Ethereum’s transition to Proof-of-Stake (dubbed The Merge) is easily the most significant and anticipated improvement of the blockchain network since its genesis in 2015. The Merge has been in the works for as long as Ethereum has been live, and it will occur at Total Terminal Difficulty (TTD) 58750000000000000000000, or somewhere between September 13th and 15th.
The Ethereum community, whether they are developers, stakers, or end-users, obviously have many questions related to preparing themselves for the Merge, depending on how they interact or build on top of the network.
One of the largest changes to the blockchain is the replacement of Proof-of-Work miners with Proof-of-Stake validators. There is a hope that one of the most welcome changes as a result of this is the rise of solo stakers that strengthen the robustness, security, and decentralization of Ethereum.
In this article, we will explore what solo staking is, what you need to be aware of if you’re already a solo staker post Merge, and how you can prepare ahead of the Merge.
Proof-of-Work is a consensus mechanism used by blockchains like Bitcoin in order to achieve agreement across the network. In this protocol, miners compete with one another to solve cryptographic puzzles and earn the right to create a block in exchange for rewards. This requires a lot of energy and causes miners to spend huge amounts on electricity to have the capital required to secure the network and an incentive to act honestly.
On the other hand, a blockchain network using the Proof-of-Stake consensus protocol replaces miners with validators who deposit a certain amount of money with the network (32 ETH in Ethereum’s case) in exchange for the ability to mine new blocks and verify existing blocks. The network chooses a validator at random whenever a new block needs to be created, and other validators verify that the created block is legitimate. If a validator is honest and functions as desired, it receives rewards. However, if a validator acts dishonestly or refuses to perform desired functions, they lose part or all of the tokens that it has staked.
By replacing electricity with staked cryptocurrency as the primary method of securing the protocol and keeping participants honest, Proof-of-Stake can reduce energy consumption of the network by more than 99%. It also makes participation more democratic by allowing people without expensive hardware and mining farms to take part in maintaining the network and earning rewards.
Solo staking is the process of participating directly in the network consensus (as an individual) by running an Ethereum node and activating a validator by depositing exactly 32 ETH.
Why would you solo stake? Solo stakers are able to receive rewards—up to 15% annual percent yield (APY) on staked ETH—directly from the protocol by keeping their validator functional and online. They operate in a completely trustless environment, having total control over their keys, software clients, and hardware. Since solo staking is technically done by individuals, it is considered to be an attractive form of staking as it increases the decentralization and security of the entire network, while being autonomous.
An alternative to solo staking would be to participate in a staking pool service such as Rocket Pool or Lido. However, with this approach, you would not have complete control over the node’s network activities. If the validator is not performing as it should, you risk losing your staked ETH. Additionally, any rewards received would be a fraction of what you could earn as a solo staker. With Rocket Pool, you can run one of their nodes, but you must use their software, and again, the rewards will not be as high as running your own node.
In order to solo stake, you will need the following:
At least 32 ETH
To run a validator, you need to deposit 32 ETH to a designated contract. As it stands, you cannot remove your staked ETH. This will only be possible after the Shanghai upgrade which may be six to 12 months after the Merge. Therefore, be mentally prepared to lock up your ETH for some time.
Although it is possible to run a validator from your main computer, it is strongly advised that you assign a dedicated machine for the purpose. The hardware should have at least 4 - 8 GB RAM, at least 1 TB SSD, and access to an internet connection faster than 10 Mbps. Refer to Ethereum’s run a node page for more details and other hardware recommendations by ConsenSys.
There are two pieces of software you will require for your Infura node to act as a validator post-Merge:
- Execution layer client - (Formerly Eth1 clients) Responsible for transaction bundling, execution, and chain state management. Examples include: Geth (Go Ethereum), Nethermind, Erigon, and Hyperledger Besu.
- Consensus layer client - Responsible for PoS consensus, block seal validity, and fork choice rule. Examples include: Prysm, Lighthouse, Nimbus, Lodestar, and Teku.
