Dedicated Validator vs Public Validator
May 12, 2022
Considering the primary options for staking via Coinbase Cloud
By Harry Alford (Cloud Business Development) and Chris Pereira (Senior Solutions Architect)
When deciding how to stake assets (or those of customers) through Coinbase, there are three main options: Dedicated Validator (Company branded), Public Validator (Coinbase Cloud branded), and Public Validator (third-party branded).
Dedicated Validator: Validator is controlled by client/partner and has full operational ownership to set commission rates, option to accept outside delegation, upgrade schedules, and voting rights.
Public Validator owned and operated by Coinbase Cloud: Validator is not controlled by the client/partner. This type of validator can accept delegated funds from any wallet address.
Public Validator (third-party branded): Validator is not controlled by the client/partner or by Coinbase. This type of validator can accept delegated funds from any wallet address.
By setting up a Dedicated Validator, the owner has full control for enhanced Service Level Agreements and protective provisions including missed rewards, governance, and monetization. This opens another potential revenue stream by offering third party delegation to other asset holders and earning commission for running the validator.
All options are fully managed and powered by the underlying Coinbase Cloud infrastructure. The main considerations for running a dedicated validator or public validator include:
Dedicated Validator - Company branded | Public Validator (Coinbase Cloud branded) | Public Validator (third party branded) | |
|---|---|---|---|
Cost | Flexible cost structure including blended subscription and participation fee | Fixed to predetermined validator commission rate | Fixed to predetermined validator commission rate |
Revenue | Earn protocol rewards + commission on third party delegations minus Cloud’s fee for any delegation and rewards | Earn protocol rewards minus predetermined commission rate set | Earn protocol rewards minus predetermined commission rate set |
Reporting | Robust real time data insights using Cloud Node infrastructure to query the blockchain | Real time data insights and monthly reporting if delegated via Coinbase Custody UI | N/A |
Governance | Validators can actively participate in governance and voting outcomes | Depending on the protocol, if a validator votes, then delegators may inherit their vote. However if a validator does not vote, then delegators do not participate in governance. | Depending on the protocol, if a validator votes then a delegator may inherit their vote |
Deployment | Control of the Cloud provider and region where the validator is located. Proof of stake protocols are subject to frequent updates, such as upgrades or downgrades. This requires operators to constantly be on top of network changes to keep their infrastructure up-to-date, which Coinbase Cloud monitors on your behalf and provides real time node health monitoring dashboard in the UI | Coinbase Cloud owned/operated Validators are deployed across multiple cloud providers and multiple regions. Coinbase Cloud monitors and adjusts the infrastructure based on network upgrades or downgrades, without delegators needing to take any action | Subject to the reliability and geographic deployment of the person or organization running the public validator |
Deployment Time | < 2 Days | Instant | Instant |
Barrier to Entry | In some cases higher barrier to entry defined by protocol’s minimum staking requirement | In some cases lower barrier to entry, defined by protocol’s minimum delegation requirement | In some cases lower barrier to entry, defined by protocol’s minimum delegation requirement |
Implementation | “1-Click” UX and dedicated support to get your validator up and running, with Custody integration for supported assets | Integrated with Custody. “1-Click” native staking option to delegate supported assets | Input third party validator address in validator selection field within Coinbase Custody |
SLAs | Increased protection through an MSA. 99% uptime guarantee. Missed rewards. 24/7 support by engineering and protocol experts. Optional use of a Hardware Security Module (HSM). | Robust safeguards in place to protect against downtime and/or slashing losses | Subject to validator owner |
Contact us to learn more about setting up a validator
This document and the information contained herein is not a recommendation or endorsement of any digital asset, protocol, network, or project. However, Coinbase may have, or may in the future have, a significant financial interest in, and may receive compensation for services related to one or more of the digital assets, protocols, networks, entities, projects, and/or ventures discussed herein. The risk of loss in cryptocurrency, including staking, can be substantial and nothing herein is intended to be a guarantee against the possibility of loss.This document and the content contained herein are based on information which is believed to be reliable and has been obtained from sources believed to be reliable, but Coinbase makes no representation or warranty, express, or implied, as to the fairness, accuracy, adequacy, reasonableness, or completeness of such information, and, without limiting the foregoing or anything else in this disclaimer, all information provided herein is subject to modification by the underlying protocol network.Any use of Coinbase’s services may be contingent on completion of Coinbase’s onboarding process and is Coinbase’s sole discretion, including entrance into applicable legal documentation and will be, at all times, subject to and governed by Coinbase’s policies, including without limitation, its terms of service and privacy policy, as may be amended from time to time.
