Recently, PoS (proof of stake) and “staking” have become quite popular in the market. Increasing amount of people would like to join this expanding segment known as staking. Generally speaking, staking means using your coins as collateral to contribute the decentralized network so that it could be more secured, in exchange for the token rewards. Different from PoW (proof of working) which uses energy to earn the coins, PoS has some invalidators to verify the blocks. Thus, the participators in the system can stake their coins as invalidators and earn the rewards.
It looks perfect in the blockchain ecosystem, and with Bitcoin price increasing, the whole market situation becomes better as well. Based on the graph from CoinAll exchange, it is easy to find that Bitcoin price has the tendency to get increased after hitting the bottom point. But there is still high pressure at around 6000USD, we also need to keep caution when trading in the market.
The staking landscape
Staking is possible with all cryptocurrencies that use PoS consensus, and so far, EOS, Tezos, Dash, Decred and NEM are the five biggest staking protocols. Ethereum is also expected to shift to PoS eventually, while other networks are expected to launch with the consensus mechanism. Thus, the value of these future PoS networks is estimated to exceed $8 billion. As these new blocks are found, the stakers are compensated with a reward, which can range from around 5 percent to 25 percent annually, depending on the network and the level of participation. As calculated, over $1 billion is expected to be paid out in stake rewards.
Well, it sounds great because the stakers can earn profits just by locking their coins. However, where the profit comes here? It is from additional token issue from the projects. Another question come out? Like currencies, if there is large portion of additional issue, is there inflation? And people who are always holding the asset will face depreciation.
Staking= Inflation?
From the analysis above, can we say staking will definitely cause inflation? Not really. Before discussing this question, let us review the basic economic principle — supply & demand. The asset will get inflation when supply is over demand, which will cause value depreciation. However, in the staking model, if the increasing rate of demand is more than supply, the asset value will also rise because the net demand is growing eventually.
In conclusion, to evaluate whether the PoS project will get successful or not, we need to understand how their staking scheme works and what kind of potential market they can have. When their market value can go higher than the additional issued tokens, the overall ecosystem can enjoy sustainable increase.
CoinAll, a strategic partner of the world-class exchange OKEx, is a leading digital asset exchange in the industry. CoinAll is committed to providing users with the best asset and trading experience, and some famous PoS related projects like V SYSTEM (VSYS) is also listed on CoinAll, we are always concerning about our users.
What is your opinion about the PoS staking system?Welcome to join our community and share with us!
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