For every successful blockchain, there is an entire ecosystem of partners, developers, content creators, and investors who believe in the product. That is especially true about Elrond, whose community and Network have taken the world of crypto by storm in 2020. This article features exclusive insights from The Elrond Network’s Head of Communications, Dan Voicu, Orion Protocol’s CEO, Alexey Koloskov, and Centaur’s co-founder, Sean Kor. Together, these combine to form a part of the stunning Elrond ecosystem. However, the other major part that drives it is the community.
Part of the reason for this community foundation is the growing support for Elrond’s staking mechanism referred to as a Secure Proof of Stake (SPos). As a result of this community, and to build upon it, we have included content from our partners throughout our blog posts.
In this article, we will discuss:
- Types of modern-day staking with a specific focus on problems within the industry
- The Elrond SPoS and why it makes staking on Elrond different
- How the Elrond community makes the protocol so powerful
- What is staking in Modern-Day Crypto?
What is staking in Modern-Day Crypto?
There are two different types of prevalent consensus mechanisms that are found across the cryptocurrency industry: Proof-of-Work and Proof-of-Stake. In this section, we will go over each one briefly, and then discuss some problems that the consensus algorithm landscape is facing.
According to a November 2020 Binance Launchpad article, Proof-of-Work is, “the mechanism that allows transactions to be gathered into blocks. Then, these blocks are linked together to create the blockchain. More specifically, miners compete to solve a complex mathematical puzzle, and whoever solves it first gets the right to add the next block to the blockchain.”
Proof-of-Work is an effective method for achieving the decentralized consensus required to add new blocks to the blockchain. However, one of the drawbacks of this method is that it is very computationally intensive, and getting more computationally intensive by the minute. Back in the day, Bitcoin could originally be mined on your computer in the background of whatever you were doing. Now it requires powerful, dedicated mining rigs that are strung together to achieve the necessary processing power to solve that puzzle and add new blocks to the blockchain.
Proof-of-Work is not a “one-size-fits-all” solution to consensus. Few cryptos have the network size and computational power that Bitcoin does, and so, therefore, the Proof-of-Work consensus mechanism cannot effectively power every single blockchain. So what other options are there? Well, one of the most popular alternatives is known as Proof-of-Stake.
Proof-of-Stake (PoS) is a consensus mechanism that does not rely on computational power to achieve consensus. Rather, it relies on using the crypto you hold to get selected for block validation. According to that same Binance Launchpad article, “The main idea is that participants can lock coins (their “stake”), and at particular intervals, the protocol randomly assigns the right to one of them to validate the next block. Typically, the probability of being chosen is proportional to the number of coins — the more coins locked up, the higher the chances.”
One of the primary functions of any consensus mechanism is to maintain the security of the network and the integrity of the blockchain. To achieve this, the Proof-of-Stake consensus mechanism imposes penalties on stakeholders who are not doing their job properly. Penalties can range from attempting to approve “double-spend” transactions or staying offline and not validating for an extended period. The Proof-of-Stake network can impound some or all of the stakeholder’s coins in the situation that their actions compromise the security of the network or the integrity of the blockchain in any way.
It is for this reason that several blockchain projects are utilizing PoS consensus mechanism. Several legacy blockchain projects like Ethereum that originally employed the Proof-of-Work consensus mechanism are migrating to Proof-of-Stake to improve efficiency and scalability.
Algorand invented a consensus mechanism called Pure Proof-of-Stake. However, one of the drawbacks of this consensus is the high latency time. Elrond takes this consensus mechanism one step further by developing what is known as the Secure Proof-of-Stake (SPoS).
How is Elrond’s staking different and why is the protocol important?
Compared to other PoS providers, Elrond doesn’t have a single blockchain. Rather, the Elrond protocol uses sharding to increase a transaction’s throughput. Elrond’s Secure Proof-of-Stake (SPoS) consensus mechanism ensures both long-term security as well as distributed service.
More specifically, Elrond improves upon the randomization and latency time found in other Proof-of-Stake mechanisms. In SPoS, the speed of the consensus selection committee is cut from 12 seconds down to 100 milliseconds. This is in part due to Elrond removing the previously-required communication that was necessary from the random committee selection to agree.
According to Elrond’s Head of Communication, Dan Voicu, gaining interest is one of the most compelling cases you can make to an investor currently.
