Recently we released an article about how Ankr’s ETH stakers earn rewards as well as some behind-the-scenes information about how it all works. This article will now explain how we are going to adjust the fee structure that allows our node providers to receive benefits in a win-win situation that makes the most sense for both stakers and providers.
This article will walk you through exactly what is changing, why we’re changing it, and how it should affect both our ETH2 node providers and stakers.
How Ankr’s ETH2 Staking System Works
At this time, Ankr has 208 ETH2 node providers that form the basis for Ankr’s ETH2 staking solutions. By having this many providers, Ankr effectively turns the ETH staking system into Delegated Proof of Stake (DPoS), which is a better way to decentralize the validation process for Ethereum.
With our system, users can contribute their ETH to the Ankr Earn platform, where a smart contract then stakes it across the 208 of our selected ETH2 node providers that are “delegated” to validate new blocks and share rewards from transactions fees among stakers.
As illustrated above, these node providers are paired with Ankr’s ETH2 sidecar nodes. The sidecar nodes report to the smart contracts that execute tasks on Ankr Earn, like when a user wants to make a request to stake. Ankr will also ensure the providers are performing well as a part of our risk-monitoring function.
Ankr is changing the fees that node providers collect from a rate of 15% to 10%.
Currently, Ankr’s ETH2 node providers are seeing an average APY of around 118.6%. This is very large compared to others.
How this provider revenue is calculated:
There is an average of 9.06 ETH2 nodes per sidecar X 32 ETH for each node = 289.92 ETH
289.92 X 5.25% in gross staking rewards = 15.22 ETH
15.22 ETH X 15% node provider fee = 2.283 ETH
+ 2 ETH X 5.25% gross staking rewards x (1–15% node provider fee) = 0.089
So, 2.283 + 0.089 = 2.372 ETH
2.372 ETH rewards ÷ the initial 2 ETH deposit = 1.186
1.186 x 100 = 118.6%
Current node provider APY: 118.6%
Proposed node provider APY: ~80%
To calculate the new APY, you would simply need to substitute 10% for the original 15%.
(This APY will be 33% less at about 80% APY).
Why We’re Changing the Fee Structure
We are changing this to provide more benefits and a sustainable structure that provides the best of both worlds for both providers and stakers.
Benefits for Stakers:
The current provider APY is currently massive compared to others. We can improve liquid staking costs for our stakers to be even more competitive by cutting this fee by a moderate amount. Bringing more stakers to Ankr Earn will benefit stakers, providers, and the system as a whole as there will be more TVL and participants in the use of our ETH liquid staking tokens.
Benefits for Node Providers:
It might look like node providers are making a sacrifice, but in the end, this will be a win-win situation. Our existing Node providers’ rewards distribution will be protected and not diluted as we will not be adding any new node providers — this is due to the price discount of ETH2 liquid staking tokens. As long as our aETHc (reward-bearing tokens) and aETHb (reward-earning tokens) are traded at a discount on DEXs, anyone interested in ETH2 liquid staking should first consider buying these tokens at a discount on a DEX before staking their ETH through Ankr as these two options are effectively the same.
Very soon we will launch new features that will help our users make the best decision before staking as they may be able to simply swap their tokens for our liquid staking tokens on a DEX at a discount. From there, we will further clarify all the DeFi opportunities related to liquid staking. Stay tuned!
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