State of Stake #17

Published in

Paradigm

18 min readApr 4, 2020

21st March — 4th April

“The reason we are all here is that the current financial system is outdated.”
– Charlie Shrem, founder & CEO Bitinstant

Market overview

Current Value in Staking by Asset

Think & Stake

Projects that are about to launch staking. The data is from Staking Rewards and the launch date are estimated, the actual data might be different.

Does the percentage of total tokens staked have an impact on price?

Messari analysis shows the correlation between the percentage of liquid supply stake and price return YTD is fairly weak.

Despite the lack of a definitive trend, all of the staking protocols that have less than 40% of its liquid supply staked are down in price this year. On the other end, the two networks with the highest staking totals experienced the most significant price drops YTD.

In some cases, staking can reduce token velocity (the rate at which funds are exchanged), which can have the secondary effect of lessening sell pressure. But the price movements observed here are more closely related to project-specific announcements as well as the general direction of the overall market (which has been decidedly down due to a tumultuous last month).

Chorus One Podcast — 34 Flow: A Blockchain by and for Smart Contract Developers with Dieter Shirley. In this episode, Felix is joined by Dieter “dete” Shirley, CTO at Dapper Labs. The team at Dapper Labs, a spin-off from Axiom Zen, are the creators of Cryptokitties and have spent recent years to create their own blockchain optimized for decentralized applications building on their learnings of writing some of the most widely used smart contracts. The podcast begins with Dieter going into his background in crypto and how Cryptokitties emerged out of a series of ideas his former company at Axiom Zen had for blockchain applications. They then talk about how Cryptokitties helped the team realize both the benefits and shortcomings of Ethereum and Solidity development. Dieter explains how Flow is designed from the ground up with composability and developer experience in mind. They go into detail as to how Flow is able to scale by having multiple separate node roles, the interplay between them, as well as benefits that Flow tooling and the programming language Cadence provide to developers. Finally, they wrap up with a discussion of the economics in a blockchain with multiple different roles.
Staking Is Gradually Replacing Mining and Opens up New Ways of Making Money. Read the article about the paradigm shift by Marko Vidrih on The Capital.
Interview with the Nerd: Jack — Kysenpool. The Interview with the Nerd aims to highlight the daily and tireless work of projects, validators, and Cosmonauts in the Cosmos Network ecosystem. Read Daniela Pavin interviewing Jack Chan from Kysenpool.
Assets Tokenization: How Tezos Ecosystem Fuels Traditional Economy — an article by Everstake.
Wilson Withiam Twitter thread:

Tezos Foundation holds a massive amount of capital ($635M) per its latest biannual report, but what stands out is its active approach to portfolio management. The foundation dialed back its exposure to crypto, liquidating ~7,500 BTC and adding more conservative investments.

Why did Tezos dip into its Bitcoin reserves to fund development as opposed to cash? It’s possible the foundation chose to offset its increased exposure to $XTZ, which came from an appreciation in price (up 40% since Aug.) and an extra 10.6M tokens collected via baking rewards.

This portfolio reshuffling paid off over the last month during the Coronavirus selloff. The new treasury portfolio fell by only 21% to ~$500M, which saved the foundation tens of millions of dollars compared to previous portfolios.

This is the type of treasury management that many other crypto projects failed to implement before the crypto market turned south in 2018 and dried up available funding.

Upcoming Staking Events

8th April 2020, 4pm CET — Liquid Staking Working Group call.

Theme: Staking-related financial products and implications

@0xlildex on UMA protocol priceless synthetic tokens
StakerDAO on their DAO and BLEND PoS token tracker

Details are available via the link above.

16th April 2020 — Intro to Polkadot, Kusama Network, and Substrate, Washington, US
16th April 2020, 5pm CET — Chorus One AMA with the Band Protocol to learn more about staking, oracles, and their collaboration.
25th April 2020 — Tezos Baking Tour: Thailand by Tezos Southeast Asia & Blockspaper. Tezos Southeast Asia’s next stop in the Tezos Baking Tour is Bangkok, Thailand! Join TSA and Blockspaper and learn why you should be part of the Tezos community and how you can earn a passive income through validating (a.k.a. ‘baking’) on the Tezos blockchain through this hands-on workshop. Bring down your laptop and interact with their developers at the workshop where they will guide you step-by-step.

Recent Staking Updates

Harmony team updated the Token Economic Model, ahead of the Open Staking launch. The goal is to achieve a higher staking ratio, to simplify the model & to create a path to 0 issuance, all of which they believe will bring long term benefits for Harmony.

