Author: BlackMario

"Dora Factory first launched Public Good Staking, which is helping the PoS system to balance security and ecological development, and build a new balance. It can not only provide flexible LSD income services, but also provide developers and various Web3 applications with more Development opportunities."

In the past year, Dora Factory has built the infrastructure of Public Good Staking as an industry pioneer. According to the roadmap recently released by Dora Factory, the total agreement pledge (TVL) has reached 300 million US dollars and is increasing rapidly.

image description

Source: defillama.com

As ETH completed the Merge upgrade, ETH 2.0 officially came, and its consensus mechanism officially transitioned from PoW to PoS, and the chain structure was expanded from one main chain to 64 shards, with the beacon chain as the pivot chain. After the upgrade, the scalability improvements on the ETH 2.0 chain (such as transaction speed and cost) are visible to the naked eye, and can better serve various demanders. After abandoning PoW, Ethereum is also realizing a certain ideological A kind of "political correctness" (environmental protection and carbon neutrality). This is a very positive signal for the development of the encryption world and the Web3 ecology.

In the long run, as the largest DeFi Layer 1 ecosystem in the encrypted world, with the further improvement of technical solutions such as interoperable tools such as cross-chain bridges, the future form or function of Ethereum may become other chains (other Layer 1 Secure settlement layer with Layer 2, etc. (transactions occur on other chains, and settlement is realized on Ethereum).

image description

first level title

ETH 2.0 ecology deviated from the original intention of PoS

PoS brings more scalable advantages to Ethereum, and the validator pledge mechanism based on ETH tokens is also enabling more people to participate in the validator pledge, so as to make the verification network more decentralized and further guarantee Network security (increasing the economic cost and threshold of validator attacks). In the ETH 2.0 system, any user can become a validator by staking at least 32 Ethereum tokens in the beacon chain and running the client.

From the perspective of participation costs, according to the current $1695 per ETH, the capital threshold to become a validator is more than $540,000. According to the current income statistics (calculated based on the pledged amount of 16.6638 million pieces), the daily income of the 32 ETH currency standard is around 0.0027 ETH. So we see that for ordinary investors, becoming a verifier has a very high cost threshold but a low rate of return and lack of flexibility. However, if you run the client by yourself, there may also be slashing due to inactivity.

Under the wave of ETH 2.0, the LSD (Liquid Staking Derivatives, Liquid Staking Derivatives Agreement) track is meeting the needs of some small and medium investors to participate in ETH 2.0 Staking. Among them, LSD service providers represented by Lido, Rocket Pool, and SSV have emerged. Lido, Rocket Pool, etc., as asset managers, accept user fund pledges and feed back liquid pledge tokens such as rETH, stETH, etc. (CEX also belongs to One of them), and hand over to operators such as SSV to operate the nodes.

Currently, Lido is the leading application on the track, its market share occupies about 74% of the entire LSD market, and controls nearly 18% of the DeFi market (TVL). Lido's excessive market share means that once any problems occur in Lido and stETH (deeply participating in the DeFi market), it will be fatal to the development of the DeFi market and the ecology on the Ethereum chain. At the end of last month, Lido had nearly 116,000 depositors and held 30% of the total ETH tokens, but it only had 54 node operators overall, which means 30% of the PoS validators Controlled by 54 entities. Therefore, this virtually increases the risk of centralization. And as Lido's market share further increases, it may also take a majority of the revenue generated by the ETH network in the form of a monopoly.

PoS aims to further promote the decentralization of the network to ensure security by bringing benefits to pledgers and verifiers, but this model does not take into account the potential impact of economic factors in the external market on ecological development. Once the market develops towards the above-mentioned trend, the enthusiasm of the ecological roles participating in the pledge (such as retail investors, communities, investment institutions, etc.) will become lower and lower due to the decline in income (LSD giants may first increase the pledge income to seize the share after monopolizing the market, lower income).

In addition, the profit-seeking of funds is further promoting the development of PoS in a direction that deviates from the original intention. The LSD giants continue to use the ETH token rewards generated in the network for compound interest, rather than to promote the ecological development and development of the Ethereum chain. Governance, which is the most fatal to the long-term development of the ETH ecosystem (currently, neither the Bitcoin nor the Ethereum ecosystem has any block incentives that directly contribute to the development of the ecosystem). And the market seems to be developing towards this trend. On this basis, the pledge rate of ETH tokens participating in the pledge of ETH 2.0 validators is less than 14% (the number of pledges is about 16.6638 million), and most of them come from the LSD platform . This not only did not produce gains to network security, but increased hidden dangers.

Therefore, economic factors do not seem to help Ethereum form a solid security moat, nor provide benefits for the development of the ecosystem, but are necessary and important for the further improvement of Ethereum’s ecological governance and incentive model.

