Guys and/or @samkazemian , can you pls clarify whether introducing

sfrxETH v2 would at the same time cancel the current easy staking mode where people could just stake their ETH without worrying about validators and possible liquidations?

If you stake sfrxETH, you literally do not have to do anything at all between v1 and v2 updates. It's the same frxETH and sfrxETH tokens. Nothing changes. Rather than getting PoS yield from validators ran by the core devs, you get interest payments ran by decentralized validator borrowers. It changes absolutely nothing in terms of functionality. You can just hold sfrxETH like always and do whatever you are doing now with it and keep earning.

No, that won't cancel it. Staking will still remain easy 🙂

What do you anticipate the spread to be for validator operators, and how much will the collateral be?

That is a great question! We'll have to see in the open market. As far as the LTV goes, veFXS holders should set those parameters. On launch, we can probably start with a 75% LTV which is de facto what Rocket Pool does. 8 ETH collateral to spin up a validator. veFXS holders can adjust that if needed.

thanks sir. Will that collateral be staked or used for another yield generated activity?

You can refer to this https://t.me/fraxfinance/267996

The collateral is staked in the validator itself for efficiency. But the entire validator is owned by the Frax Protocol. The node operator just operates the validator and keeps the earnings. So if you put up 8E as collateral, then you borrow 24E from the lending pool, combined with your 8E as collateral, you then spin up 1 validator since it equals 32E. You pay the interest rate on your 24E debt essentially. If you get slashed for 3E, then you get liquidated/ejected and you only get 5E of your 8E back. The protocol keeps part of your collateral to make itself whole. Think of it like a home mortgage. Let's say you wanted to buy a $3.2m house but you only had $800k. You go to the bank, ask for a $2.4m loan. The bank gives it to you, you combine it with your $800k and buy the $3.2m house. You get to live in the house and profit from it. But the bank owns the house technically. The title is in the bank's name. You owe the bank interest and are in debt. In this case, the lender is the bank. In frxETH v2, the lenders are frxETH minters who lend ETH.

ah ok. thank you

But you need to keep collateral on the EL if you want to liquidate, otherwise you don't have a mechanism to incentivise validators to exit

Two things: 1.) If validators get slashed, they get auto-ejected so it is a forced liquidation. Because of this, there's already a built-in mechanism that takes care of any misbehavior up to the collateral value. 2.) A secondary line of defense is that when the validator spins up, they must send the beacon oracle system a signed exit message from their validator's public address. This message can be broadcasted at any time to eject the validator and return to them any remaining collateral. So this can always be done if necessary (but usually won't be necessary).

currently, only the validator key holders could eject the validator, how the protocol could auto reject the validator? in your case, the protocol will hold the validator key either?

but it is possible that the pre-signed exit messages fails to work after the concensus layer upgrade?

how is rocket pools 75% LTV btw? their NOs put up 8 and borrow 24 24:8 is not 75% LTV?

it’s more like they’re loaning you 24ETH to run a validator with your 8ETH, with a total value of 32ETH. 24:32 75%. If you do poorly and your ETH gets slashed, let’s say by 2ETH, now they have to loan you more it’s 26:32 and LTV then goes up to 81.25%. make sense? this is not how rocket pool actually works btw bc of RPL “insurance” but it is how frxETH v2 would work

thanks for the clarification. im aware that this is how it works, but labelling 24 borrowed eth as 75% ltv is still wrong? its like saying oh i deposited 8 eth in aave and borrowed 24, my LTV is 75%. No its not, its 300% and its undercollateralized loan: 24eth value: 8eth (of node operators own collateral) ltv = 300%

LTV stands for loan to value. If you put up 8ETH, you are being loaned 24ETH for a validator worth 32ETH. Your example for an aave loan is different because you could do whatever you want with the 24ETH and aave would lose money. Here Frax cannot lose money. You are borrowing a validator which will get ejected if you get slashed.