Staking-as-a-Service: The New Social Signal
As blockchain technology becomes more established and entrenched, we can expect to see an evolution in the nature of the businesses and services surrounding the ecosystem. Perhaps there is no better example than the rise of Staking as a Service (StaaS) platforms. StaaS platforms have developed around blockchains that utilize a Proof of Stake (PoS) consensus mechanism to validate and verify transactions or smart contracts. PoS has garnered a huge amount of interest as a replacement for Proof of Work, the more established consensus mechanism utilized by Bitcoin, Ethereum (currently), Z-cash, and other blockchains.
With the launch of Cosmos, Tezos, LivePeer, and future launches of Eth 2.0, Dfinity, Polkadot and Harmony, amongst others, ‘Staking’ really is one of the major market trends of 2019 so far.
This trend towards staking may lead to a rush for Tokens Under Management (TUM), similar to the multi-billion dollar Crypto Asset Hedge Fund rush in 2017–18 to increase Assets Under Management (AUM). The rise in crypto-asset funds could be mirrored or replicated by these newly emerging StaaS platforms who follow suit and compete to try to lockup as much TUM as fast as possible as well.
We have also seen fund managers like Pantera’s Dan Morehead, Multicoin’s Kyle Samani, and Bitbull’s Joe DiPasquale become extremely influential in the blockchain space as thought-leaders in their own right. They’ve each made repeated appearances on network television to give their takes on the market. Many of these funds led investment rounds in a variety of stake-able blockchain platforms, and are sitting on large allocations of stake-able tokens. They are seeking a viable way to stake these tokens, participate in blockchain governance, and store them securely with institutional-grade custody solutions.
Enter the StaaS Influencers
When these crypto asset funds lead investment, they signal to the market, which projects are “hot”. We are already starting to see this factor play out in the staking industry as well, even at this early stage. Staked.us has received quite a bit of media coverage simply from the fact that it received a lot of attention from several top-tier crypto-asset funds in its seed investment rounds. The Tendermint based Cosmos blockchain, with its stake-able Atom token, is another example of this phenomenon. Coinbase can also be included with their high-profile StaaS announcement and support of Tezos. In all these cases, it was the businesses behind these projects which signalled to the market that these projects are worth paying attention to.
We expect the same kind of social-signalling from leading StaaS providers to become just as relevant, based on which PoS & DPoS platforms they decide to offer secure and regulatory compliant staking services for. It’s been projected that TUM will grow dramatically in the next 2–3 years, because it is the most frictionless solution to securely stake tokens and participate in governance for non-technical token holders.
This is true on the retail investor level, just as much as it is for institutional investors, as neither are typically technically proficient enough to run a validator, stake their own coins or secure them properly. The PoS blockchains that garner the most peripheral support from leading StaaS providers will emerge as the winners. These projects will benefit from the additional security, usability, and reliability as secondary effects of the staking and node-operating infrastructure being built by StaaS providers.
But these aren’t any old communities
The leadership teams forming around the dominant StaaS platforms that arise in the staking space may end up having a tremendous amount of influence over the next few years. We’ve seen the influence crypto-asset fund managers exercise when picking which projects they invest in, or leading exchanges and the power they demonstrate over which coins they choose to list. We may see StaaS providers gain a similar level of influence.
A quick glance around the StaaS landscape and one will note that these StaaS leaders are people who have a deep technical understanding of cryptocurrency and blockchain; they understand security and custody. They are genuinely interested in developing their respective projects by offering solutions, running nodes, debating token staking models, etc. Their communities consist of developers, node operators, high-level investors, and tech-capable blockchain enthusiasts.
There’s not much of the “wen lambo?” crowd here. Why is that important? Because StaaS providers are building a high-quality following and community with a high signal to noise ratio, making it a much more valuable community. We are seeing the emergence of a new kind of leadership, and a sophisticated, tech savvy, and receptive community springing up around this new leadership.
It’s not necessarily only technical people being attracted but all kinds of people interested in the next generation of blockchains, the economics behind them or even ecological implications and this diversity is what can really help the system thrive.”-Henrik Hofstadt, CEO, Certus One
Inadvertently, as the Staking Economy proliferates further through the cryptosphere and into the mainstream, StaaS leaders will be strong signallers for what makes a good or a bad project. With their high-calibre communities and so far, overall respectability, they could have great sway on billions of dollars of assets.
