Ethereum Staking Year in Review

Happy New Year!

Greetings everyone!

On the last day of the year, we’ve prepared a brief summary of this year’s developments in the Ethereum staking ecosystem for you! If you missed the developments in staking and want to catch up, this recap is for you!

In this content, you can see what 2023 has shown us, what we have learned, and what awaits us.

Many thanks to Nixo for contribution in creating this content. 🫡

Diversify Everything

The best word to summarize the staking ecosystem in 2023 would be diversity. The idea of staking, which was laid on quite primitive technological tools and purposes in the past years, saw its limits tested, its design reviewed, and significant technological steps taken this year. Diversity is an existential concept, especially for Ethereum. Diversity increases the network’s resilience, reduces its fragility, and enhances its flexibility. However, I think the most important point is that if we approach diversity in an existential way, Ethereum must be diverse. The foundation of social consensus lies in this concept. I believe the word of the year should be diversity.

What did we learn?

• Diversity is essential. Client diversity alone is not enough; we also need Validator diversity, Builders diversity, Node diversity, diversity in serving data to other peers, LST diversity. In short, we need to diversify everything.

• As Nixo said, solo stakers continue to be the network’s insurance. Of course, not everything is perfect. In latest article, Vitalik addresses the limitations of solo staking while aiming to maintain its benefits and make the system more accessible. Also, take a look at EIP 7251 explainer.

• If we talk a little bit about numbers, the number of validators has increased by more than +400K, which means an increase of almost 95%. The increase after Shapella is really incredible. Of course, this increase also brings problems. And solutions.

• MEV continues to be a disruptive element in the staking ecosystem. We’ll see if MEV Burn could be a solution. Check out Toni Wahrstätter’s presentation about MEV Burn.

• LSTs diversified and protocols continue to grow step by step. StakeWise, Ether.fi, SSV, Rocket Pool, Swell, Stader are on mainnet while Diva is getting ready for mainnet. The controversy over Lido, the largest LST protocol, almost reaching its 33% limit is significant. It seems the concept of diversity is showing itself here again. We will together see the consequences of choosing to optimize performance over the resistance diversity could create.

• With Obol moving to mainnet, DVT especially started to be used among solo stakers. We are confident that it will provide great benefits in terms of both security and revenue. Check out Oisin Kyne’s presentation at Staking Gathering.

What awaits us?

• While it has its own limitations, DVT will soon fully enter our lives and even though its limits are not fully explored yet, it could provide significant security benefits.

• After Shapella, there was a significant jump in the number of validators, and we will follow discussions on how to solve problems like the extra burden this situation may bring to the network.

• Restaking and Eigenlayer continue to grow rapidly. While developing with LSTs, it’s still early to see their impact on the network.

• The relationship between MEV and Stakers is getting weirder every day. Are they losing their allure or becoming more integral in our lives? We will see together.

• Institutions are coming and in a bigger way than ever before.

• Node operators can support protocols by establishing cooperative-like structures, while individually getting safer and more meaningful gains. We have started to see examples of this. The features of Stakewise and Obol that support this approach are quite remarkable.

• It is also likely to turn to solutions where stakers will continue their operations with the same beacon chain configuration. Gnosis Chain proposes exactly this. Its 1:1 similarity with Ethereum allows DVT protocols to be easily implemented on the network.

Please share your own learnings and predictions below this post!

Ethereum is alive and well. Do your part to keep it that way.

Happy new year everyone!