 Hi, yeah, my name is Steve Berryman and I'm from a testant a testant is a an Ethereum only staking company and what we're going to look at today is an Alternative to liquid staking liquid staking has been phenomenally successful phenomenally successful and as with anything in the Ethereum ecosystem something that becomes that successful becomes centralized and then becomes an issue so we We're a testant and been talking to some other staking companies Try to come up some other ideas around how to transfer validators from From one owner to another without going through the exit queue So really this is one idea that we've been floating around and we are looking for you know other staking companies to to To be part of this building this out if if we think it's a successful direction so I've kept this quite light in the way I want to go with this is is It's to really give the justification for what we're trying to do and the detail and getting into the weeds Really, I think if you're interested come and speak to us and we can talk through some of the detail But it's really the rationale why we're doing this so Let's have some context around what what is staking in the first place? What is staking in Ethereum? So this is a very high level clearly There's a lot of complication goes under underneath the hood of this for Ethereum staking but in from a very high level in how we want to view this is We're locking up funds 32 ETH you send 32 ETH to the deposit contract. This was that this started in December 2020 You sent your 32 ETH to the contract and That basically gave you a ticket onto the beacon chain and that that ticket Enables you to build a validator and go through a certain number of steps and duties and if you carry it out Then duties you receive the world's So some of the things you see receive rewards for a testing. That's the You're doing that every six minutes. It's the bulk of the rules you receive and if you're online and you're testing You get a very small Small amount anybody's used the the blockchain Website has got a validator and you'll see that the rules keep chipping in And proposing a block doesn't happen very often now. There's 7,200 blocks a day There are 44,000 validators out there so roughly every 62 days you'll get a block But they were the only two Places to get rewards back in December 2020 then we had the Outer thought and that introduced sink committees sink committees are even lower than blocks What proposals you'll get one of these I think maybe now once every three years But when you do when they do turn up you make a lot of money during that period is only for two days So if you're flying in two days, it's unfortunate And then of course what we've seen with the merge The merge and this is really everyone's excited because now we can we're not only getting Transaction fees which used to go to the miners, but now we can spend it and we couldn't spend before so this You know is exciting for the first time after almost two years of having money locked up finally. We've got some we can spend and Of course, no comes in here as well. You know, so that that's that's staking in a in a nutshell Ethereum Okay liquid staking so briefly what liquid staking is and it's hard really not to Really not mention Lido because Lido is the biggest player clearly and there's going to be try to be other players But again, it's another centralizing force. So what is liquid staking and why do people go for this this approach? Well, currently over 30% of the staking rules go to Lido and that's not great But then again Lido runs under different node operators. So it's not quite as centralized as you may feel But still, you know, it's a ecosystem with lots of various different options But why has this become so popular? Well However easy, you know, some of us techies think it is to run a node It's just not easy and there are lots of complications and you have to keep the thing updated And you know number of people I speak to go oh, it's stopped working Well, you know, you just not committed enough in what's going on the community. So it's difficult It's difficult to stay on top of things and so And so with that people are gonna want an easier solution to pick up some rewards and of course you got slashing I mean you mentioned slashing to somebody and they're going that's it. I'm not even gonna touch touch home staking But being in the staking company. We always try to get people to stake at home But I mean, you know the technologies for most people is probably out of reach and they've got to be want to do it So when you know Lido came along, it's just a perfect. It's convenient. It's so simple You just go and buy their token you go and take your you know, you're easy going buy some Token you've got two choices. You can go and mint it directly or you can go and buy that buy them for on the exchange uni swap and and Basically, you're there. That's it. You stick it into cold storage. You forget about it Lido uses a rebase token. So your rewards go straight to your wallet. There's there's no messing about cost you 10% But you haven't got a set up a box and you haven't got to worry about it So so and it's been you know a phenomenal big success What's the downside to it? Well, one of the downsides is you lose control of your ether However, good Lido are you are handing it over you're handing over your ether to a pool of ether and You're getting effectively an IOU Now for individual small investors less of an issue for large institutions This is a no-no, but it won't get past the compliance department. There's also some other issues Which are very interesting regulatory issues You're in a pool. Paul gets tainted with tornado cash It comes tricky So people don't want to necessarily large institutions don't want to be involved in in a pool system And of course there is a taxing in some jurisdictions going from one token to another can be seen as Disposal and a taxable event So that is something I think probably a lot of Lido users probably don't realize that many jurisdictions put that as a as a taxable event Okay, so So so what isn't an alternative approach we've been throwing this idea around for for a while But the thing is is you know, there was this little thing called the merge that sort of kept us busy for a while But now that we're sort