Constant annual reward of 441M ONE regardless of changes in underlying variables such as block time and staking ratio.
Transaction fees offset issuance creating a path to 0 issuance as protocol gains adoption.
1st year yields range: 164% (at 5% staked) to 9% (at 95% staked).
For more in-depth information, take a look at the spreadsheet model.

CasperLabs Pivots Away From Ethereum to Fundraise With Its Own Blockchain — BitMax hosted public sale of CasperLabs (CLX) on March 30. In September 2019 CasperLabs has closed $14.5M USD private fundraising round with participation from Acuitas Group Holdings, Arrington XRP Capital, Consensus Capital, MW Partners and Hashkey Capital among others. According to CoinDesk, BitMax will automatically stake CLX for buyers when the mainnet launches later this year, after which there will be an enforced 90-day lock-up to prevent prompt sell-offs. BitMax is committed to operating a full node at CasperLabs’ mainnet launch to facilitate staking services for CLX and selling up to $3 million worth of tokens, as evaluated by both participating companies. More details to be released.
Introducing Staking 2.0 on COTI — COTI has released details on its updated staking model. According to the recently released blog post, the staking volume will be increased as of May 2020. Both community and advanced nodes will allow staking of 5M COTI. The node selection algorithm will now additionally take into consideration the amount staked on a node. COTI is offering one of the highest annualized staking rewards at the moment. Staking on exchanges TBA.
BitMax has launched staking as a service program on its platform as of April 2. Tezos (XTZ) and Cosmos (ATOM) will become the first coins offered for staking with 5.4% and 6.5% annualized return rate respectively. Staking of Kava (KAVA) and Harmony (ONE) to follow shortly. According to the recently released blog post users will be able to unstake their coins any time, use staked assets as margin collateral and maximize returns through automated redelegation of rewards. It will not be an automated staking like other offerings among cryptocurrency exchanges. Users should stake and unstake their coins manually. But it will offer both earning and margin trading on one platform.
Everstake Becomes The Harmony Staking Partner. Considering the Harmony initiative, the ecosystem made a decision to test open staking experience on the blockchain by inviting staking partners for participation. This stage of the open staking process is important before moving to an extensive open testing stage. By running the system in the test mode the project can find different bugs as well as vulnerabilities, that must be fixed before entering the mainnet.
Cardano Community Outraged by Cardano Staking Cartel in Shelley Testnet. A large number of staking pools in the Cardano community have formed an alliance on the Shelley Incentivized Testnet. Other members have criticized the alliance for promoting centralization.

Group of stakepools formed on Cardano called ISPPA.
Pool operators produce around 12%-13% of the blocks in the network.
Community fears such coordinated efforts could lead to centralization.

Daily Cosmos Outpost Apr 03, Inflation 7.0% Bonded 72.0%.

Validator Views by Staked:

{Keep Update — March 31, 2020}

Keep is expecting to launch the Keep Network mainnet with staking and trustless Bitcoin (tBTC) in the near future.
KEEP tokens will be unlocked on-chain over the same period of time as their Use Restriction (6 months, 12 months or 24 months). The KEEP tokens will be released for withdrawal into the owner’s account linearly, as each block of the Ethereum mainnet is generated.
Locked KEEP tokens can still be staked, but only from the wallet address that is associated with the owner. Keep’s standard SAFT terms require owners to stake their tokens.
100,000 KEEP is the minimum required to stake on either the Keep or tBTC networks. The minimum stake will decrease over time according to a schedule the Keep team will be publishing at the time of launch!

{ETH 2.0 Update — March 26, 2020}

The Least Authority team recently completed an audit of the Ethereum 2.0 specifications. The audit identified seven issues and made three best practice suggestions. Furthermore, the audit highlighted two areas that would benefit from further review and additional documentation: the Peer-to-peer (P2P) networking layer and the ENR system. Read the full audit report here. It is now time for multi-client testnets and the Phase 0 bug bounty program!

2. The first ETH 2.0 testnet slashing of an external validator recently occurred. The slashing was caused by a GCP instance migration, as two validators were validating behind the same key. View the slashing in the block explorer here.

