[DRAFT] [Airdrop: Proposal] Ethereum Validators

🏛 Governance Provisions Discussions
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Proposal to include Ethereum Network Validators in Token Distribution

Intro: wish to start discussion around this idea, I am making the case that Ethereum Validators should be included in L2 token distributions. This is a draft proposal, primarily to get discussion and feedback.

Previous discussions/links:

Intent: Include Ethereum network validators in StarkNet token distribution. This proposal targets solo validators who made at least one deposit to the Beacon Chain. This excludes LSD (liquid staking derivative) token holders and staking as a service customers.

Onboarding ecosystem-aligned actors who have proven their early dedication to Ethereum. These Beacon Chain depositors are likely to partake in governance and node operations on Layer 2, arguably more so than basic users of L2s.

Recipients: A list is being maintained here https://github.com/GLCNI/ETH-Solo-Validator-Addresses/blob/main/Validator%20List.csv

Currently 10,182 addresses and is up to date until the end of June 2022, RPL node operators are included using their withdrawal addresses. This is an attempt to gather addresses belonging to individual stakers in full control of their nodes.

Rewards should be on the basis on whether an eligible deposit was made and not number of validators, the list contains all unique addresses that made a valid deposit to the Beacon Chain, addresses belonging to centralised exchanges (such as Coinbase/Kraken), LSD services (such as Lido/Stakewise) and contracts have been removed.

Airdrop Allocation: TBD pending discussion on this post. Currently 9% is allocated for Community provisions, and 8.1% is unallocated

StarkNet Alignment:
The design of the StarkNet Token is shaped by the need to power a net-work that is composed of (i) Users of StarkNet, (ii) Operators — peo-ple providing the network with computing resources that perform se-quencing of transactions, generation of STARK proofs, and long-term storage providers, and (iii) Developers writing software for its infra-structure and for applications running on it.

Distribution is highly important, not only wide but also targeted to a diverse and valuable set of stakeholders. Rewarding ecosystem aligned participants will bring value to StarkNet governance. Validators have locked ETH and operate nodes to secure Ethereum via proof-of-take consensus, this is the fundamental infrastructure layer for Ethereum.

Once deposited to the beacon chain contract validators have committed a non-trivial amount of capital until the merge, they must be positioned for long term success of Ethereum. They must provide physical infrastructure or pay for it to keep your validator active on the Network, which incurs electricity costs, hardware costs, internet provider costs and time/effort for maintenance.

Considering the token utility of participation in StarkNet’s consensus mechanism, it would make sense to include those actors that are likely to support these operations.

Validators have:
Proven: aptitude to run node operations and service the network
Proven: long term alignment with Ethereum, especially pre-merge
Proven: ‘proof of work’ actual resources and effort is spent to secure the network, and this cannot be gamed.

As such, validators should have a say in the development of L2 networks, and would be a set of participants that bring value to L2 and a strong foundation of network shareholders primed to run the decentralised node set of the L2.

Benefits to both StarkNet & Ethereum:

For StarkNet
Onboard a strong set of ecosystem aligned users, that will bring value

Value to governance: this set consists of builders/devs & very dedicated early supporters, proven by commitment to early risk pre-merge. Those responsible for the base networks security/infrastructure should have voice in the direction of layer 2.
Strengthen the future node set: ensure a strong foundation of the StarkNet community to run the nodes and decentralised sequencers when they are ready. Many validators have expressed interest to run nodes/sequencers on layer 2, and it will be trivial for existing validators to add to existing operations. L2 networks should aim to have a decentralised node set that is run by the community with many node operators, and not in the hands of a few institutions.

For Ethereum
Layer 2 is essential for Ethereum to reach mass adoption, Including these participants sends a strong signal of rewarding meaningful support that will have positive effects on L1 that will benefit the L2 layer by having a stronger foundation.

Positive External Incentives: Increase Validator Decentralisation

Centralisation of ETH staking is a growing concern for Ethereum, and proof of stake. Ethereum has prioritised decentralisation & sustainability, allowing end users to participate in network consensus. However, the conditions of the merge timeline has allowed centralised institutions to gain a large market share over individual stakers.

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LIDO (stETH) accounts for 31.30% of deposits to the beacon chain. LSD holders benefit from liquidity without needing to lock ETH or run nodes, this allows additional yield to be earned in DeFi on top of the base staking yield. It is currently more profitable and easier to stake with a service like Lido than it is to run your own validator, all work and maintenance involved in running a validator/s is abstracted away and handled by a centralised institution, this has hindered unique validator growth harming the network’s security/decentralisation.
Coinbase accounts for 14.61% % Kraken 9.35% of Beacon chain deposits, by allowing users to stake their ETH through their exchange. This means a single entity is holding this ETH and staking across their own validators, not only is this damaging to network decentralisation, a single entity holding this much is a massive honeypot for hackers.

