Valid Points: The Reality of ‘Rayonism,’ a New Plan to Merge Ethereum and Eth 2.0
This week, we do a deep dive into the intricacies of one single Ethereum 2.0 metric: total value staked (TVS). There’s a lot of nuance to this metric, but once you do the legwork a little knowledge can really pay off in terms of insight into the protocol and a better understanding of how to interpret what seems at first like major discrepancies in the data across providers and sources.
Then, in true nerd fashion, we delve into an ongoing hackathon that, even if you’re not particularly keen on joining, you’re still going to want to know about. Why? Because the future of Ethereum 2.0 depends on it.
Pulse check: Interpreting the metrics of TVS
There are a number of different ways users and data providers interpret the metric total value staked (TVS) on Ethereum 2.0. Depending on that interpretation, the calculations for this metric and the resulting figures will differ, sometimes by thousands of ETH.
Whenever reading figures for TVS on Eth 2.0, it’s important to consider how the metric is being interpreted in order to understand and make sense of the discrepancies found in its value in different sources.
Most users and data sources will calculate TVS by how much ETH has been sent to the Eth 2.0 deposit contract.
As background, the deposit contract is an Ethereum-based smart contract used by the Eth 2.0 blockchain to verify which users are eligible to become active validators and earn rewards on Ethereum’s parallel proof-of-stake (PoS) network. A one-time deposit of 32 ETH must be sent to the deposit contract before a user can become an Eth 2.0 validator.
Summing up the initial deposits of prospective Eth 2.0 validators is how sites such as Etherscan, Dune Analytics, CryptoQuant and Glassnode calculate value accruing on Ethereum’s PoS network. Between these sites, the total amount of ETH sent to the deposit contract may differ by one or two validator deposits, depending on when a particular site last queried the Ethereum blockchain and updated their webpages with the latest on-chain data.
Other data providers query the Ethereum 2.0 blockchain directly and calculate total ETH staked by summing the balances of validators who are online and eligible to earn rewards on that network.
Not all deposits of 32 ETH on Ethereum are immediately activated on Eth 2.0. At times there is a pending queue where validators must wait for a period before their stake is eligible to earn rewards. In other cases, a validator is offline or disconnected from the internet; therefore, that stake would not be used toward finalizing blocks or transactions. Validators can also be forcefully removed from the network for malicious behavior and, again, in this case their 32 ETH deposit would not be eligible for fulfilling validator responsibilities.
The total balance of all online and active participants on Eth 2.0, including validator rewards, is the second way in which the metric reflecting total ETH staked can be interpreted. Both beaconcha.in and BeaconScan use this figure for their chart and data analysis. Because it does not count the initial ETH deposit of all validators in existence but selectively chooses the stake of eligible validators, the resulting total is usually less than what is tracked by the first method.
The third way in which TVS can be calculated is by summing the deposits of all validators and their reward balance irrespective of their status or eligibility.
So long as transfers of ETH to Ethereum 2.0 remain a one-way deposit and any rewards accrued on Eth 2.0 stay on Eth 2.0, this interpretation of TVS reflects a cumulative total of all the wealth that has been sent to Ethereum’s PoS blockchain since its launch, as well as how much new wealth has been issued in the form of interest on validator balances.
It usually results in the highest estimate for TVS. Compared to the amount of ETH in the Eth 2.0 deposit contract, which is 3,891,586 ETH, and the amount of eligible stake on Eth 2.0, which is 3,876,812 ETH, the total value accumulated on Eth 2.0 stands at 3,978,285 ETH, all at time of writing.
Since launching the CoinDesk Data Dashboard, I’ve been using this last interpretation to calculate TVS on Eth 2.0. It is the widest definition for this metric, and one that I think captures how much is riding on the protocol overall.
Each of these interpretations, however, is set to evolve and become less interchangeable as a way of measuring value growing on Eth 2.0 once the network initiates its merge with Ethereum.
