Take your Web3 skills to the next level

Benefits of running your own node - Part 2/4

Nodes are the foundation of the Web3 economy. However, running nodes seem like a distant notion to most Web3 participants today as it requires more effort than just being a user and the benefits of doing so are often unclear.

Welcome to part 2 of a 4-part series on the real and tangible benefits of running your own node. Click on the linked title if you missed last week’s edition!

  1. Running validator nodes is the most secure way to put your crypto assets to work

  2. Take your Web3 skills to the next level and boost your earnings

  3. Self-sovereignty and privacy should be basic human rights

  4. Promote decentralisation and make your vote count!

If you enjoy reading this, feel free to share the link with anyone who would find it helpful! - https://stakesaurus.beehiiv.com/ or get to know us better here 🕸️

Take your Web3 skills to the next level 🎮

You can think of running nodes as the next evolution of a self-sovereign Web3 user

If you are reading this, you most likely believe that Web3 is here to stay. Given this belief, it makes sense to develop a “hard” Web3 skillset to secure your future in this new world. However, the extent of most users’ participation in Web3 today is merely clicking a few buttons to farm tokens.

I’m oversimplifying, of course. But the point here is that we normal users can “level up” and get rewarded while we are at it. You can think of running nodes as the next evolution of a self-sovereign Web3 user after creating your non-custodial wallet and knowing how to interact with smart contracts.

Earn incentives for testing out new projects and one-up basic airdrop hunters 💰️🥇

Traditional airdrop hunting will become increasingly crowded as Web3 participants rush in to take a bite. More participants = less rewards per participant. Doing what everyone else can’t or won’t do will give you an edge.

Here’s how.

Players like Lido, Rocketpool, StaderLabs, IndexCoop, etc are called Liquid Staking Protocols. They abstract the technical process of running validator nodes and pooling assets from users via layers of smart contracts.

Now that withdrawals for ETH validators are live following the Shanghai upgrade (12th April 2023), the already red-hot Liquid Staking Derivatives (LSD) narrative is likely to get even hotter due to increased confidence levels from stakers who were previously sitting on the fence.

More players are bound to enter the space to grab a share of the pie when demand increases. These newer players will introduce novel ways of optimising the trade-off between convenience vs security and will most likely involve individual node operators in their business models.

Current ETH staking options has a security vs convenience trade-off

New LSD players will attempt to solve both security and convenience

Why will new LSD players need to involve node operators? Building something that has the best of both worlds will be inherently complex and require rigorous testing to make sure things work during actual deployment.

How will new LSD players involve node operators? These new players will want to tap into the existing network of node operators to rapidly acquire real world data points and bootstrap their own initial network. This means they will need to allocate a portion of their marketing budgets for node operator incentives.

One such example is the upcoming ETHx LSD project developed by Stader, a multi-chain liquid staking player with $128m in total value locked (ie. the Web3 equivalent of AUM) and $16.5m of total funds raised. The team launched a $725k incentive programme for node operators who participate in the testnet and become early adopters on the mainnet.

Check out the invitation to the incentive programme here for those of you who are keen to participate. The testnet incentives will be ongoing until 28th April 2023 so there is still time!

This will be a good way to get a feel of setting up a validator node as the Stader team have abstracted a good chunk of the complexities into a simplified graphical user interface. Reach out to us for a guided setup to get started!

Beat the queue for token airdrops 🪂 

Now lets imagine you qualified for a highly anticipated airdrop after diligently completing tasks and using a new project for several months. You run some quick analysis and realise it could make you mid 5-figures if you sell within the first 15 minutes of the airdrops being released. You start to think about all the things you could do with this windfall and feel the excitement well up in your stomach. The countdown on the screen is showing 48 hours remaining before you can claim your airdrop.

But there’s a problem - everyone will be claiming their airdrops at the same time as you. All public endpoints will become bottlenecks as everyone floods them at the same time. It’s now down to luck whether you are able to claim yours quicker than others.

This was what happened during the recent Arbitrum airdrop. Most users were not able to claim their airdrops until the next day and those who managed to claim earlier got to sell theirs at a much higher price.

ARB/USD price chart on airdrop release day

So how do we claim our airdrops quicker? One way to beat the queue for future token airdrops is to connect your wallet’s (e.g. Metamask) RPC endpoint to your own private node - essentially a direct access point to the world of Web3 that no one else can access!

Admittedly, there’s more to be done for the entire claim >> transfer >> sell workflow but running your own node is a key step.

Reply to this email with “beat the queue” if you are keen to learn the full workflow so I know whether or not to spend time writing on it!

Collaboration with large Web3 projects for longer term opportunities 🏦 

As you build an on-chain track record of your proficiency in running a node, your eligibility to work with large Web3 projects increases. e.g. -

  1. Liquid staking projects:

    Selected node operators get to work with Lido, Rocketpool, and Stader without needing to stake their own ETH. Instead, the projects themselves provide these tokens from their user base and split the revenues with the node operators.

    Currently, the most exciting initiative in my opinion is the Staking Router by Lido, which expands their current gated node operator set to individuals and grassroots communities. With more than US$12 billion worth of ETH and 300k stakers, being able to work with Lido will greatly boost your income.

  2. Node-as-a-service projects:

    These are companies such as Infura, Alchemy, and Pokt network. Think of them as the Web3 equivalent of cloud service providers of today (e.g.. AWS, Google Cloud etc).

    Infura is the bellwether on this front with their “Decentralised Infrastructure Ecosystem” initiative, which allows Web3 developers and users to pay you to access the Web3 world through your node. Given this precedent, I expect the other players to follow suit in the near future.

By leveraging these partnerships, node operators can build scalable recurring income streams on the side while helping Web3 become more decentralised! But wait, there’s more..

Become a Delegate by building a brand around your new skill 🧑‍🏫 

For those of you looking to max out this skill tree and have the chops to build an audience, you can consider the path of a Delegate. Delegates are node operators who are directly chosen by users to stake tokens and perform blockchain governance voting on their behalf. As you can imagine, this is also a highly scalable model as you can take a fee from helping to put a way larger pool of assets to work. It is also the most self-sovereign model as you are not beholden to any intermediaries who might change the rules anytime.

It does however, require you to build a brand (which is arguably the hardest thing to do) and win “votes” from your audience - just like a politician.

While this feature is not available on Ethereum (or perhaps not yet), many alternative Layer 1 protocols operate under this Delegated-Proof-of-Stake (DPoS) model - e.g. Cosmos, Near, Tezos, Elrond.

Feeling excited and think this is a skillset you want to pick up? Reply to this newsletter to say hi or drop me an email at [email protected] and I will get in touch for with you for our next free workshop!

Level up and stay ahead of the curve,

- Sam