Today we’re covering eth2’s traction, eth2’s first incident, how a similar incident would impact eth2 post merge and EIP-1559, and announcing our coming support for Lighthouse.
Eth2 is continuing to grow! There is now:
Eth2 had its first incident on mainnet on April 24th, when a bug in the Prysm client resulted in Prysm validators (accounting for ~70% of all validators) being unable to produce blocks.
The ELI5 explanation of the incident is that roughly every 7 hours all eth2 validators agree on the latest data from the eth1 deposit contract, called a deposit tree root. A Prysm validator created an invalid tree root, and other Prysm validators agreed to use it without first verifying whether the root was valid. Because Prysm validators didn’t have the right view of the eth1 deposit contract, whenever a block on the Beacon Chain contained data about a new deposit into the deposit contract the block proposal would fail, as the validator could not reconcile this new data with what it thought the eth1 deposit contract looked like.
In this piece, however, I would like to examine the possible consequences of a similar incident, in which blocks are not able to be produced, occurring post merge and EIP-1559.
The first potential consequence to note is that the lack of block production would be highly disruptive to the dapp, and specifically DeFi, ecosystem. Each block contains transactions arbitraging prices, liquidating deposits, and other means to keep the ecosystem healthy. A 70% drop in block production is bad, but the good news is that it will be less bad once the merge and EIP-1559 are live.
EIP-1559 includes a concept called elastic blocksize cap by which validators will be able to make blocks up to 200% larger than the regular cap permits, allowing the network to better react to bursts of demand. If the demand for block space remains the same, but the supply of blocks decreases, the blocks that successfully go through will quickly reach the 200% cap.
So, instead of a 70% drop in eth2’s transaction throughput, the network would likely only experience a 40% drop in throughput (albeit at much higher fees) since the 30% remaining functional validators would create essentially 60% worth of blocks. Although obviously not ideal, this is incredibly encouraging as it shows that the network can remain robust and performant during periods of severe instability.
The other potential consequence is that the average loss per impacted validator was about $.50 throughout this incident, however, this number would be much higher post merge. Currently, validators earn about 5% of their rewards from proposals, but with the coming Altair hard fork this should increase to 12.5%, making successful block proposals more impactful for validators.
Post merge, validators will also earn transaction fees from block proposals. Justin Drake estimates that the eth2 reward rate will increase to 25% (currently at ~8%), so when you net it all out, the expected share of rewards that a validator earns as a result of proposing blocks could increase from 5% today to ~80% post merge. Given the briefness of this incident, the net losses in rewards to validators from a similar incident in the future should still be relatively small, but it’s easy to see how losses could quickly grow if the incident were to be extended or recurring.
Bison Trails’ mission is to advance the crypto ecosystem with secure and reliable infrastructure. We take network security, stability, and performance extremely seriously, which is one of the reasons we are such huge fans of eth2 and its design for anti-correlation and client diversity. Our multi-cloud, multi-region infrastructure is incredibly powerful in supporting most networks, but taking it to the next level for eth2 required one more step.
Today we are excited to announce that we will launch support for Lighthouse next week in addition to our existing support for Prysm. Becoming multi-client was our goal from the beginning, and adding Lighthouse support has been in the works for months, so there is a certain amount of serendipity that we are able to announce this after an incident highlights how incredibly important client diversity is.
Sigma Prime is a tremendously talented team of security-oriented engineers and we are eager to continue to work closely with them, including on features such as remote signer support for Lighthouse (which we currently support for Prysm).
Bison Trails will continue to work hard to keep eth2 robust and performant so it can serve as neutral infrastructure for our financial future.
—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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