New frontiers: Transitioning to Ethereum 2.0 With ‘Rayonism’
Let’s talk about Rayonism, the hackathon project for Ethereum’s forthcoming transition to PoS.
As background, Ethereum developers launched a parallel PoS blockchain dubbed “Ethereum 2.0” back in December 2020. It operates separately from the existing Ethereum blockchain and was originally going to be the network onto which users and decentralized applications (dapps) are eventually transferred.
With Rayonism, the thinking has changed.
Instead of deprecating Ethereum’s proof-of-work (PoW) network through a multi-phased upgrade, developers are looking to rewire the protocol so that consensus – that is, the way blocks and transaction history get finalized in a decentralized protocol – happens on Ethereum 2.0.
The “consensus layer” of Ethereum would essentially get swapped out from PoW mining to Eth 2.0 staking. The execution of user transactions and dapps would continue as normal on Ethereum and be maintained by the same software clients many of us know and love like Geth, OpenEthereum and Hyperledger Besu.
The software clients maintaining Eth 2.0 (such as Prysm, Lighthouse and Teku) would also continue to have their role in maintaining and supporting Ethereum’s PoS consensus layer. Merging these two parallel systems, as opposed to transitioning from one into another, does introduce complications.
This means consensus and execution are not done on one single piece of client software, as most Ethereum users and dapp developers are used to doing today. After “the Great Merge,” Ethereum’s software will have a composite design consisting of two parts: a consensus node and an execution node.
What does Rayonism look like in practice?
Well, no one is really quite sure. To find out, Ethereum developers have kicked off a month-long hackathon for designing a test network (testnet) that has all the features of Rayonism implemented, plus functionality for sharding. (If you don’t know what sharding is, I recommend reading this article,but, in short, it’s a way to greatly scale Ethereum’s transaction capacity and keep fees low on the network over the long term.)
Over the next four weeks, hackathon participants will be heads down building and iterating upon a list of shared ideas and to-do’s for making Ethereum’s Great Merge a reality. On May 14, all projects will be presented and judged in the hopes that abstract plans for PoS activation on Ethereum are made more concrete and brought forward in the network’s development timeline.
As always, the goals are ambitious with Ethereum developers and the Ethereum 2.0 project. Will Rayonism succeed? As always, I look forward to seeing it try.
Validated takes
- Bitcoin and ether are recovering from a price nosedive. What happened? (Video, CoinDesk)
- Canada approves three Ethereum ETFs in one day (Article, CoinDesk)
- DeFi protocol EasyFi reports hack and loss of over $80 million in funds (Article, CoinDesk)
- Web 3.0 is coming for the “sharing” economy (Article, CoinDesk)
- RSK: the Bitcoin-based smart contract platform (Podcast, Epicenter)
- Magic Money: the mystical world of Anchor, Alchemix and Gyroscope (Video, The Defiant)
- NFTs will be far bigger as digital clothes than as collectibles (Article, The Defiant)
Factoid of the week
Open comms
Valid Points incorporates information and data directly from CoinDesk’s own Eth 2.0 validator node in weekly analysis. All profits made from this staking venture will be donated to a charity of our choosing once transfers are enabled on the network. For a full overview of the project, check out our announcement post.
You can verify the activity of the CoinDesk Eth 2.0 validator in real time through our public validator key, which is:
0xad7fef3b2350d220de3ae360c70d7f488926b6117e5f785a8995487c46d323ddad0f574fdcc50eeefec34ed9d2039ecb.
Christine Kim will be extending the conversation on Ethereum 2.0 with Consensys’ Ben Edgington in a CoinDesk podcast series called “Mapping Out Eth 2.0.” New episodes air every Thursday. Listen and subscribe through the CoinDesk podcast feed on Apple Podcasts, Spotify, Pocketcasts, Google Podcasts, Castbox, Stitcher, RadioPublica, IHeartRadio or RSS.