This post was updated on April 4, 2022 to include a full copy of the Client Incentive Program details.
A diverse set of clients is key to the Ethereum network’s health and decentralization. Diversity ensures that innovation continues at the base layer of the protocol, that the network is resilient in the face of potential attacks or bugs, and that a broad set of participants are engaged in debating potential changes to the core protocol.
While clients provide an essential service to the network (without them, there is no network!), it has historically been difficult for them to capture value. Recently, more avenues have become available for these teams to build sustainable businesses, but most of those focus on mainnet-adjacent opportunities rather than the main Ethereum network. Additionally, these opportunities generally do not scale proportionally to the amount of value created.
To ensure that client teams have a strong incentive to maintain the core Ethereum network over the long term, the Ethereum Foundation has launched a Client Incentive Program. This program offers client teams ETH-denominated rewards which unlock over time, as long as they continue to build software which meets the performance and security requirements of mainnet.
Specifically, teams in the program will receive a total of 144 validators (4608 ETH) each to operate on mainnet. The size of these grants recognizes both the excellent work performed over the past few years and the many development challenges expected well into the future. One team, whose client is more recently mainnet compatible than their peers, has been included in the program with a 50% stake.
The teams eligible for the program are, alphabetically:
– Go-ethereum (geth)
– Hyperledger Besu
– Lodestar (50% stake)
The validator deposits are made upfront to be operated by teams immediately, while the withdrawal credentials (the ownership of the funds) will be vested over several years, with the first tranche unlocked at the delivery of Beacon Chain withdrawals. In order to receive this and subsequent tranches of validator withdrawal credentials, teams must continue to maintain their clients, meet performance benchmarks on mainnet, and generally contribute toward delivering the Ethereum community’s roadmap, as it evolves over time.
After The Merge, client teams will also receive transaction fees collected by their validators. This, along with staking rewards, will begin to provide a steady source of revenue to teams. As the grants vest, teams are free to do what they please with the validators they control – e.g. continue to stake and earn rewards, withdraw and liquidate, or some combination of the two. Also note, the Client Incentive Program is in addition to any grants that the EF provides to these teams.
A full copy of the program’s details has been included as an appendix. Geth’s participation in this program is unique since they are a team housed within the Ethereum Foundation. However, the Geth team – like the other clients listed above – will have complete discretion over how to use these validators, earned fees, and their ETH deposits as the grants vest. The structure of the program aligns teams with the long-term health of the network and ensures they are incentivized to build secure and performant software. It was designed to be backwards-looking and reward teams who have already delivered production-quality software. We hope that it provides a foundation for a healthy incentivization of core contributors to Ethereum.
As always, the Ecosystem Support Program is available, and eager, to fund earlier innovative Ethereum implementation efforts, including new client teams. We are excited to finally share this initiative publicly, and we look forward to seeing more ways for the community to come together and support public goods!
Client Incentive Program Details
Given the aggregate total of ETH that is planned to be distributed to client teams (about 42,000 ETH when considering validator rewards, or, as of April 4, 2022, over $145MM in value), we recognize the community’s interest in learning more about how distributions will take place and how milestones will be met. The full details of the incentive program, as shared with client teams, are below.
Program Goals & Eligibility
The program aims to provide long-term support and incentives for teams towards maintaining reliable clients and a healthy network overall. For client teams to be eligible, they should already be contributing to the general development of Ethereum and intend to support the upcoming transition to proof of stake. Throughout the program, teams will need to maintain certain levels of performance to be eligible for the rewards. More on this below.
– NUM_PERFORMANCE: 128 (Number of validators monitored for performance)
– NUM_CANARIES: 16 (Number of canary validators)
– NUM_VALIDATORS: NUM_PERFORMANCE + NUM_CANARIES (Number of total validators)
– INITIAL_RELEASE: 32 (Number of validators to release at initial major milestone)
– TIMED_RELEASES: [6, 10, 14, 18, 22, 26 + NUM_CANARIES] (Number of validators to be released each 6 months after INITIAL_RELEASE)
– METRICS_WINDOW: 8192 (Number of epochs over which success metrics are observed)
– MAX_PROBATION_WINDOW: 32768 (Maximum number of epochs that the Client can be in probation before the EF can partially or fully remove the Client from the incentivization)
The following are the high-level steps performed by “EF” and the “Client” through the life of this plan.
1. Make deposits
After a client has agreed to join the program, the EF creates NUM_VALIDATORS 32-ETH deposits. Total ETH at stake in the client incentivization plan is equal to NUM_VALIDATORS * 32. In consultation with client teams, a formal start date for this program will be determined where teams will gain control of validators, approximately between October 1, 2021, and whenever The Merge occurs.
2. Transfer control of active signing keys
After step 1, there will be NUM_VALIDATORS privkeys mapping to the pubkeys in the validator deposits controlled by a single mnemonic. These keys must be securely transferred to the client team. This mnemonic is transferred to the Client via one of the following:
– Using asymmetric encryption (e.g. PGP) via a known/validated public key of the recipient Client
– Read verbally 25% at a time over 4 encrypted calls of various platforms
– Through an alternatively negotiated, secure means
The Client then generates NUM_VALIDATORS keystores using the mnemonic and verifies that each privkey maps sequentially to the batch of validator pubkey deposits made in their name. The EF retains the mnemonic in cold storage in the event that active keys must be used to exit validators from the program.
3. Client operates nodes/validators
Deposits are made; keys are transferred. Now, the Client is in charge of the management of the associated validators until withdrawal credential privkeys are released. Specifically, the Client must use their own software as an execution engine or consensus layer and is responsible for choosing and maintaining support for a counterpart client throughout the incentivization period. Performance of the Client’s validators can be assessed simply by viewing chain metrics, but additional node performance metrics might be requested.
4. Release sets of withdrawal credentials upon meeting milestones
Waves of validators are to be released to the Client upon meeting predefined milestones via the transfer of the underlying privkeys for the validator withdrawal credentials. When a wave of validators is released, this ends the obligation of the Client to the EF for those validators. The Client is free to choose to continue to validate, to exit, to withdraw, etc. These keys will be PGP encrypted and transferred in batches.
Due to the dynamic nature of the ever-evolving Ethereum roadmap, simplicity is favored in the choice of milestones. A wave of credentials is released when withdrawals from the beacon chain are enabled, with a minimum period of one year between the launch of the Client Incentive Program (CIP) and the complete release of the first wave of credentials. If withdrawals from the beacon chain are enabled within or before the first year of the CIP, the first wave of credentials will be released monthly, in equal tranches, from the first month after withdrawals are enabled to the one-year mark of the program. Otherwise, the first wave of credentials will be released when withdrawals are enabled. Subsequent waves are released over time if the Client continues to meet expectations.
Specifically, the milestones are as follows:
– Release INITIAL_RELEASE validators at the time at which withdrawals from the beacon chain are enabled.
[The rest of the content is unchanged and contains further details about the program’s milestones and releases.]