ETHx Deposits |...
ETHx Deposits | Tech Explainer
Stader is a multi-chain, non-custodial liquid staking protocol on six chains, including Polygon, Fantom, BNB, NEAR, Hedera and Terra 2.0. With over $120 Mn in TVL across chains, Stader is trusted by 70K+ wallets and a community of 150K+ members.
Stader’s mission is to unlock a passive income opportunity for 1Bn+ people through staking and DeFi. We aim to achieve this by simplifying staking & offering the best yield opportunities with our liquid staking solution across multiple blockchains.
ETHx (following Stader’s convention of an x-for-suffix for liquid tokens) is the liquid staking token for staked Ethereum offered by Stader. ETHx aims to provide stakers, with a decentralized and scalable solution with diverse DeFi integrations.
This blog post aims to give the reader a deeper understanding of how ‘Deposits’ work in ETHx. In our previous post we covered Node Operator Onboarding in ETHx and nuances with respect to the onboarding of permissionless and permissioned node operators.
ETHx is built to reduce barriers to running nodes on Ethereum. Empowering individual node operators and enabling home staking is paramount for Stader. With the modular architecture of Stader’s ETHx, several pools with different security bonds, compliance layers and exit requirements can be run while enjoying the shared benefits of security, liquidity, incentive structures, etc. Each pool is assigned an initial pool weight indicating the ideal spread of validators. These weights are subject to DAO governance and are updateable to suit the evolving needs of the protocol. It is possible to balance different pools to their target weights.
Here are a few design considerations taken into account for the deposit workflow.
ETHx smart contracts have target weights for each pool. Several actions, including deposits and withdrawals, are performed, moving the weights of pools from current value to the target value. For example, a weight of 7000bps and 3000bps for permissionless and permissioned pools indicates an ideal scenario where 70% of ETH is staked to the permissionless pool and 30% to the permissioned pool.
Any staker-deposited ETH is retained in the deposit pool until staking to Beacon Chain can happen. There are two methods by which ETH can be staked to the Beacon Chain. The first is to call the batchValidatorDeposit function, specifying the pool for which deposits are to run for. This permissionless and no-cooldown function ensures that the deposited ETH can be staked to a set of validators queued and verified in a specific pool while not exceeding the target weights set for the pool. These guardrails ensure that the target weights governed by the DAO are respected.
The second is via the depositETHOverTargetWeight function callable in a permissionless manner but enforces a cooldown to prevent abuse. This function helps stake all deposited ETH to the capacity available across any pool without disabling deposits. This feature is designed to be fair to all pools over time and enables Stader to stake all deposited ETH as long as the validator supply exists on any pool. Furthermore, this function enables greater stake efficiency and improves returns for all Stakers and commissions for node operators and Stader.
Furthermore, a limit on processed ETH is placed on any single stake allocation transaction preventing timeouts and ensuring that current pool weights do not rapidly deviate from target weights.
It is essential to select the proper mechanism to choose a validator(s), from the list of available validators, for each pool while adhering to the broader principles of fairness and decentralization.
For the permissionless pool, we choose a first-come-first-served approach after considering the following factors:
We choose a round-robin approach for the permissioned set of operators because of the following factors:
In essence, every active permissioned node operator is treated equally for the distribution of any eth to be staked.
In this post, we’ve briefly covered how deposits work with ETHx contracts. We walked through Staker deposits, staking the deposited ETH to the beacon chain and associated limits. In subsequent posts, we will cover the other portions of ETHx product– withdrawals, rewards, and oracles.
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