“Gaining interest on an appreciating asset is perhaps the most compelling argument for investors looking at PoS economies in their bootstrapping phase,” according to Voicu.
Orion’s Broker Software as Go-to-Market
Another aspect of Elrond’s complex go-to-market strategy has to do with Orion’s Protocols broker system, and the software brokers use to execute trades.
“Decentralization is what the industry is fundamentally built on. Decentralized finance has many applications, one of which is achieving consensus on a network through staking. Our entire network is built on our proprietary staking mechanism, Delegated Proof of Broker (DPoB): composed of a network of brokers and stakers fulfilling every function on the protocol, with our native ORN token at its core.
Brokers with accounts across multiple exchanges (or exchanges themselves) run Orion Broker Software, automatically execute trades routed from our liquidity aggregator via their trading accounts. Brokers are chosen to execute trades based on how much ORN they stake in the Decentralized Brokerage and receive a portion of fees from each trade they execute,” Orion CEO Alexey Koloskov said.
This admittedly serves as the heart of Orion and part of Elrond’s go-to-market strategy. This strategy enables more protocol functionality.
“As a go-to market strategy, this enables us to facilitate every function on our protocol, reduce tokens in circulation on the secondary market, and critically, reward token holders for their support and activity. Above all, it’s based on a premise that we value throughout our ecosystem: mutually-beneficial value,” Koloskov said.
How is Elrond Different?
According to Koloskov, the scalability and raw speed of the network sets it apart from any other chain and is critical to the success of Orion.
“Our mission is to ensure the sustainability of the crypto landscape through aggregating all exchange liquidity into one decentralized platform. It’s no small feat, and internet-scale liquidity requires internet-scale performance. The aggregation of the crypto market in its entirety (including liquidity, trading pairs, and order book depth) requires a highly scalable, fast, efficient, and secure blockchain platform to operate at scale.
This is why the Elrond network was created: to achieve performance at internet-scale. Elrond lays the foundation for a new solution space within the internet ecosystem, in which the barriers to what’s possible are no longer performance bound. Given that Elrond can process more than 100,000 transactions per second, with a 5-second latency, and 100x less transaction cost than Ethereum, it’s instrumentally positioned to enable significant growth for the Orion Protocol ecosystem, and the wider Defi landscape.
Thus, the deployment of Orion Terminal on the Elrond network is critical to our success: their network brings a 1000x increase in blockchain speed, scale, cost, and user experience.” Kolosko said.
Three Important Aspects of Elrond
According to Voicu, there are several important aspects of Elrond’s network. Those are chiefly tech, the interface, and economics.
“There are three important aspects to Elrond. First is Tech — perhaps the most advanced layer 1 blockchain which has the high throughput to sustain innovation at internet scale, and the smart contract properties, smart accounts & token design to enable the most valuable financial applications,” Voicu said.
“The second is the interface. Interacting with the Elrond blockchain is nice & fun for users and developers. Users have Maiar — the money app for the next billion, devs have frameworks and tools they are already familiar with. This will make building with Elrond tech and using it an excellent experience for the next billion users,” Voicu said.
“The third part that makes Elrond special is economics. Individually, each component is valuable on its own. But with all three combined, Elrond is positioned to become the backbone of the permissionless global economy at an internet-scale. The token supply is capped at a maximum number — pi * 10⁷, and its issuance is offset by transaction fees, the scarcity increases with adoption. Its name — eGold — immediately conveys the notion of value to the next billion people, who perhaps do not understand chains of blocks, coins of bits or ether, but do get the timeless value of gold and the advantages technology adds to it.” Voicu said.
According to Voicu, these three aspects of Elrond are some of the most exciting updates coming to the protocol.
“The technology, interface, and economics will all reach v1.0 in 2021 — the bootstrapping phase will therefore be finalized and Elrond will enter into a hyper-growth period, driven by Maiar’s accelerated user acquisition, and by its ability to scale financial innovation,” Voicu said.
Adaptive State Sharding
Additionally, Elrond implements what is known as an adaptive state sharding design which makes it an ideal DeFi-centric solution. According to Centaur’s co-founder, Sean Kor.