Dora Factory has launched a protocol called Public Good Staking, which aims to improve the potential development problems of the ETH 2.0 ecology in this way, so as to form a new balance and complementarity between network security and the development of the ecosystem. . At the same time, Public Good Staking is building a new LSD paradigm to push the track into a new narrative direction.

first level title

The operating mechanism of Public Good Staking

Dora Factory is a DAO-driven Web3 hacking digital infrastructure facility. The ecology aims to help open source communities and frontier technology builders to develop more vigorously in the form of creating protocols, tools and public welfare infrastructure. Recently, the Dora Factory team announced that it will release the Alpha version of the Ethereum Public Good Staking protocol (Public Good Staking) at the end of this month. The 2.0 pledge standard and the ecosystem financing scheme model allow users to participate in the development of ecological public goods while freely participating in pledge without permission.

From the perspective of execution, the protocol itself is divided into three parts, including (1) the mechanism for sending block rewards; (2) managing the Grant pool (fund pool for ecosystem development) through DAO; (3) building towards the ecosystem allocating funds.

image description

Source: Dora Factory (https://research.dorahacks.io/2022/12/02/block-incentive-ecosystem-funding/)

The model takes into account both autonomy and effectiveness, that is, the intervention factors of centralized fund allocation are minimized to achieve autonomy, and at the same time, effectiveness can be retrospectively measured by reviewing the sustainability of funded projects and the value they create.

(1) "Block reward" mechanism

Dora Factory's block incentives in Public Good Staking are based on the formation of blocks to further "separate" new incentives for funding ecological development. Block incentives come from two parts, one of which is that one method is to issue a small amount of tokens in each block and add them to the Grant pool, and the other method is to increase the income of verifiers A block reward tax is imposed, that is, each validator "pays" a small part of the income as an incentive fund after completing the verification.

image description

Source: Dora Factory

(2) Manage the Grant pool through DAO

image description

Source: Dora Factory

(3) Fund allocation

image description

Source: Dora Factory

first level title

The significance of Public Good Staking to PoS ecology

image description

Source: Dora Factory

The multi-level development of the Ethereum ecology is the core of ecological sustainable development and the long-term vision for the future. However, the incentive model between verifiers and builders is unbalanced. At the same time, the LSD track application represented by Lido is forming a new monopoly situation (mentioned above). In addition, holders of ETH tokens do not have enough interest to participate in the construction of the ecology (lack of flexible incentives). Then under the influence of comprehensive factors, the Public Good Staking launched by Dora Factory to promote ecological construction is binding more roles, general rights and interests and incentive depth to fundamentally alleviate the above problems.

On the surface, building a more dispersed and large number of nodes is a key factor in improving the network moat in the form of decentralization, but from a deeper perspective, only by improving the richness of the ecology can the ecological provide impetus for long-term development. In fact, at present, Ethereum itself has not established a reasonable security balance from the external market through its own PoS mechanism, and Public Good Staking is expected to further promote the mutual complementarity of security and ecosystem development.

From another perspective, the infrastructure built by Public Good Staking is helping to build a more diversified and flexible liquidity staking income model to provide an early foundation. On this basis, more and more users are expected to enjoy richer benefits through staking, such as getting token airdrop benefits by helping more high-quality projects achieve early start on Ethereum, etc. It is just one of the potential benefits, and the imagination of the benefit scenarios it can provide is huge.

In this way, more C-end community users will be mobilized to participate in the node pledge of Public Good Staking. At the same time, it can also help crypto investment institutions explore more Web3 business scenarios through Public Good Staking and nodes, and jointly promote The development of Public Good Staking.

At present, the ETH 2.0 pledge agreement launched by Dora Factory based on Public Good Staking is about to go online, and through the above methods, it will help potential projects get the opportunity to start early. At the same time, Public Good Staking will also support Nostr, the world's largest social protocol, and deploy multiple relay node.

Public Good Staking is becoming a new form of LSD ecology. Through the support of multi-scenario and income incentive models, and the binding of multiple ecological roles, PoS token holders and community users can use Public Good Staking to In the form of the new form of LSD, pledged tokens (including PoS tokens or DORA tokens) can be obtained through the Dora Factory platform (dorafactory.org) to obtain more flexible income and enrich the means of improving capital utilization. For developers, on-chain applications, etc., they can obtain more unique development opportunities.

Previously, the first cooperation between Dora Factory and Aptos initiated the Aptos Grant DAO funding plan to fund the construction of Aptos ecological projects, and received 14,241.8 APT funding to help the development of Aptos ecological projects, and improved the liquidity and utilization of APT tokens Rate.

The deeper significance brought by the launch of Public Good Staking is that it is more conducive to improving the monopoly trend of the "traditional" LSD track, avoiding the deformity due to external economic factors, and having a positive impact on the long-term development of PoS ecology such as Ethereum. influence, and promote the return of the PoS consensus mechanism to its original intention.

Dora Factory related links:

Official website: https://dorafactory.org/

Twitter：https://twitter.com/DoraFactory