Dangers of hosting your own Eth2 node, explained

Hosting an Eth2 node is a big responsibility — and if things go wrong, this could result in some painful penalties.

How does a hosting provider tackle the dangers of running your own node?

Allnodes can offer an affordable alternative to doing everything yourself, reducing the risks of financial penalties and slashing.

The company offers an intuitive user interface, and two easy-to-understand hosting plans to ensure that customers can make an informed decision. This is coupled with support teams who are online 24/7, all year round, and free node maintenance with instant and unlimited upgrades.

Validator keys are given multi-level protection to prevent them from being stolen and lost, and all of this is achieved while ensuring that only users have access to their funds. Nodes are monitored for free — with dedicated bots providing regular Telegram and Discord alerts.

But as we mentioned earlier, uninterrupted uptime is the most important thing to look for in a hosting provider. As a result, Allnodes provides enterprise-grade infrastructure — with a guaranteed 99.90% service-level agreement in place.

Staking on Eth2 doesn’t have to be a daunting experience — and with the right tools, even those who aren’t technically minded can enjoy the perks of running their very own node… without the hassle.

What are the alternatives to hosting your own node?

Companies exist that specialize in validator node hosting — and better still, they can be non-custodial, meaning they have no access to user wallets.

Platforms such as Allnodes provide masternodes, full nodes and staking services for dozens of different blockchains — and have now rolled out support for Ethereum 2.0.

This brand launched in October 2018 when CEO Konstantin Boyko-Romanovsky realized just how difficult it is to host a masternode given the technical expertise required — not to mention the sophisticated hardware and uninterrupted bandwidth that’s needed too.

Allnodes says it now hosts more than 8,400 nodes on behalf of its customers with a value in excess of $130 million — commanding an overall masternodes market share of 13.1%.

Instead of getting bogged down in endless technical manuals, the company aims to handle behind-the-scenes operations so crypto enthusiasts can focus on other things. The registration can be completed in just a few simple steps.

Are there any other risks that you should be aware of?

Keeping validator keys secure is essential, as they can be lost or damaged.

Eth2 validators who run their own node run the risk of losing their keys, forgetting the password, or damaging the hardware where the keys are stored. In some cases, the hardware may have been physically damaged — but it’s also possible for crucial data to be lost as a result of a technical fault.

And yes, all of this can result in some more financial penalties — this time for inactivity. Instead of block rewards being reduced, this could result in an ETH stake being permanently slashed.

Security needs to be at the forefront of every single person who wishes to become a node operator. Validator keys can also be stolen by someone who manages to gain access to the computer or remote location where the node is being hosted. Messages can end up being double-signed — seemingly on your behalf — or a malicious actor could attempt to compromise the network with inaccurate data.

If the security of your node is compromised, it’s possible that it could be a year or two before you regain access.

What happens if the uptime of your node is interrupted?

You could end up being penalized, eliminating any financial reward from operating a node.

It’s worth bearing in mind that you risk being penalized even if the circumstances were outside of your control. A dodgy internet connection — something that’s commonplace for many of us living in residential areas — could result in a slashing event occurring. Given how these outages can be caused by everything from bad weather to water damage and road repairs, relying on the infrastructure you’ve got at home isn’t necessarily the best idea.

As a result, many of the people who want to operate their own node have decided to pay for an external hosting provider, where they have a greater chance of receiving the type of uptime they need to be regarded as a trustworthy validator. But again, even this approach isn’t without potential pitfalls. Selecting a hosting provider that can’t guarantee continual service could trigger financial losses, and you may not be eligible for compensation as such downtime is often factored into the terms of service.

If you are going to opt for an external hosting provider, it’s crucial to read legitimate reviews — helping you to form an opinion about whether the company is reputable. Finally, always remember that market-leading solutions may not be the best course of action for hosting a node. In November, an Amazon Web Services outage affected countless thousands of websites, including the likes of Coinbase, and such an event would have hurt Eth2 node operators too.

Is this an easy thing to do without any technical knowledge?

Operating an Eth2 node can get quite complicated — and wading into this commitment without knowing how things work can result in some costly mistakes.

Even if an inexperienced validator makes some innocent mistakes, some of the 32 ETH they have staked can end up being taken away from them if they have been seen to work against the best interests of the network. Should 50% of this 32 ETH be deducted, their node will be automatically ejected from participating any further. Given how this would equate to a loss of about $9,500 at current rates, this is best to be avoided.

The problems don’t end here, though. Fully understanding the inner workings of Eth2 can be an uphill struggle to say the least. As the old saying goes, time is money, and you could argue that the effort involved in getting up to speed with this new PoS blockchain may not be worth the hassle given the rise of staking-as-a-service providers.

What does hosting your own Eth2 node involve?

It means that you’ll become a validator for the newly upgraded Ethereum blockchain — and be responsible for verifying transactions and maintaining the network.

The genesis block of Eth2 launched on Dec. 1, paving the way for long-awaited improvements to the network’s security and scalability. This will involve a shift to a proof-of-stake consensus mechanism, which is regarded as more eco-friendly and eliminates the need for miners.

More than 16,000 validators transferred 524,288 ETH into a deposit contract before a deadline of Nov. 24, paving the way for “Phase 0” to launch a week later. The total value of deposits has grown even further since.

Participants are not going to be able to withdraw this ETH until the current Ethereum mainnet “docks” with this new blockchain — a process that could take several years.

Those who host their own node have had to stake a minimum of 32 ETH (worth about $19,000 at the time of writing.) There are also other costs to consider too, such as gas costs and the expense of finding a reliable hosting provider.

That’s a lot of money to have lying around. In exchange for becoming a validator, they’ll receive rewards for contributing to the upkeep of the network — but with these perks comes responsibility.