of over that and you know It is think Danny said, you know, it was uneventful which was for a staking company. That's what you want uneventful So now some of these things come back on the radar and also they do require some extra changes to the EVM in order for some of this Stuff to work But our idea is that we make validators Transferable so that they can change ownership now When I say transferable, I'm not talking changing staking company the the validator will stay with the same staking company, but you can transfer the ownership to somebody else and At the moment the way validators work You have a validator key and that's the thing you have online to create your rewards and you have a withdrawal key the withdrawal key is Just a regular aetherium or in fact it can be a theory in one address or it can be a BLS address but when submerged once the Once you get past to the withdrawals So it means go and Get to withdrawals this thing doesn't have to be just a withdrawal key it can actually be a smart contract and We've already got a smart contract that handles this sort of thing very well NFTs So we could use an NFT smart contract which issues a receipt to the to the validator and now the validator is transferable it can be moved around and It's also an NFT. It's actually valued something. It's not You know, it's not a JPEG underneath. He has actually got 32 ETH under it. So so this idea Once once you've got once we create this smart contract, then we've got a lot more flexibility and It's in one way. It's not up to us decide what the market does with this It's just quite interesting to put the great thing with DeFi You put stuff out there and see what happens But you know, I've got a couple of my own use cases where I think this would be particularly useful For example, you've got a large institution wants to buy a thousand validators and Somebody wants to sell a thousand validators now. You can off-board it It takes at least 15 to 24 hours if there's no queue or and you then somebody else on board It's quite heavy on the network as well for Ethereum to do that and also both sides are losing a crude interest So if you think if this is a bond, you know You're losing money For for the 24 hours and if there's a queue, it could be a lot longer So wouldn't it be more convenient if there was a marketplace where two people just Bought the validators off each other. There's instant settlement The Ethereum network handles it extremely well. It's just a transfer. We've still got the same validators running and You know, it just becomes a much easier way of large institutions about to buy and sell I mean clearly the marketplace has got to have liquidity to do this, but you could imagine You're just about to get rid of a thousand validators You would go to the marketplace first if there's a liquidity You're gonna get a better price or you're likely to get a better price Then just unwinding it because you're gonna lose a day's worth of interest and rewards Some other stuff you could do with a receipt And I don't know if this is an advantage or disadvantage or let you decide but it could be used as collateral in DeFi So all them wonderful things and the great thing with this it comes with a revenue stream So anybody's into financial engineering could come up with many different views of ways this could be used And it could be very interesting and I think a marketplace where buyers and sellers can come together. I think would be very interesting and As I say, it's for the network for the Ethereum network It's also better not having these ether huge amounts of ether coming in and out of the system And and you know, why wouldn't this why wouldn't this be the better way of transferring and providing liquidity to staking assets without You know without going through the the on and off building Okay, so What are the benefits? I mean the biggest one is you still own the ether is it is a receipt You still own it it's yours. It's not pulled. Okay, so it means decentralization because you know, we're You know people are not pulling this thing into Lido or into another pooling system So and the other thing with this is Something as a staking company we think about if you're a good staking company in Lido or you're a bad staking company Nobody cares because all the rewards are just mixed with this We start to find out who are the better ones because the marketplace can monitor it and marketplace can can do Can look at all the stats for all the different validators and clearly we think that's a good idea and It's something that also if you think of these things are starting to look very much like bonds Credit spread could actually be these are like credit spreads. So the the staking The staking companies become credit spreads and I think that would be quite an interesting marketplace I think this is also the vanilla vision We've got but I could imagine we could take a step further and a lot of this stuff and we could build insurance We could build fees we could be a lot more because now it's a smart contract. So everything's up for grabs really So why hasn't this already been done the obvious question? Can't do it or we can't do it easily. We can't do it easily The biggest problem is that we've had the merge So what's the problem these two things and now talk to each other, but they don't they don't We we did the minimum to get the merge over the line and so at the moment the EVM Can't talk to the beacon chain So we've got no way have been able to test the state and test you actually own that validator So there is actually an EIP which is aiming for Shanghai Which is the 4788 and what this does is produces an opcode for the EVM Which allows you to see the beacon route the state route and what does this able to do? You can build a Merkel proof and you can prove the validator is yours and then you build the NFT So it just needs this little bit of glue and then we're away and hopefully this will get included into that Shanghai and we will be testing some ideas around this. Yeah So so really that's the main thing of this not being done is just we're waiting for the next the next thing for You know this this EIP to come through hopefully in the next Hopefully in the next round of updates Right potential issues. There's always going to be some You know It's the