbulence in the near future. We also do not expect significant releases from client teams (beyond patches) or other Beacon Chain initiatives to emerge in the final days of 2020 as we head into the holiday season.
Those who didn’t make it in time for genesis (as individuals or enterprises) are still working hard in the rush to join. Based on recent announcements, such as the one from Coinbase, it is safe to predict that an enormous amount of ETH will be joining the network in the near future. Our expectation is for 10m ETH to be staked in coming months, bringing the reward rate to 5.72%. A key driver we’re keeping an eye on are liquidity solutions that may push this rate much higher as they help mitigate some risks of participation.
Looking ahead to 2021, we expect the eth2 Phase 0 excitement to fade and for efforts to refocus on Phases 1, 1.5, and 2. There are two important items to note here. First, the research and development work to enable these phases is happening concurrently, meaning the phases may arrive out of order. Second, these phases are still in R&D. There is a good chance the scope and implementation of each phase will change significantly by the time it arrives (and some, like Phase 2, may never be needed). If you’ve followed eth2’s Phase 0 effort closely, this insight may not be surprising. Vitalik’s post on a rollup-centric Ethereum roadmap is a must read: it covers the community’s considerations and discussion of tradeoffs.
Additionally, we expect an eth2 hard fork in mid 2021 that will raise the slashing penalties back to their full values, enable light clients, and enable several other improvements. Justin Drake casually referred to this as Phase 0.5, so, while it is not yet set in stone, it’s a good thing to look forward to.
Lastly, I hope these updates have been helpful for you to navigate eth2’s launch. Thank you for reading, and I look forward to delivering more great news to you soon.
Yesterday, December 2nd, Joe Lallouz, Viktor Bunin, and Mara Schmiedt of Bison Trails participated in a live event with Messari: “The Road to ETH 2.0.” Watch the recap. Check out Messari’s definitive report—”ETH 2.0: The Next Evolution of the Cryptoeconomy”—filled with insights from Bison Trails.
Don’t miss Elias Simos’ research on the Medalla testnet data, conducted jointly with Sid Shekhar, Blockchain Research Lead at Coinbase. Elias and Sid were just recognized by the Ethereum Foundation as some of the winners of the eth2 Medalla Data Challenge!
Those new to the world of eth2 (or just in need of a refresher) can check out our guide to eth2 and accompanying eth2 Terminology Guide, a living and non-exhaustive list of key terms to understand the eth2 protocol.
Enterprise participants in the Bison Trails eth2 Pioneer Program have early access to Bison Trails’ suite of eth2 products, including:
Leading exchanges, banks, and enterprises have already joined our eth2 Pioneer Program and are beginning to integrate with our validator management API.
It’s not too late to be an eth2 Pioneer! Contact us to learn more about the eth2 Pioneer Program. We want you to have access to build on the Beacon Chain!
For custodial staking, use Coinbase's eth2 retail staking solution powered by Bison Trails.
—Viktor Bunin, Protocol Specialist
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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