“Elrond’s adaptive state sharding design works wonders for projects that require a high throughput and is ideal for DeFi-centric solutions. This would overcome significant barriers in the current ecosystem, most notably exorbitant gas fees on Ethereum. In an industry where interest rates and other incentive mechanisms are calculated in percentages, the flat fee structure of Ethereum’s gas pricing model creates significant costs and nullifies the promises of micropayments, whereas the Elrond network is poised to address this issue,” Sean said.
Adversarial Nodes Allowed
Furthermore, Elrond improves on the PoS consensus architecture by introducing a function called rating. With a rating, a node’s probability of being selected in the consensus group changes slightly to include credibility based on past performance. A rating is recalculated at the end of each epoch (except in cases when slashing occurs, a violation which instantly reduces rating). However, even with a bad rating, nodes can still be selected. That is because the adversarial model Elrond blockchain uses only requires that 2/3n + 1 of nodes in a shard are honest and uncompromised.
Other factors that Elrond Network improves upon compared to other PoS models include:
- The requirement of formal verification for important protocol updates to improve on algorithm correctness
- A second communication rounds for aggregate (BLS) multisig scheme
- Using A) small public hash key size and B) the randomization factor as the two functions for determining a block prosper
Not only is this model computationally advanced compared to predecessors, but it’s also more-community friendly.
As Centaur’s co-founder Sean pointed out, Elrond’s staking mechanism encourages people to want to be a part of Elrond through monetary incentives.
“Staking is ideal as it incentivizes community members and network participants to have some ‘skin-in-the-game’ without functioning as a sunk or direct cost. It also serves as a way to reward supporters in proportion to the amount of tangible support provided, while other campaigns can be designed to reward intangibles,” Sean said.
Road Map and Looking Ahead
However, staking isn’t the only exciting update on the horizon for Elrond. Sean also expressed enthusiasm for the upcoming launch of the Maiar wallet.
“It’s definitely the upcoming launch of the Maiar wallet. We’re excited to see how we can integrate such interfaces with our planned solutions that would interact with the Elrond network,” Sean said.
Additionally, liquidity pools will also further extend Elrond’s stronghold within the DeFi ecosystem.
Alexey Koloskov also expressed his excitement for Elrond in regard to road map events in the year to come.
“Moving forward, once our liquidity pools are stable on Ethereum and integrated with the existing DeFi solutions and our main net, we would definitely be looking at rolling it out on Elrond immediately after. This would open up DeFi solutions that are currently concentrated on Ethereum to the Elrond network and vice-versa,” Koloskov said.
“Naturally, I’d have to say the launch of Orion Terminal on the Elrond blockchain excites us most for the year ahead! Elrond is ready to offer internet-scale performance, and we will soon be ready to leverage Elrond’s network, opening new, unrivalled liquidity streams to the world,” Koloskov said.
Koloskov is very much looking forward to the launch of Orion Terminal on Elrond. He then discussed several benefits of hosting the Orion Terminal on Elrond’s blockchain.
“Upon full launch, Orion Terminal will aggregate the liquidity of the entire crypto market. Each trade on the terminal will be settled on the Elrond blockchain, complete with order validation logic, trade exchange, and signed order messages. Elrond’s high throughput and low latency smart contracts execution platform make for a great building block for our terminal, while bringing a significant number of transactions to the Elrond blockchain,” Koloskov said. “Furthermore, Elrond’s smart contracts will be integral to the deployment of each additional solution on our roadmap, including a price oracle, liquidity boost plugin, enterprise trade widget, and more,” he said.
Elrond Staking Phase II
Currently, Elrond Network is at Phase II of staking. The phase started in early December 2020. There have been over 200+ staking transactions and 225+ new nodes in the validator queue. In phase 1 of Elrond validator staking, there were 2,169 put into the network. Moving forward in phase 2, more new people will be given access to stake on the Elrond wallet as new slots open up.
Even more so, phases 3 and 4 will offer a lot more on the horizon. New features for later phases include more nodes and the staking of more than 2,500 eGLD (which is the limit as of December 2020). Elrond’s open delegation feature will also be deployed in a later phase. Given the rarity of Elrond’s high gas royalty rate (30%) for smart contracts, more developers will be incentivized to join as well.
Importance of the Elrond Community
The Elrond team has taken the time to develop a community-friendly network which has propelled the platform to grow even further. For example, take the forum section and the very active telegram for the Elrond Network. Elrond’s dev team took time to create a discussion board for communities. It sets a standard that illustrates the network’s openness to communicate with its community. This is a stark contrast to running the protocol from an ivory tower that is indicative of many teams from previous generations of software technology.