same thing as the advanced you see it can be used in DeFi You know, and you know, we we see we've seen the good and bad of that. So It's just be wary of it And we could have bugs. It's a smart contract You know seen a few of them as well in the last few years I think with the bug sting though, this stuff is using the standard technology. We're using an NFT contract We're not doing it. We're not putting any innovation in new stuff. We are gluing it together differently So clearly lots of audit very around that but we're not going out and building some new smart contract We we're using technology that we've all been using for the two or three years All right, and that is the end of my talk It's a it was quite lightweight to give you a rationale of why we of why we're looking into this If people want to get into the weeds, please come and contact me We you know, we're looking for getting more staking companies involved This thing only really works if other staking companies is a network effect, you know It's if it's just a test and it's not going to work So so clearly we need other people involved to build the tools out to to make this You know if if if the community thinks something like this is is an alternative and even if it takes a small Percentage from people using Lido that's going to help the decentralization and I think I've Thank you, Steve We have four five minutes more. So maybe a question from sure. Yeah, so here Thanks for the presentation. So you mentioned that The staking a liquid staking tokens are subject to a tax here We are also like receiving a receipt that receive will include some yield, right for staking rewards So, yeah, I think it's the same disadvantage here correct. You mean from the tax point of view, right? So you could be I mean it does depend on jurisdiction because you could argue and you know, we're I'm not know much about tax But you could argue that a receipt is different from a token transfer, you know It is all you're doing is like a receipt for goods I know the UK government doesn't do that So I know you're right in that fact, but there is a lot of debate going on about it But really there has not been a transfer of assets. So that would be the thing I would like tax authorities to look at to go look you've just got a receipt. You still own these assets, right? You're right in that it's a it's messy so messy it's a messy field and as for the collateral I mean that sounds messy, right because as well because Collateralizing NFTs, I mean NFTs are non-pungible by definition. Yeah, so Yeah, I mean I mean NFT as a collateral for a DeFi. I mean it is already done So and I'm not suggesting this is a good idea. It's already done We've seen there are many platforms already doing this and you know It's not it's not for us to try and decide where the market takes this stuff It's it's just the point that you can use it for collateral and I'm sure somebody will do that. So, right. Thanks. Yeah Hi, thanks for the talk. It was great. Oh, sorry This may be a silly question, but I'm gonna take the chance to embarrass myself so validators don't they run with hardware? I think so, how how are you then going to kind of transfer the hardware with the right? So I didn't go too much into that but it is it is a good question because I'm there's a certain assumption I've made in the presentation that this would be done by staking companies, okay? So we as intestine we would still be running it So it's not transferring from the point of a staking company So if you're if you've got a validator, you're still and it was with us You're staking with a test and you're just selling it to somebody else So and a testant is still doing its job. So the the hardware and all that stuff doesn't stay I mean a validator is basically made up of two keys a validator key, which is what a test and Hold and then the withdrawal key which the client holds So, you know, all you're really doing is is changing the ownership But what we're not doing is changing the people that are doing the validating Have you all thought about what this looks like with shared operators inside of the NFTs? So it's not just one staking company, but it's a collection of people running together I'm not really I personally not really thought about that we've kept it very Very simple in a way of you know providing some liquidity To clients who would need it this where this has really come from and you know It's just a way of taking the pressure off the network that you know It seems silly to me. We've got a lot of validators coming in a lot of validators leaving and Really, it's one big organization wants wants to buy it and another big organization wants to buy it So it seems a natural way to do this I mean, there were some other things that like you may you know One institution may have all their staking with one company and another institution has all their staking with another company And I could imagine for risk management. They may actually swap some of the validators over to split the risk So, you know, I'm sort of making up use cases But this is sort of thing that once you've got a marketplace then then and it's liquid enough I think people would probably use that sort of facility So you mentioned Lido, I'm curious if you think there are ways to synergize with existing like pooled staking derivative projects or if like if you have any thoughts in that direction I mean definitely we talk a lot with Lido. I mean we write a Software stack called vouch if any of you are familiar with but vouch 22% of the Lido operators use vouch So that we there is constant communication and with these guys Whether they will get involved in certain things, but certainly Lido don't want to be 40% of the network I can tell you that so it's in their interest to have You know options that work to to spread the load So, you know, we talked to them about various different things So they will certainly be in the conversation Could do again, I think let the market decide all right because you know You could would it make sense to do many things with this stuff Well, I think I think being able to transfer ownership is the big use case For my thinking but you know there I can imagine there'd be lots of funky project product built off the back of it So, you know, I was somebody involved Thank you