Ethereum 2.0 Staking Fund for Institutional Investors

JC jawe.sol
3 min readDec 17, 2020

Three weeks already past, Ethereum 2.0 is close to tripling its initial deposit threshold of 524,288 ETH. These deposits made in increments of 32 ETH represent the stake of active or soon-to-be active validators on the network.

Image from coindesk

New frontiers

It’s important to remember not all ETH 2.0 staking options are equal.

Staking services come in two flavors: custodial and noncustodial. In practice that means the validator key is either held by the service provider or it’s created and held by the investor.

“Not your keys, not your coins” is a crypto rallying cry for a reason, and it’s no different with ETH 2.0. Knowing who holds your keys is the same as knowing who controls your funds, and it is the most important part of setting up your validator.

When you deposit funds in ETH 2.0, you create a total of four keys: a public and private validator key set and a public and private withdrawal key set.

Rewards & Penalties

As an active validator, your balance either increases or decreases, it never goes sideways*. Therefore a pretty reasonable way of maximising your profits, is to minimise your downsides. There are 3 ways your balance can be reduced by the beacon chain:

Penalties are issued when your validator misses one of their duties (e.g. because they are offline)

Inactivity Leaks are handed out to validators that miss their duties while the network is failing to finalise (i.e. when your validator being offline is highly correlated with other validators being offline)

Slashings are given to validators who produce blocks or attestations that are contradictory and therefore could be used in an attack

Institutional Investors Keys

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