Vitalik Buterin's Surprising Ethereum Staking Strategy Explained

Vitalik Buterin’s Surprising Ethereum Staking Strategy Explained

Time Stamp: July 8, 2023 9:28 AM
Vitalik Buterin's Surprising Ethereum Staking Strategy Explained PlatoBlockchain Data Intelligence. Vertical Search. Ai.

Ethereum co-founder Vitalik Buterin recently shared some intriguing insights into his personal staking strategy for Ethereum (ETH).

As Cointelegraph reported, during a June 29 episode of the Bankless podcast, Buterin revealed that he only stakes a “small portion” of his ETH. The reason? The complexities of multisignature wallets, or multisigs.

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Unraveling the Multisig Mystery

Multisigs are a type of digital signature scheme that requires multiple parties to sign off on a transaction before it can be executed. This added layer of security is crucial in the crypto world, but it’s not without its challenges. Buterin explained that staking ETH requires the keys to be public on an online subsystem for safety, and setting up a multisig for this purpose can be quite complicated.

Comparing Staking Strategies

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Buterin’s cautious approach to staking stands in stark contrast to that of Charles Hoskinson, the co-founder of Ethereum and founder of Cardano. Hoskinson expressed his surprise on Twitter, stating he was “at a loss for words” upon learning that Buterin only stakes a small portion of his Ether. He went on to reveal that he stakes all of his Cardano holdings.

The Future of Staking: EigenLayer Protocol

Buterin also touched on the topic of the EigenLayer protocol during the podcast. This protocol allows Ethereum validators and stakers to “re-stake” their assets onto other emerging networks. While it’s still in its testnet phase and not expected to launch until Q3 2023, Buterin highlighted that it poses “centralization risks.” He explained that the system would value trustworthy stakers more than untrustworthy ones, and the former are less likely to get slashed.

Sreeram Kaanan, the founder of EigenLayer, concurred with Buterin’s concerns, emphasizing the “complex risks” associated with restaking. He advocated for a “constrained approach in building restaking,” focusing on what’s beneficial for the ecosystem and the potential for new innovation.

The Challenges of Scaling and Smart Contract Wallets

Buterin’s comments on staking come on the heels of his June 9 blog post, where he stated that the Ethereum blockchain would “fail” without sufficient scaling infrastructure to make transactions affordable. He also pointed out another potential point of failure related to smart contract wallets. According to Buterin, the move to these wallets has led to complexities in user experience when users manage multiple addresses simultaneously.

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