We see a trend where individual stakers (‘others’ in the chart above) are diminishing, centralised institutions are catching up as the incentives for solo validating simply struggle to compete with current LSD. Execution risk of the merge has some influence over this, but even post merge due to the ease of LSD allowing holders to gain exposure to yield, have liquidity and earn additional yield in DeFi. We are still likely to see favour in LSD, APY is simply not attractive enough for the majority of would be Stakers to lock up/join the exit que and have to maintain node infrastructure when similar results can be achieved via LSD.

This has the potential to turn the tide on the current problem of Ethereum’s increasingly concerning centralisation.
By creating external incentives to run solo validators, many more ETH holders will be willing to put the extra work in running their own validator for the additional incentives. increased ‘implied’ APY, this will take market share away from CEXs and LSDs. It is also likely that other L2s and projects will follow suit. A stronger Ethereum foundation is beneficial to any layer 2 that relies on the trust assumptions/security of layer 1.

We see a similar effect with other external incentives: Gitcoin participants have become increasingly included in project airdrops. resulting in increased ecosystem funding, though the motivations may be profit seeking it does not detract that this creates an environment where more public goods are funded. Governance participants, many who would have been apathetic to governance voting, are much more likely to pay attention and contribute to these activities when active voters in proposals are included in project distributions.

If Airdrop incentives drive ecosystem growth, airdrop incentives could also drive ecosystem decentralisation.

Why the exclusion of LSD holders, and exchange depositors:

Because this has been brought up in previous discussion, the following explains the main reasons

  1. Difficulty: due to liquidity of these tokens it makes it easier to game as people can spread these to farm airdrops, add the extra challenges with liquidity pools and tokens held on exchanges.
  2. Incentives: Expanded in the previous section, reduces the effectiveness of this proposal to increase validator decentralisation.
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agree! Airdrop to Ethereum validators looks legit IMHO

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I think this is a good proposal. It’s a pity that traders on testnet before the announcement can’t get rewards :sweat_smile:

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Wow, well written proposal of a very interesting suggestion!

I definitely need to digest and think more, and what I’m saying here is not “formal” StarkWare/Net endorsement but just my initial personal reaction.

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Honestly, I’m lukewarm on this one.

I would prefer tokens to be rewarded via GitCoin grants or via specified bounties for tooling rather then airdropping it to people who might be motivated to contribute to the ecosystem…but probably won’t be.

Yes, Ethereum validator decentralization has an impact on the StarkNet ecosystem. If Ethereum rises, so does every other L2 that swims in it’s tide.
But validator decentralization is an issue that has to be solved by the Ethereum protocol. Temporary L2 airdrops won’t be the solution, neither in the medium or long term.

I would definitely still be for this airdrop over dropping it to random StarkNet users.

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I have updated GitHub - GLCNI/ETH-Solo-Validator-Addresses: unique ETH addresses belonging to solo stakers this includes every depositor to the Beacon Chain until the Merge on Sept 15 2022. There are 12,775 validators in the solo-validator category of which I believe the vast majority would be prime candidates to run StarkNet infrastructure on its path to full decentralization.

On the improvements
#reviewed for false positives, filter list has been greatly improved
#Coinbase accurately identified and is the main culprit accounting for 86% of the unique addresses depositing to beacon chain contract. This is due to the way they conduct deposits, with a fresh new address generated per deposit.
#Most staking as a service/LSD providers deposit through a contract and are not included in the list by default

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I agree with this, I’m also of the opinion that the team doesn’t totally ignore early starknet alpha users that stress tested the system on mainnet alpha as OGs despite the risks involved.

They’ve contributed to the growth of starknet in their own little way and as so should be considered.

The best way to get the best number of individuals that will qualify is by picking those that interacted prior to any token announcement, if possible same snapshot date used for the current airdrop criteria could be applied to be on a safer side to beat Sybil in their own game.

Secondly, the team can use sismo badge or rabbithole to reduce Sybil by making sure every qualified participants complete some quests or some human verification tasks to make sure Sybil are totally removed and token given to the right parties.

Thank you

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I disagree with it. Sismo and badges are the most farmed and sybil attacked protocol in the crypto space as it stands now.

Secondly, you don’t need lot of tech to prove whether an address is organic or a sybil.

