Tezos Activates Rio Upgrade: Enhancing Staking Flexibility and L2 Incentives

Tezos has activated its Rio upgrade, enhancing staking flexibility, supporting growth on Layer 2, and strengthening the validator framework. The upgrade reduces the XTZ cycle length from 3 days to 1 day, improving user experience across Web3 services. Rio also advances the adoption of the Tezos Data Availability Layer (DAL), allocating 10% of baking rewards to bakers participating in DAL. The upgrade introduces stricter inactivity thresholds for bakers to reduce the risk of slowdowns and increase network resilience.

Tezos has successfully activated its Rio upgrade, marking a significant milestone in the blockchain's evolution. This 18th protocol upgrade introduces several key improvements, including enhanced staking flexibility, support for Layer 2 (L2) growth, and a stronger validator framework. The upgrade reduces the XTZ cycle length from three days to just one day, significantly improving user experience across Web3 services [1].

One of the standout features of the Rio upgrade is its support for the Tezos Data Availability Layer (DAL). The DAL is designed to boost L2 scalability by increasing the amount of transaction data that can be published on-chain, up to 4,000x, while reducing costs for rollups like Etherlink. This upgrade allocates 10% of baking rewards to bakers participating in the DAL, incentivizing their involvement [1].

The upgrade also introduces stricter inactivity thresholds for bakers, aiming to reduce the risk of network slowdowns and enhance overall resilience. Bakers are now marked as inactive after two days of inactivity, losing their consensus rights until they rejoin. This measure ensures that the network remains efficient and reliable, a key quality for any high-performance blockchain [1].

The changes introduced by the Rio upgrade are designed to improve the experience for both Tezos builders and users. The upgrade demonstrates Tezos's commitment to self-amending capabilities and community-driven, on-chain governance, making it more resilient and future-ready [1].

Meanwhile, Grayscale Investments is seeking approval from the Securities and Exchange Commission (SEC) to introduce Ethereum staking capabilities in its exchange-traded products. The asset manager, which manages the Grayscale Ethereum Trust ETF (ETHE) and the Grayscale Ethereum Mini Trust ETF (ETH), argues that current restrictions put American investors at a disadvantage compared to international markets where staking is permitted [2].

Grayscale's proposal aims to address the technical challenge of the time mismatch between ETF redemptions and Ethereum's unstaking process. The company suggests maintaining a "Liquidity Sleeve" of unstaked Ethereum to handle redemptions, along with potential short-term financing arrangements with custodians and liquidity providers. If approved, this change could allow U.S. Ethereum ETPs to capture significant staking rewards [2].

In conclusion, the Rio upgrade and Grayscale's staking proposal demonstrate the ongoing evolution of blockchain technology and its potential to enhance user experience and capture new investment opportunities.

References:
[1] https://techbullion.com/tezos-unlocks-more-flexible-staking-improved-ux-and-l2-boosting-incentives-in-rio-protocol-upgrade/
[2] https://www.etf.com/sections/news/grayscale-sec-approval-ethereum-staking