Earn income from our WETH treasury and contribute to decentralisation
The treasury has 656 WETH that has been sitting idle for over a year.
This CIP proposes creating 20 x 32 ETH CityDAO validators to earn yield on our treasury, whilst also contributing to the decentralisation of Ethereum.
Income
We could be earning 28.8 ETH ($55k) per year on our current treasury (640 x 4.5% APR).
Decentralisation
By creating CityDAO validators, instead of using LIDO stETH, we’re helping decentralise the validator set. Lido currently controls over 30% of all Ethereum validators.
Risk
We currently hold ETH and there is no additional ETH exposure risk.
No smart contract risk. By running our own validators, we don’t have any smart contract risk with a liquid staking token.
Slashing risk. Validators will be run by a trusted Node Operator with historic experience.
Withdrawals
The beaconchain now allows for withdrawals, when we need to sell ETH, we can withdraw validators in 32 ETH lots or all at once.
There is currently no exit queue to withdraw validators, but this could change in the future and we should plan for withdrawals ahead of them being required.
Node Operator
The CityDAO Node will be operated by Reeves (proposal author) who has been running community validators for years. Reeves was a facilitator and Gnosis Signer of the CityDAO Dev guild when it existed, and worked on the Parcel-0 Land NFT.
Costs
Initial Hardware Costs: $1,500 USD to purchase dedicated hardware for CityDAO.
Commision: 10% of income to the Node Operator to cover running costs (maintenance, power and internet). This is the same commision that is charged by Lido if we were to use stETH. Rocketpool has a 14% commision.
I support this. We already have the WETH just sitting there. If we stake it, then we get 4.5% APY at no additional risk. Earning 28.8 ETH a year seems great compared to earning none.
Thanks for people’s support so far. I jumped on the community call earlier today and I thought I would share a few FAQs that have come up:
What exactly is a validator? A validator is a virtual entity that lives on the Ethereum Beacon Chain, represented by a balance, public key, and other properties, and participates in consensus of the Ethereum network.
What is a node operator? A node operator is the human being who makes sure the software is running appropriately and maintains hardware as needed.
What is the validator deposit?
You can think of the deposit as a transfer of funds from an Ethereum account to a proof-of-stake validator account. It specifies who is staking, who is validating, how much is being staked, and who can withdraw the funds. For CityDAO the SAFE (Gnosis) will make the deposit and it will be the only address that can withdraw the funds.
When can we withdraw our funds?
We can signal our intent to stop validating by uploading a pre-signed voluntary exit message at any time. This will start the process of ending our commitments on the network. A “withdrawable epoch” will take ~27.3 hours, assuming there is no validator exit queue. The withdrawal address will be set to the CityDAO SAFE, and all ETH will be automatically transferred in the next 5 days. We can exit one or all validators, depending how much of the treasury we want to remove from validation at any point.
What happens if the Node Operator is incapacitated or doesn’t perform their duties?
The CityDAO council or multisig will be supplied with a pre signed voluntary exit message when the validators are established. If the council or multisig needs to exit the validators for whatever reason, the file can be uploaded to a broadcast service (Broadcast - Open Source Ethereum Blockchain Explorer - beaconcha.in - 2023) and all the validators will exit and funds will be returned back to the CityDAO treasury SAFE. There is nothing a node operator or third party can do to stop the process.
Credit Ethereum Foundation for a lot of these FAQ responses.
I read the CIP yesterday and I had questions about it which I was just going to post today, but this perfectly answered everything. I fully support this CIP.
Finally, our team started to do some normal things, to develop and make blockchain real projects, instead of always focusing on the little money raised
Single Node Operator: Having a single Node Operator, even if experienced, introduces a single point of failure. If the Node Operator faces technical issues or goes offline, all 20 validators could be at risk simultaneously.
Dependency on Proposal Author: The fact that the proposal author (Reeves) operates the CityDAO Node raises questions about potential conflicts of interest or undue influence in decision-making.
Future Changes in Ethereum Protocol: The proposal does not account for potential changes in the Ethereum protocol that could affect the effectiveness or efficiency of running validators.
Overall, careful consideration of these factors and a transparent discussion within the CityDAO community are essential before implementing the proposal.
Single Node Operator: The CityDAO council provides governance to the node operator by holding signed exited messages for all the validators. Should the node operator become incapacitated or not be fulfilling their duties, the council can exit the validators and the funds will be sent back to the treasury gnosis safe. The node operator can not overrule that process.
Dependency on Proposal Author: The CityDAO council provides governance over the validator. The node operator is only a service provider.
Future Changes in Ethereum: Any protocol changes would impact 25%+ of all Ethereum that is in validators. I don’t see the risk here? The most likely change is to limit liquid staking majority rather than DAO nodes like we’re proposing.