#35: A BFT Birthday:

A Birthday Present for the Cosmos Hub — One year ago on the 13th of March, the Cosmos Hub produced its first block, marking the world’s first decentralized launch of a permissionless BFT network.
Staking Beyond Consensus — An op-ed by Union Market’s Shayne Coplan on the state and the future of the staking economy. Shayne describes staking and its function as a cryptographic primitive seeking to reduce transaction costs in marketplaces in the digital economy. It’s a very spot-on take that describes how staking mechanisms should be thought of beyond determining consensus participants.
Edgeware — A Slashing Case Study — A slashing incident happened shortly after the Edgeware mainnet launch and now serves as a case study on remediating slashing events. Staking Facilities suffered the slashing penalty after a relatively short downtime due to a mixture of an unforeseen bug and high downtime penalties on Edgeware. The team has been working with the Edgeware community on how to deal with the situation since. The approach they have taken is to reimburse losses from their own funds first and issuing a proposal to Edgeware on-chain governance to recover lost funds from the treasury. Read the writeup of what happened and check out the recovery proposal here. There also was an interesting discussion on the Staking Economy Telegram about this incident and the implications for validators, who are usually running beta software and may suffer from such slashing penalties for minor mistakes, or things that are completely outside of their control. Overall, the consensus was that slashing should be deployed carefully, potentially increasing penalties once the protocol’s software has matured significantly.
Hedged Terra Staking — Korean payments network Terra introduces an idea for another innovative financial product seeking to protect the principal used for staking from price volatility of the network’s native staking token Luna. Anchor’s design aims to allow users to receive staking rewards by pledging collateral denominated in stable tokens. This product is one of the first structured products that become possible when staking and decentralized finance intersect.
Tezos Carthage and Lawsuit Settlement — The third governance-induced protocol upgrade passed all voting periods and was activated March 5. Meanwhile, the Tezos Foundation agreed to pay $25m in settle claims from an ongoing lawsuit claiming the 2017 ICO violated US securities laws.
Celo Incentivized Testnet Summary and Alliance Formation — Celo’s Great Stake Off successfully concluded and saw the participation of more than 100 entities check out the details here! In addition, the Celo Alliance, a collective of organizations seeking to support and utilize Celo’s platform to bring financial tools to millions of users with a mobile phone, was announced.

Top Cosmos Validator Chorus One Strategically Partners With Band Protocol — Band Protocol is excited to announce the long-term partnership with Chorus One, a globally diversified and industry-leading validator with over $12,000,000 in assets staked across Cosmos, Kava & Terra. Partnering up with an enterprise-grade validator with audited security setup shields for both cyber and physical attacks will strengthen the resilience of BandChain and allow BAND tokens to be delegated safely.
Libra alternative Celo Foundation gives out initial grants:

In brief:

The Celo Foundation announced $700,000 in grants to recipients helping build a more inclusive financial system.
Earlier this year, the Celo Foundation announced the Alliance for Prosperity, a network of organizations committed to using the Celo stablecoin.
This is the first in a series of expected grants from the Libra alternative.

The first game built on Tezos blockchain preparing for alpha launch. Tezos (XTZ) co-founder Kathleen Breitman is preparing to launch the alpha version of the game built on top of Tezos — a crypto-powered collectible card game called ‘Emergents.’ Emergents’ in-game cards will comprise non-fungible tokens (NFTs) that players have full ownership over. Coase intends to comprise both the primary and secondary marketplace for the cards. The company will also act as both a buyer and a seller for the NFTs.
Kava Integrates Chainlink as its Official Oracle Network to Bring DeFi to Cosmos. Integrating Chainlink’s world-class oracles strengthen the Kava DeFi platform with secure price data, now made available for the first time to all Cosmos chains. Kava’s scalability combined with Chainlink’s oracles provide the Cosmos ecosystem with the highest-quality data to make secure, truly reliable Decentralized Financial Products.
Our Network: Issue #15:

{Tezos}

Protocol Upgrade: With world-wide spotlight elsewhere, the Tezos community quietly focused on hardening its base layer with a third protocol upgrade (codename Carthage) that went live on March 5. Voted for by 46% of all bakers and backed by 72% of network stake the participation rate was slightly down from earlier votes (46%/84% in Athens, 45%/83% in Babylon). Like expected for a bugfix release the on-chain upgrade went much smoother this time. >85% of all bakers had upgraded their software ahead of time and baker churn was limited to ❤% (down from 10% in earlier upgrades). Note that a protocol upgrade in Tezos is not backwards compatible like in Bitcoin, so all infrastructure including indexers, wallets and dapps need to follow.