Here is an Infura workshop that outlines the steps on how to set up both. Installation may require a certain level of comfort with computers and the command line. Note that failure to install these clients ahead of the Merge will result in your node being seen as “offline” after the Merge until both layers are synced and authenticated.
You’ll be required to maintain your hardware and make sure it stays online and connected to the network. You’ll also have to make sure that your software clients are upgraded and updated regularly. Also, as mentioned earlier, if your validator node is not performing properly, you risk losing some, or all of your 32 staked ETH.
Fortunately, the Ethereum Foundation has released a Launchpad that walks you through all the steps to set up and run a validator node in great detail, as well as ConsenSys. This includes highlighting risks, choosing hardware and software clients, generating and securing keys, and becoming a full fledged solo validator on the Ethereum PoS network.
It’s also important to note that only 32 ETH per validator node will be counted towards rewards. Anything over 32 ETH does not count unless you spin up another node.
As stated above, one of the most important steps that a solo staker will need to take is the installation and configuration of software clients.
The Ethereum Foundation states on their webpage on preparing for the Merge that a Staking Validator (another term for Solo Staker) will need to:
Run both a consensus layer client and an execution layer client.
Authenticate both execution layer and consensus layer clients with a shared JSON Web Token (JWT) secret so they can securely communicate.
Not completing the first two items above will result in your node being seen as "offline" after the Merge until both layers are synced and authenticated.
Set a fee recipient address to receive your earned transaction fee tips/MEV.
Not setting a fee recipient will still allow your validator to behave as usual, but you will miss out on unburnt fee tips and any MEV you would have otherwise earned in blocks your validator proposes.
Ideally, you should choose clients that have their essential code open sourced, audited, and battle-tested. Infura offers the best in class execution layer and consensus layer clients in the form of Hyperledger Besu and ConsenSys Teku respectively. These clients have been developed in collaboration with the broader open source community and ensure that your validator node doesn’t go offline during the Merge.
To optimize the value your nodes can provide, be sure to learn about maximal extractable value (MEV). Software produced by Flashbots, called mev-boost, can help maximize value for each proposed block by allowing validators to purchase blocks with transaction orders already optimized. Since the software is compatible with all Ethereum consensus clients, mev-boost helps democratize access to MEV, while ensuring the most profitable blocks.
To encourage adoption as well as educate stakers on its use, Infura also recently hosted a series of weekly Merge workshops featuring Michael Wuehler, a solo staker and co-founder of Infura. Finally, Infura has also released a series of articles highlighting one solo staker’s experience of becoming a validator on Ethereum. You can review those articles here:
One of the reasons the Merge has been in the works for so long is to ensure that the transition is as seamless as possible for all the parties involved. That said, here are a few things you could do as a solo staker to be well prepared.
Gain a holistic understanding of what the Merge is, why it is being done, and why it is important (not just for Ethereum but for the blockchain ecosystem as a whole). The Consensys Merge hub is’ is an excellent place to start.
Try and stay as active as possible with the overarching Ethereum ecosystem. We recommend you do the following:
Gain an understanding of the various components you need to have in order to solo stake, including the Authentication Engine API, the consensus client, and the execution client. The Merge readiness checklist and the official Ethereum solo staking documentation are excellent places to start.
Be aware that the ETH you deposit in order to participate will be locked for the near future. You will not be able to withdraw your funds until the planned Shanghai upgrade so be sure to budget your finances accordingly.
Be wary of scams that may pop up in the form of forked Ethereum PoW chains. Before you think about trying to make a quick buck dumping your PoW coins, check out this Reddit post highlighting potential risks.
Once you feel like you’re finally ready to stake your ETH, follow the instructions on Ethereum’s Launchpad to become an active validator on the PoS network.
Solo staking is one of the most exciting activities that will come to life post Merge. Allowing individuals to directly participate in network consensus and earn rewards goes a long way towards achieving Ethereum’s goals of near perfect security and decentralization.
The Ethereum Foundation and Infura have taken critical efforts to make the process of solo staking as seamless and democratic as possible. However, that doesn’t mean you do not need to take the steps highlighted above to prepare yourself.
We hope you are as excited as us about the future of blockchain and the internet!