Now that you’ve been brought up to speed, let’s take a quick glance at \some of the companies leading the innovation and building out the infrastructure to create a painless way for the masses to participate in staking tokens.
Staking As A Service (StaaS) Platforms
Mythos services is a StaaS platform backed by Mythos Capital, a fund that invests in Crypto assets and networks. They offer StaaS for the Cosmos Blockchain’s Atom tokens, as well as the Loom Blockchain and token. They are primarily catering to “big fish” & “whale” level investors, think 100,000 tokens or more. They offer a range of specialized services like 24/7 support, audited security, and they also stake their own tokens on the platform, giving them “skin in the game” and incentives aligned with the interests of their clients.
It is essential Mythos help build out communities in the networks we serve. At the most basic level, this means providing communities with resources and tools to allow them to stake and manage their staked assets more easily. This also extends into governance of the network to optimize decision making. Lastly, it involves direct support of the developers and applications that are being built on these networks.”-Ryan Sean Adams, Founder, Mythos Capital & Mythos Services
Chorus One is another option for those looking to securely stake Cosmos Atoms or Loom tokens. They are focused on providing infrastructure, security, and transparency to clients. They have key management solutions, logging, monitoring, alerts, and automation for a next-gen staking experience. Their commitment to long-term sustainability means that Chorus One’s interests are in facilitating the long term success of the platforms they offer services for. This means that they have their clients interests in mind as token holders of the blockchains they support.
Our approach to building a community centers a lot around content and education. We work hard to help people be informed about the networks they work with and be able to participate in them.”-Brian Crain, Co-Founder & CEO, Chorus One
Certus One offers a secure validation service for Cosmos and Iris, a block explorer for Tendermint-based blockchains, with a focus on blockchain development and infrastructure. Certus One also offers auto-scaling API/RPC hosts for Tendermint-based chains. The knowledge base on the Certus One site is an invaluable resource for validators.
In our opinion growing a community is an essential part of being a validator. Validation is a highly competitive space and while we have worked hard to become the number one technically, growing the cake and helping the ecosystem grow is the best way for us to scale and make our vision a reality.”-Hendrik Hofstadt, CEO, Certus One
Staked is regarded as one of the most high-profile StAAS platforms after prominent investment funds participated in their seed round. Pantera, Coinbase Ventures, Global Brain, Digital Currency Group, Winklevoss Capital, Fabric Ventures and Blocktree Capital all got behind the Staked platform to the amount of $4.5 million USD.
Staked offers secure staking with automated payouts and reinvesting, and a detailed accounting system for multicoin investors to keep track of holdings. Staked supports Tezos, LivePeer, Decred, and Ethereum. Staked has also integrated decentralized p2p lending services. You can engage in both onchain and offchain lending of crypto assets on dYdX, Dharma, MakerDAO, and Compound. They have future plans for an array of other services in the works.
Staking Facilities is a StaaS platform based in Germany. As of now, they only offer staking services for Cosmos Atoms and Tezos, but they have big plans for the future. They are rolling out a wide range of other staking options, as well as a dashboard for clients. The dashboard will provide analytics, detailed accounting, reporting, and payout history. It will also grant users access to Staking Facilities’ Genesis talks, a series of in-house presentations and events with leading blockchain insiders from projects like DFINITY, FOAM, Rchain, and others. Staking Facilities is rolling out StAAS support for DFINITY, FOAM, Hedera Hashgraph, Polkadot, Solana, and Ethereum very soon.
Nodeswap is unique in that instead of being a straightforward StaaS platform, it aims to be a platform geared to masternodes. It will let users set up a supernode which they can use to deploy multiple masternodes, so they can stake on multiple blockchains. The platform is ambitious in the sense that it aims to be the first masternode exchange, where users can trade masternodes, slots in masternodes, or slots in staking pools at market value. Nodeswap plans to offer a PoS portfolio, Masternode pool, Staking pool and Masternode exchange.
