ETH Staking Risk

ETHEREUM (ETH)

STAKING ETH

The Ethereum network achieves distributed consensus through its delegated proof-of-stake protocol. The DPoS mechanism relies on third-party validator nodes to verify transactions included in each new block. Validators are incentivized with ETH rewards in exchange for verifying transactions. To ensure compliance with the protocol rules, validators must “stake” ETH, thus risking loss of the staked ETH should the validator fail to comply with the rules of the blockchain, known as "Slashing".

DPoS networks allow for users to participate in staking without operating a validator node. Instead, holders may delegate the right to stake their ETH to a validator. These staked assets do not leave the holder’s wallet as delegation only permits the validator to stake the owner’s ETH on their behalf. Once a validator verifies a block of transactions, the validator and all of its delegators split the ETH reward proportionally to each delegator’s share of all assets delegated to the validator.

Satstreet provides staking functionality for clients in respect of ETH, allowing clients to delegate their ETH to approved validators and earn the applicable staking rewards. However, there are various risks associated with staking and such risks are in addition to the generalized risks pertaining to ETH described below, all of which continue to apply to ETH staked through the Satstreet platform.

STAKING FEES

Each crypto asset for which Satstreet provides staking services is subject to specific fees because of the uniqueness of each blockchain network. These fees are calculated on a percentage basis in relation to the amount of rewards earned. Satstreet’s service fee may be up to 30% of net rewards earned by a user in ETH and or USD, if applicable.
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With respect to any rewards earned on your staked ETH: (i) Satstreet’s validator, Coinbase Prime, will be entitled to a fee and may pay a portion of that fee to any third-party service providers; (ii) any remaining portion of the rewards (the “Net Rewards”) will be delivered to one of Satstreet’s custodial wallets; (iii) Satstreet will be entitled to a fee of 30% in respect of the Net Rewards (the “Satstreet Services Fees”); and (iv) after the Satstreet Service Fee has been paid, your account will be credited with any remaining portion of the rewards, and, subject to any unbonding, lock-up or cooling-down period, you will be able to hold, sell or withdraw your rewards.

Validator Rewards & Supported Validators

Validators are network node operators that verify the accuracy of data being recorded on the blockchain. Validators are typically rewarded in crypto assets for their transaction confirmation activities and the reward is based on the number of validators operating on the network. The size of rewards is generally inversely proportional to the number of validators on the network. The rewards payable to validators are automatically calculated by the Ethereum Network, and validators are paid when staking rewards are distributed.

Currently, the third-party service provider(s) we may use can include Coinbase Prime, Figment, BitGo, and/or Blockdaemon.
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Epochs

ETH time is divided into “slots” of 12 seconds. 32 slots equal 1 epoch (approximately 6.4 minutes). Each slot may or may not have a block in it. The total number of validators is split up in committees and one or more individual committees are responsible to attest to each slot. One validator from the committee is randomly chosen to be the aggregator, while the other 127 validators are attesting. The selected validator is responsible for the creation of a new block and distributing it to other nodes on the Ethereum network. After each epoch, the validators are mixed and merged to new committees.

Staking & Unstaking

‍Once staking is initiated, a validator enters a queue to become “activated”. Once initiated, the network acknowledges the ETH to be deposited to the staking smart contract. Once completed, the ETH deposit is officially accessible to the Beacon Chain and remains in a “pending state” until activated. Since only four validators are activated per epoch, activation may take days or even weeks to complete. Once activated, the validator begins accruing rewards for securing the network. Similar to the activation of a validator, a queue will be formed for users attempting to unstake and withdraw their assets. This queue is estimated to consist of 6 validators per epoch. Unstaking ETH may be subject to waiting periods due to network congestion and other network-related unstaking process requirements. For informational purposes, Satstreet may provide an estimate of the time it will likely take to unstake your ETH, however you acknowledge and agree that the Company has no control over the duration of such delays.

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Slashing
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Validators miss out on ETH rewards if they fail to participate when called upon, and their existing stake can be slashed if they behave dishonestly. There are two primary behaviours that can be considered dishonest: proposing multiple blocks in a single slot (equivocating) and submitting contradictory attestations. The amount of ETH slashed depends on how many validators are also being slashed around the same time.

In the event a supported Ethereum validator is slashed, Satstreet has no obligation to replace any lost ETH or otherwise provide any compensation for any losses. Negative impacts of slashing will be allocated to all clients using the staking service in proportion to the amount of ETH they had staked.
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Last Updated: November 2023‍

Staking Risk Statements

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