Staking Simplified: StakeWise V3 Vaults
As Ethereum continues to undergo rapid infrastructural development, so do the protocols that reside on the network. One of the biggest architectural upgrades that is launching soon is being developed by StakeWise, a liquid staking protocol created to simplify entry into Ethereum 2.0 staking.
Since their initial launch in March 2021, StakeWise have undergone architectural upgrades, with v3 being their latest major upgrade to the protocol aiming to help decentralize Ethereum and maximize the health of the Ethereum ecosystem. StakeWise v3 allows anyone who is capable of running Ethereum validators to participate in liquid staking, which in return will provide users with the ability to receive staking delegations from others.
As we enter the second generation of staking pools with the imminent Shapella hardfork deploying on mainnet, permissionless node operators are the most important aspect of staking that is needed for protocols to run. The current centralization trend is on its downfall, as the demand for decentralized protocols runs high with many centralized services controlling large amounts of the network.
Enter StakeWise v3 Vaults, individual staking “shops”, synonymous to mini staking pools that can be run by a node operator, solo staker, a group of solo stakers using Distributed Validator Technology (DVT) from Obol or SSV and/or commercial operators. These vaults are:
Isolated: Mini pools for each node operator or group of node operators
Permissionless: ANYONE can launch a vault without fulfilling any requirements
Non-custodial: Vault operators don’t have access to delegator funds
Customizable: You have the option of creating or entering private and/or public vaults, with customizable fee percentages, max TVL and branding
The vault network can be viewed as an open marketplace, where anyone can come in to host a validator, whether you are a solo staker or staking company, looking to diversify their revenue streams and receive delegations. What are the requirements? As long as you can run a node, you can open a vault and either stake your Ether in the vault yourself, and/or accept delegations from others.
Is it trustworthy?
Depositing ETH into one of the v3 vaults is similar to depositing small amounts of ETH into liquid staking mini pools. You are entrusting the person running either a mini pool node or a vault to be responsible with the ETH deposited and to ensure that they have their validator online at all times. As v3 will be upgrading to a permissionless network, StakeWise does not have control over the stakers or companies that open a vault, however vault operators are able to offer collateral, by adding more ETH into the vault to signify trust assumption with users.
Liquid Staking Token
Depositors into the vaults will be able to mint osETH, the ERC-20 liquid staked ether token of v3. osETH is a representation of your staked ETH and rises in value to reflect accrual of staking rewards. The team have designed osETH to make staking simple. Once you have deposited ETH into a vault you will receive a return of osETH in your wallet to start earning staking rewards immediately. The user then has the opportunity to convert the osETH back to ETH to cash out on what you have deposited and earned in rewards.
You can read the StakeWise osETH deep dive post here.
Running a Vault
The process of a StakeWise vault creation is quite straight forward and fully customizable. When you open a vault, you are able to choose specific parameters for it e.g. whether it is public or private, the name of the vault, fees, max capacity and the name of the token (something that represents your share of the vault). The StakeWise and Daapnode teams recently held a panel at ETHDenver, where they highlighted how easy it is to create vaults for decentralized staking.
StakeWise have officially kicked off their first round of v3 audits, with their mainnet launch coming soon. Make sure to follow the team on Twitter and join their Discord to stay up to date with the project and contribute towards the decentralization of the Ethereum network.