Coinbase has also entered the fray in the first wave StaaS platforms. Coinbase is one of the largest crypto asset companies in the US. They have decided to offer StaaS support for Tezos, with plans to add other coins in the future, as well as a governance service for MakerDAO. Coinbase plans to run their own nodes and validators on behalf of clients, coupled with institutional grade security and custody solutions. The governance support for MakerDAO will employ a voteproxy smart contract. They will also roll out Cosmos validator services shortly. Coinbase has a reputation for being an industry leader so it’s no surprise to see them demonstrate their leadership in the StaaS arena as well.
Figment Network is another StaaS platform allowing users to participate in staking tokens for the Tezos, Livepeer, and Horizon blockchains, with planned additions of StaaS services for the Cosmos, Polkadot, Aion, and FOAM blockchains as well. Figment Network focuses on providing a regulatory compliant option for staking your tokens. They’re based in Canada and also offer accounting and features for tracking returns as well. The team behind Figment Network draws on years of software, data center and security expertise to provide a next-level StaaS platform.
Stakewith.us is a StaaS platform that aims to be hassle free and easy to use. They’re developing a dashboard for users to use for staking on several blockchains including Loom, Cosmos and Skale currently live, with plans to add Polkadot, Casperlabs and IOV soon. Stakewith.us takes security and reliability very seriously. They run their own secure data centers, cloud infrastructure, nodes and make sure to have a 99.9% uptime. They have also included governance abilities in their dashboard, making it a cinch for users to participate in voting. Stakedwith.us is making it easy for anyone to stake and participate in governance and they handle all the technical and security aspects for users.
We take the voice of our community into consideration, offer governance and security for the networks we support. We set ourselves apart from our competition by providing deep support for the projects we bootstrap. We’re building-out ecosystem tools to drive adoption with the end goal of ramping up transaction volumes for long term viability of the network.” — Mervyn Chng, Co-founder, Stakewith.us.
StaaS Services are meeting a demand of the market
With a better understanding of the projects at work, let’s dive into how they are meeting the demands of the market. First of all, providing a non-technical option for token holders to participate in staking is a vital service for the health, security and reliability of these projects. The more staked tokens, the more secure the chain is. One of the ways StaaS platforms are building robust communities around staking as a service, is by offering educational resources for network participants.
Many of these blockchains which employ PoS or DPoS have included governance models into the project’s design. The issue is that many of these governance models use staking, or operating a staking node as the qualifier to vote or participate in governance issues. If a token holder is not savvy enough to run a node or stake tokens themselves, they can’t vote. By offering StaaS to these nontechnical network participants, it allows them to actively vote in governance issues and have a say in the future direction of their investment and the project.
It is vital that staking service providers maintain “skin-in-the-game” in the networks they support. This generally involves some capital investment in the staking asset itself, but also could include investment in technologies and teams that increase the value of the network in some other way.”-Ryan Sean Adams, Founder, Mythos Capital & Mythos Services
Global masternode statistics as of April 15th, 2019
The final reason why StaaS is important is the sheer amount of blockchain projects making the decision to utilize PoS or DPoS as a consensus mechanism. A quick glance at masternodes.pro or masternodes.online shows just how badly these kinds of services are needed.
Conclusion
We’re seeing a lot of new players enter the market, and also seeing existing custody enterprises add StaaS services to their custody offerings. We’re seeing a higher level of sophistication among the communities and businesses in the staking sector. If staking goes mainstream, the masses may see it as an alternative way to save or store value. What does this mean for the future of blockchain as a whole?
StaaS is the only feasible way that staking or mining could hit the real mainstream. It completely reduces nearly all of the technical friction that we currently see. The mass market needs plug and play solutions, with the ultimate convenience of zero maintenance. If crypto assets are soon seen to have stable returns through staking, it might open the market to a gigantic pool of passive investors, such as large pension or endowment funds. The possibility to get a steady 2–10% return (approximate quoted yield for most staking projects) could be seen as very attractive in a world still reeling from the after effects of the financial crisis and low interest rates.
This is obviously theoretical right now and we may be a couple of years away from any major institution staking at scale. But it does bring us back to the overarching point of this post. If this really does become a multi-billion dollar industry in the next decade, the leaders of these first established and respected StaaS companies will have huge sway on the direction that this money flows. If PoS and DPoS become dominant, then long after the ICO Youtubers have died out, StaaS influencers and their communities will be the real power in the blockchain space.
