Stratis Platform: Cold Staking

Bringing a more secure solution for staking $STRAT

Khilone
Khilone
4 min readDec 14, 2018

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Proof of Stake

Stratis’s consensus is Proof of Stake (PoS). Proof of Stake is a type of algorithm by which a cryptocurrency blockchain network aims to achieve distributed consensus. In PoS-based cryptocurrencies, the creator of the next block is chosen via various combinations of random selection and wealth or age (the stake). In layman’s terms, the more $STRAT tokens you own, the more chance to get the reward of creating the next block.

A Node

So how does this work and what do you need to successfully stake? The first thing you need to understand is how it works, how blocks get created and how you get rewarded in return. This process goes through a ‘Node.’

A node is a device on a blockchain network, in essence, the foundation of the technology, allowing it to function and survive. Nodes are distributed across a widespread network and carry out a variety of tasks.

A node can be any active electronic device, a computer or a phone or even a Raspberry Pi, as long as it is connected to the internet and has an IP address. The role of a node is to support the network by maintaining a copy of the blockchain and to process transactions.

All you need to be eligible to run a node and stake is:

  • Own $STRAT
  • Store your $STRAT in the Stratis wallet that enables staking (Stratis Core)
  • Enable staking in Stratis Core
  • Keep your device on and connected to the internet

When you successfully do all of this, you are a node that participates in the Stratis network and have a chance to create blocks and earn rewards in $STRAT.

The Problem

Anyone who wants to stake $STRAT has to store their $STRAT in an online wallet which is connected to the internet called a ‘HOT’ wallet. The way Proof of Stake works is the more $STRAT you own, the bigger the chance is you create a block and earn $STRAT. Keeping your tokens in an online wallet brings security risks and holding a significant amount of $STRAT makes you a target.

A lot of token holders decide that the rewards don’t weigh against the security risks and choose to store their $STRAT on a Ledger (Hardware wallet), a ‘COLD’ wallet as it’s stored offline. It has the plus side of better security and the down side of not being able to stake and earn rewards for the $STRAT you are holding.

The Solution

Staking your $STRAT through ‘Cold Staking’ is more secure. When you cold stake your $STRAT, you get the rewards of staking but also get the security benefits of a ‘COLD’ wallet. Something that currently isn’t available with Ledger. So how does this work for Stratis?

The solution is the introduction of a new opcode that can be used in scriptPubKey to allow UTXO spending and full access with one private key and only staking with another key. By just staking, you can only spend this UTXO to the same pub key, and you have to spend all of it (you can’t unlock 1 $STRAT and lock 0.5 because that would essentially be burning of the coins).

Stratis will enable cold staking when a majority of the stakers has upgraded to C# Nodes. Cold staking will only work in a secure way if more than 50% of the staking power is on the softfork side.

Stratis cold staking is unique because the script pub key is quite small and they activate it using a softfork and not a hardfork as some other projects have in the past.

In order to use the cold staking solution from Stratis you have to create a coldstaking setup (scriptPubKey with that cold stake opcode) in a way that the key that can spend colds (cold key) belongs to a cold wallet and the key that can only be used to stake (hot key) is stored in a wallet that is always online and staking (hot wallet). All of this will be made simple on the user side: there will be a simple user interface within the Stratis Core Wallet.

Conclusion

Stratis developed a solution for cold staking without having to do a hardfork as other coins have done in the past. With Stratis’s solution, your $STRAT can be held offline, but you are still able to earn $STRAT through staking.

A huge milestone, especially for everyone who is holding their $STRAT on their Ledger but would like to stake. This is your chance! You still have the security of an offline wallet but now have the benefits of staking and earning $STRAT. Ledger isn’t supported in the current cold staking setup, you will need to use Stratis Core as the cold wallet before Ledger is supported.

Another benefit of cold staking is that the Stratis network probably will get more decentralized and secure because more people will be staking their $STRAT.

Cold staking currently is in test phase, this feature will be activated when 95% of the stakers have adopted the C# Full Node production release.

Khilone

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The material contained in this article is not to be regarded as an recommendation to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information on this document does not constitute legal, tax, or investment advice. You must not, therefore, rely on the content of this document when making any investment decisions.

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Khilone
Khilone

Writing articles about Stratis Platform, Beaxy Exchange and Crypto in general — https://twitter.com/Khil0ne