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Hi Nex & Victor, I was wondering your feedback about the Gitcoin Passport

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I asked some friend and told me that it seems pretty costly to manage a Sybil attack if there is “Identity Staking” requirements. [https://www.staking.passport.gitcoin.co/]

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I strongly disagree with this proposal. A long story short: The guy proposes to make rich people even more rich. All the narrative will be around “I’m a validator and I made a proposal which describes me as a perfect user to receive an airdrop”. He’s trying to represent a work of a validator like a volunteering. Lol, just try to make any erc20 transaction in mainnet and see how much fees “volunteers” receive for each transaction. Let’s make it clear - validators do what they do for a very specific (financial) reason and let’s be honest, they receive a ton of cash for hosting a node. After swithcing from POW to POS they receive even more. This proposal looks like an attempt to “monopolize enthusiasm”. To me it sounds like "I was early back then when Ethereum emerged, I made a lot of money on hosting a node and I want to run even more nodes (L2) and to receive even more cash for it. It doesn’t sound fair to me and it has nothing to do with decentralization.
If a guy who made this proposal really cared about decentralization he would ask why this happens instead of crying for an airdrop.

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Hey @Eddy_W i’m glad you brought this up, but I think your largely missing the point.

this isn’t about who gets rewarded more than others, it’s about an L2 network being better positioned for decentralization at the infrastructure level. And promoting further decentralization of the beacon chain of which the L2 is dependent on.

Note: this is suggesting that validators be included (not the sole recipients)

99% of normal users do not run nodes, if you want to include a set of users that run nodes a way to do that is including beacon chain deposit addresses. There simply isn’t a good way to target this set of actors except beacon-chain depositors.

if the airdrop goes to regular users (which it should!) then 99% won’t run nodes, which is why I think a part of the allocation should be a targeted distribution to a specific set of actors, which gets the L2 a strong decentralized node set.

I do agree that ‘today’ an ETH validator cost is a high barrier to entry. I would suggest that Gnosischain validators be included in the distribution too.
StarkNet does not derive security from Gnosischain, however GNO shares the same clients and beacon chain design to ETH, any GNO validator would be able to support ETH validators and likely nodes on L2, the lower barrier to entry would open this to more participants.
I have been meaning to add this to the repo or a separate list, in an update soon.

Eddy_W:If a guy who made this proposal really cared about decentralization he would ask why this happens 1 instead of crying for an airdrop.

I have talked about this a lot, and in the Repo I targeted solo-validators, the two-thirds of nodes hosted on cloud is mainly from the centralised actors that I intentionally excluded. For home stakers it is not cost effective to run a node in the cloud, due mainly due to storage costs that apply to individuals and not institutions subject to massive discounts and price breaks.

I do care about decentralisation and I am making a effort to encourage it, this proposal (and similar) would like incentivise more solo-stakers/ better decentralisation, LSDs are simply too attractive for the average user giving institutional stakers a lead.

Also just want to point out that to this day (and until shanghai) ETH validators particularly home stakers have made 0 real income.

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@GLCstaked Ok I think I got what you meant. In this case indeed it would be fair to support validators.

I didn’t mean that airdrop should go solely to regular users btw. I think it’s not a good idea either. My main concern was about a high barrier to entry for people who want to run a node but don’t have such an opportunity because of financial reasons.

I think we’ve reached an understanding on the issue.

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@GLCstaked this is a great proposal. Do you envision also having some sort of vesting time?

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This will be very bad. Airdrops should be loyal fans of starknet, and airdrops cannot be exclusive to the rich in Ethereum. For example, ordinary people share the advertising effect of their airdrop joy on social platforms, so that more people can know about starknet… .But the rich rarely share the joy of airdropping small money…so, for the development of starknet, the airdrop should give more consideration to ordinary starknet fans.

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You are very creative

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To run node is time and money consuming, so I agree that it should be included in the airdrop proposal. However, it is relatively technical dependent, so for non-technical guys, they can not set up nodes, and we should also consider those non-technical guys’ benefits.

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Yo @GLCstaked This is about an L2 network being better positioned for decentralisation at the infrastructure level, not about who gets paid more than others. thereby encouraging increased decentralisation of the beacon chain, upon which the L2 is reliant.

Notice that this is advocating the inclusion of validators (not the sole recipients)

Users do not run nodes; however, you can include a group of users who do by including the beacon chain deposit addresses. The only effective approach to go after this particular group of actors is to target beacon-chain depositors. :melting_face:

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Great proposal, but only for a part, we should not forget that a block chain it s working with validators but also with user. Without user it s no reason to validate blocks. So user should be more reward in case of airdrop than validator as validator get token native rewards from their action. It is very important to also have a representative distribution between all the actors of the ecosystem for more decantralisation.

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When it comes to airdrops you can structure the distribution so that both validators and users are adequately rewarded. For example as a reward for their efforts, a portion of the airdrop could be allocated to validator while another portion could be allocated to users who participate in the ecosystem in certain way, such as by staking their tokens.

Lastly, a balance must be struck between incentivizing validators and users while also ensuring that token distribution remains fair and representative of the ecosystem’s overall participation. This allows the blockchain ecosystem to succeed and stay decentralized which is critical for its longterm success.

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There’s no word yet on when the snapshot will take place, so we’ll just have to keep waiting.

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