The Cheapest Way to Run a Permissionless Node on Ethereum: ETHx by Stader Labs
You will only need 4.4 ETH to run a permissionless node on Ethereum
Stader Labs’ value proposition is to contribute to the decentralization of the nodes on Ethereum by providing a cheap and profitable way to run a permissionless node.
Most of the nodes’ infrastructure on Ethereum is centralized (~50% of all staked ETH flowing through the top 3 entities).
Running a permissionless Ethereum node is very hard: there are High capital barriers (32 ETH for solo-staking, 17.6 ETH with the top decentralized LSD) and Limited choices for LSDs nodes — including material exposure to LSD tokens, and additional volatility.
The ETHx tokenomics is designed to:
Reduce Capital Barriers to entry for Permissionless Nodes Operatora by ensuring the lowest bonding requirements to run nodes for ETHx: 4 ETH + 0.4 ETH in SD (Stader’s native token);
Align Incentives between Node operators and Stader: governance rights for node operators.
Provide additional utility for SD holders with an opportunity to earn up to 2% real yield in ETH + double digits rewards in SD by lending SD for Node operator bonds in phase 2.
ETHx and LSD Node Operators
Current node operators on a decentralized LSD must have a minimum of 1.6 ETH (~3k$) exposure in LSD governance tokens per validator, as material exposure is a prerequisite. That’s a big issue for node operators, as they don’t want to be exposed to the volatility of LSD which could wipe out their profits.
Imagine staking for years only to have your LSD governance tokens going to zero.
This shouldn’t be a factor in the equation for node operators.
The ETHx launch will be done in two Phases:
Phase 1: Permissionless node operators will need to bond a minimum of 0.4 ETH worth of $SD per validator, in addition to the 4 ETH bond, as additional protection for user funds against poor performance by node operators. This requirement is also intended to align incentives between node operators and Stader as they will be able to participate in the governance of the protocol.
Phase 2: will allow ETH-only exposure for Node operators that prefer not to hold governance tokens of LSDs and introduce a way to borrow $SD collateral-free to cover the 0.4 ETH in $SD bond per validator. Where will the borrowed SD you may be asking? From SD holders lending it to node operators in exchange for SD incentives and 10% commissions of Node profits.
In fact, Stader will provide special incentives for node operators. They have set aside between 800k-1.5 mn SD tokens (worth ~1–2 mn $), as incentives for node operators.
What is the Projected Profitability of ETHx Node Operators?
Food For Thought:
Decentralizing the node infrastructure of Ethereum is a very ambitious yet important objective.
Stader Labs introduces a series of incentives to align node operators with SD holders and the network. Operators will have the incentive to hold SD tokens in order to address governance. They might even decide to hold more tokens than the minimum in order to have more voting power.
The introduction of LSD nodes without the need to exposing to the material tokens is a much-needed improvement in order to safeguard stakers profits and secure more value.