Elrond is built upon a foundation of partners, nodes, and validators, and the network understands that in order to grow, other entities will have to help build out the ecosystem. That is partially why the community-factor makes Elrond standout as an ecosystem. Acknowledging this, Elrond spends time to make it known that community is important to the protocol. Ecosystem partners like Centaur and Orion supply major energy and dedication to improving the strength of Elrond.
“The Elrond community has been very active in our telegram group and the more senior and experienced members have been providing us with a great deal of advice and support, particularly after the initial listing,” Centaur co-founder Sean said.
The way that Elrond has setup its staking is also indicative of how the protocol embraces its community. The Elrond ecosystem is compartmentalized very well as different partners have taken on different tasks to make up the greater whole. That is a message consistent across every partner who discusses Elrond. They deliver on their promise. This community aspect of Elrond is vastly underrated according to Alexey Koloskov.
“While still considered a relatively new project, Elrond’s community is unrivaled in long-term holder support. Alongside strategic development and marketing efforts, I believe this is because their proposition is, and always has been, clear in what Elrond promises to deliver: the internet-scale blockchain. Partnering with Elrond has not only allowed us to tap into their community of avid supporters but has elevated what we can deliver from a technical standpoint — underpinning internet-scale liquidity with internet-scale performance. Their loyal supporters have played a key role in building our community to what it is today, driving awareness and education of our proposition across various channels.”
However, this road has not been easy. According to Voicu, it was the hard work and grind of the community that has perpetuated Elrond to the next level.
“It was a long and hard journey, but the best members mirrored our work ethos and worked harder through the toughest periods. We now pride ourselves on the best and most supportive community out there, which proudly represents Elrond on Twitter, Telegram, and other channels. Some of our current strategic partners, such as Helios, started off as community members themselves and built alongside us,” Voicu said.
Community Brings Sustainability
Orion CEO Koloskov went on to say that the community ensures sustainability and that offering a compelling tool for your partners will ensure that the network continues.
“We’re astutely aware of the value of strong partnerships in building out our ecosystem, expanding our offering, and ultimately ensuring our sustainability. From inception, we’ve been focused on developing mutually-beneficial integrations over the ‘partnerships-for-optics’ so prevalent in the space. Via Orion Terminal as well as each of our enterprise solutions to be deployed on the Elrond Network throughout 2021, Orion will bring a significant number of transactions to the Elrond blockchain,” Koloskov said.
The Token Bridge that Orion is building for this is also integral to the community ethos of Elrond’s blockchain.
“Furthermore, we’re building a Token Bridge ecosystem for Elrond between different blockchains — acting as a driving force behind their interoperability. Other tools to be developed include a Metamask integration, an Ethereum bridge, and open-source tools that will be reusable by any future integrations with the Elrond blockchain,” Orion Terminal CEO Koloskov said.
Proof-of-Stake is an effective, efficient, and scalable consensus mechanism that many leading blockchain projects are utilizing. It offers a unique opportunity to participate in the process of block validation and earn a passive income from doing so. Instead of requiring large investments in expensive mining equipment that depreciates in value and is difficult to resell, it relies on an investment in crypto which can appreciate in value over time and can be a safer investment in the long run. Elrond improves upon the traditional PoS model by improving latency and functions to the committee selection process.
Furthermore, Elrond goes above and beyond to show its community that it cares. It has developed a complex ecosystem of partners as well as certain features like a community discussion forum. Moving forward, Elrond will continue to make altruistic design features that support this robust ecosystem of partnerships and investors.
Terms to Know:
Validator Queue: The validator queue is a list of new nodes that are interested in joining the Elrond network as stakers. With the queue, if a node becomes unstaked it can be replaced 1-to-1 with other nodes in the queue. The main concept behind the queue is to ensure the number of nodes stays within 1,920 so that for every 3 shards, 1 metachain can be formed with another 80 nodes on each shard’s waitlist.
Staking Calculator: Elrond Network has an easy-to-use staking calculator that allows those interested in staking to simulate how much they would make under different scenarios.
To learn more about Helios Staking and how to stake visit us at:
Twitter: Helios Staking 🔥 (@HeliosStaking)
LinkedIn: Helios Staking B.V.
Telegram: Helios Staking Announcements