Staking at Bitcoin Suisse — 2020 and Beyond
In conversation with Ian Simpson
- Tell us about the development of Bitcoin Suisse’s staking service. How has it gone so far? And where is it headed?
Mikael Bondum: It has gone very well. Over the past 12 months we have gone from offering one token for staking to currently six, with the seventh one upcoming with the launch of Ethereum 2.
We are carefully considering which blockchains to add in terms of staking. We are looking at many different variables to decide which ones to add. As a custodial staking service provider, we have a broader range of options of how we can deliver our staking services — and thus hopefully being able to create a better product for our clients in the end.
Svante Jørgensen: We have also worked a lot on the systems behind the scenes over the last couple of quarters. We are constantly seeking to improve our validator’s performances so that the rewards we generate for our clients are as large as possible. This is and will continue to be our top priority.
Another thing that we are looking forward to introducing to our clients, is the new Bitcoin Suisse Staking Dashboard which provides a very detailed and transparent overview of their rewards, their staking currency accounts and more.
2. What trends do you observe among proof-of-stake protocols?
Mikael: One of the common criticisms of proof-of-work protocols is the misalignment of interests between holders of the cryptocurrency and miners. In the communities surrounding the large proof-of-stake protocols, this misalignment seems to be non-existent, as those guaranteeing the security of the network also hold the actual underlying token.
Stakers tend to be much more committed and engaged in the protocol on which they stake their tokens, than miners are on those they mine. If mining profitability changes, miners tend to flip their equipment to mine whatever is most profitable. The trend among stakers in the proof-of-stake protocols is that they stick with the protocol and they choose to stake with lower ROI than alternative placement of capital such as DeFi or lending protocols.
3. Bitcoin Suisse offers a wide range of services, from trading to custody to staking. Where does staking fit in this “interconnected” world of crypto-financial services at Bitcoin Suisse?
Svante: Staking is essentially a way of activating your funds so they ‘work’ for you — instead of being dormant. You are participating in the security of a given blockchain and are being rewarded for the job you perform. You earn the native token in the most secure way possible on a blockchain, which makes it a great product for long-term holders of a given token.
Mikael: I see staking as a core and backbone product of any crypto-financial service provider that wants to be taken seriously in the market. As a custodial service provider, we have been able to combine staking with our loan products, enabling clients to use staked assets as the collateral for loans. It lets clients utilize their position twice at the same time — something we believe is unique in the market.
4. Many people, regular investors, or those who are not so familiar with blockchain technology, have a hard time understanding staking. How do you explain it to them?
Mikael: In a simple way, staking can be explained as the ‘new mining’. It is a new form of consensus mechanism where the amount of stake you are willing to commit to the protocol will be the primary factor determining how much you security you provide — the same way as the hash-rate a bitcoin miner contributes to the bitcoin consensus network is the main determinant for how much security is provided.
The rewards you earn is an expression of how much a given protocol is willing to pay you to maintain its security — whether it be staking or mining. Staking requires native tokens, whereas mining requires strong hardware and favourable electricity prices.
Learn more about the Bitcoin Suisse all-in-one staking service here.
Originally published at https://www.bitcoinsuisse.com on October 28, 2020.
