Today, there are 120,000 Ethereum addresses that hold the minimum 32 ETH required to become a validator on the Ethereum 2.0 chain. Of course, not all of the existing and future ETH holders will have the technical ability or desire to operate their own validator client node(s) and help secure the Ethereum network.
Luckily, prospective stakers will have the option to stake their ETH through Staking-as-a-Service providers or exchanges that will run validators on their behalf. In a large scale survey we conducted, over 1/3 indicated their interest in using a third party provider to stake on Eth2. If you are one of them this post is for you!
In order to participate in the consensus finding of the eth2 chain and receive rewards for doing so, validators are required to sign attestations and propose blocks with their validator private key. This validator private key will be operated by the third party staking provider if you plan to stake on eth2 without running any of your own infrastructure.
It is important to note that trusting a single company with your validator private key effectively grants the provider unilateral operative control over your validator. This creates a single point of failure that can put your capital at risk if the provider experiences downtime, knowingly or unknowingly incurs a slashable event or needs to exit the system prematurely due to bankruptcy.
Exchanges with a large share of existing users such as Binance and Coinbase are well positioned to leverage existing customer onramps and reputation to extend existing business lines to offer eth2 staking on behalf of their users. Compared to smaller providers larger companies may also have sufficient economies of scale and alternative revenue streams to subsidize staking services at below market averages or 0% commission rates in some cases to drive further ad...