Should Galaxy continue in the Curated Module set following the acquisition of CryptoManufaktur?

Description

Summary

In July, it was announced that Galaxy had acquired CryptoManufaktur and communicated it to the community via the Lido research forums. As there is no formal process through which mergers and acquisitions of node operators are considered, a discussion on the forums of how to potentially consider the matter (including if there is any reason to act in an immediate fashion to pause or stop the node operator), as well as a historical review of previous instances took place. The result of the discussion was that the community and Lido Node Operator Subgovernance Group (LNOSG) did not see any reason to object to Galaxy staying on in the Curated Module as the successor to CryptoManufaktur. The matter being voted on is to formalize tokenholder acceptance of this proposal that “Galaxy should remain in the Curated Module”. At the time of the acquisition, CryptoManufaktur was an active Node Operator and still is (as “Galaxy”) at the time of writing the proposal.

Details

NOTE: Separately and independently to the matter at hand in this snapshot, an on-chain vote of an administrative nature also occurred, in which the requested changes to the Node Operator name and reward address to reflect the post-merger status has been passed.

Following the announcement of the acquisition, two things took place:

1. A historical review of previous instances of NO changes (details below)

Historically, these are the changes that have happened in the Curated Set:

• Certus One was acquired (infra+team) by Jump Crypto Quant Shop Jump Trading Buys Blockchain Firm Certus One - Bloomberg. Post merger, the operator did not add additional keys and eventually exited the active set.
• Blockdaemon acquired (infra+team) Anyblock Analytics at a time when both Node Operators had already joined the Curated Set. As a result, the two operators were “merged” in the node operator registry by essentially pausing deposits in Anyblock Analytics (so new validators would only be going to Blockdaemon infra) and then prioritizing exits and eventually deprecating and deactivating the latter operator registry entry.
• Prysmatic Labs (infra+team) were acquired by Offchain labs. Prysmatic Labs are a bit of a special case in that they are a client team, but even so there was no change in the people running the validator infrastructure using Lido on Ethereum, nor how the infrastructure was being run.

2. A discussion around the formation of a first-principles approach to consider the impact and decision-making criteria of an NO merger/acquisition. The following suggestions were put forth:

• it could be assessed whether, as a result of the business deal, there are material changes to validators’ operations (different people / different infra)
• it could be assessed whether, as a result of the business deal, there are material changes to the organizational structure and “meta-properties” of the node operator (e.g. impact on geographic and jurisdictional dispersion of the operator set)

In the cases of substantial change in either or both of the above, community members and tokenholders may want to consider whether to:

• ask the LNOSG (or anyone else) to conduct an appraisal similar to that during onboarding rounds and offer an opinion, after which it could vote on whether the operator in its new form should remain in the curated set (or a secondary option should be explored), and/or
• directly move to pause (i.e., disable the allocation of new validators) or stop (exit and deactivate) the operator.

The responses from the Node Operator were as follows (the first response from Thorsten Behrens of CryptoManufaktur):

The infra for the validators remains as-is. I am hearing you that any material change (e.g. moving into cloud instead of baremetal) needs to be discussed with the DAO first. I don’t foresee such a change.

The people running the validators remain as-is for now. There will be a change in the medium term:

• We intend to train Galaxy staff on our operations and add them to the maintenance/escalation rotation

The geographic distribution of the nodes remains as-is. For reference, we are in EMEA and APAC, an have no plans to move the infra. This, too, would require a discussion with the DAO before making any material changes.

The jurisdictional location of the operator remains as-is as far as I know, but I’ll let Galaxy chime in on it

• The headquarters are in the US, no change there from CMF
• Galaxy has offices in Europe, Asia and Canada - I do not know whether this impacts jurisdiction, or jurisdiction is strictly at HQ

The second response was by Zane from Galaxy.

We’re beyond excited to bring Thorsten and his excellent team into Galaxy. I’m happy to shed additional light on the acquisition and plans for the future.

1. As a result of our deal, confirming there are no planned material changes to existing validator operations. As Thorsten mentioned above, the goal is to preserve and further support CMF’s Ethereum staking operations – same team, same infrastructure set-up, same commitment to participating in the Curated and Simple-DVT modules and other strategic NO initiatives.

2. Also confirming there are no planned material changes to the organizational structure of the NO. Galaxy will be keeping legacy CMF operations intact – including set-up from a geographical / jurisdictional perspective. Galaxy, while headquartered in the US, is truly global with entities and offices across North America, Europe and Asia, and so will extend CMF’s ability to deliver services where required jurisdictionally.

Our goal is to further improve the provisioning of said NO services over time, with additional maintenance, business continuity + redundancy measures afforded by Galaxy’s globally-distributed engineering, networking, and operational support teams.

We absolutely agree that CMF’s Ethereum and Lido community impact have been exemplary, and thus view this acquisition as a means of pushing Thorsten and the team’s contributions even further. Galaxy’s plan is to take the non-blockchain work off of Thorsten’s plate, so that he can spend more of his valuable time assisting with core development and strategic initiatives.

We view the acquisition of CMF as (1) a means of accelerating our technical capabilities, especially in the Ethereum staking space, and (2) a show of Galaxy’s commitment to the development of the blockchain infrastructure ecosystem at large. We are working on developing best-in-class enterprise-grade (and certified) infrastructure for the largest institutions with Thorsten + team’s help, while also celebrating Thorsten’s commitment to the EthStaker / solo-staker community

The LNOSG, having considered the above plus some internal discussion and additional questions to Galaxy, opined that “the general consensus (with no objections) was that it suggests to the DAO that Galaxy Digital continue to participate in the Curated module.”

Proposal Actions

This proposal seeks tokenholder opinion on the suggestion that Galaxy remain in the Curated Module as a Node Operator following the acquisition of CryptoManufaktur.

• A vote “For” indicates agreement with this proposal. If “For” wins, then essentially nothing in the status quo changes, and Galaxy continues to be an active NO in the Curated Module.
• A vote “Against” indicates disagreement with this proposal. As the range of options of disagreement is very large, a vote “Against” entails that a discussion should take place to identify which possible options should be considered and brought to a following vote. These options may range from:
  • Setting a Target Limit to the Node Operator at their current active key count such that they do not receive new deposits pending further discussion
  • Deactivating the Node Operator (no more new deposits + no rewards) pending further discussion/analysis
  • Deactivating the Node Operator (no more new deposits + no rewards) and eventually removing the Node Operator from the Curated Module registry