Staking: Custodial staking at the top 3 exchanges Coinbase, Binance and Kraken continued its strong 2-digit growth trend during March while smaller exchanges saw almost no change. On April 1st a whopping 65.7M tez (10% of all staked coins, 7.9% of total supply) was staked at Coinbase alone. Together the top 5 custodial exchanges manage 136M tez (21% staking supply, 16.4% total supply). At these numbers monthly income from staking fees for Coinbase should be around 82.5k tez ($140k USD).

Staking: 3.3M new tez were minted last month, network wide staking ratio dipped back 1.2% to 78.5%, staking rewards are at 6.07% annually, future expected yield above inflation increased slightly to 1.3%. At first sight it seems as if the downtrend in price from mid February heights could have caused delegators and bakers to liquidate some of their stake.

A closer look at the data reveals, however, that the opposite happened. Total delegated supply (the part of staking supply that is not owned by bakers) actually reached an ATH of 522M towards end of March. Reason for the network staking dip was baker churn. Around 3% (10M staking supply owned by bakers and another 7M delegated to them) went inactive during March.

{Cosmos}

Inter-blockchain Communication (IBC): IBC is the flagship digital asset and data transfer protocol for communicating value across bespoke blockchains. When IBC is launched in a few months’ time, it will usher in the era of an Internet of Blockchains — a watershed moment that will benefit the entire industry because it would bring about what I liken to the Industrial Revolution for the macro crypto economy. Today, IBC is nearing production-readiness and is being stress-tested in a testnet environment.

This visualizer shows you the number of established IBC connections there are between any two IBC-enabled Cosmos SDK blockchain which, once connected, start relaying IBC packets between one another. There are currently 8 separate Cosmos SDK-based testnets (e.g. Dokia, Ping IBC, Iris, etc.) that have established IBC connections to each other’s testnets and are transporting IBC messages to one another across chains. Image 2 isolates Dokia’s testnet chain and shows that it has 25 connections established to allow it to “trade” data/value/etc. with the economies of the other chains. Metaphorically, it helps to think of each IBC connection as a highway or even a trade route, a relayer as any untrusted vehicle (you don’t need to trust the relayer in order to be sure that the contents in the package were not tampered with) that delivers payloads (e.g. smart contract calls, tokens, location data, etc.) from chain A to chain B, and finally, a bespoke chain as a sovereign economy that wishes to embark in trade with another chain’s economy. Put it all together and what do you get? Globalization as the end-state for token economies.

Game of Zones (GoZ): Incentivized testnets were a thing pioneered by Cosmos in 2018. Game of Stakes (GoS) was the first of its kind which subsequently spurred the creation of at least 11 other incentivized testnets since its inception, including that of Cardano, Solana, Near, Oasis, Irisnet, Celo, Matic, Icon, Lino, Coda, and Nucypher, to name a few. Game of Stakes was necessary for preparing for the Cosmos Hub launch to ensure that no critical vulnerability would break the mainnet. This year, GoZ is the sequel to that for stress-testing IBC before diving, head first, into a high-stakes connected multi-chain world. This year, participants are going to be spinning up relayers and racing to drive the most IBC packets across federated testnets for GoZ. The GoZ topology will look something like this:

Cosmos Governance: The Cosmos Hub community tax pool had been slowly accumulating ATOMs since the launch of the mainnet to having over 340 thousand ATOMs. At the end of January 2020, the very first community spend vote was passed: Prop 23 (source)

In Cosmos, there is a semi-liquid democracy whereby votes are by default cast by validators and individuals with voting power inherit the votes of the validators they’re staked with. However, if individuals choose to cast their own votes, they can override their validators’ votes, which is what happened with this proposal. Because of this governance feature, Cosmos governance differentiates itself from representative democracies as seen in DPOS protocols like EOS.

Staking Amidst Market Crash: March was a tough month for everyone. If rewind to February 2, 2020, a peak was seen at staking in the network at 187 million ATOMs. It fell by 4% six weeks later, just two days after the entire crypto market took a nosedive on March 16th following Bitcoin’s lowest price point since 2017. Bitcoin, Gold, and the DJIA were all of a sudden correlated. But because Bitcoin movement informs all the rest of the token economy’s movements, ATOM, like comparable POS protocols (e.g. EOS, Tezos), took 69% haircuts ubiquitously. Network staking levels:

Because it takes 21 days, or 3 weeks, to unbond ATOMs, you can see the first wave of people who undelegated at the first trough on January 28th. The second lower trough came exactly 3 weeks later on March 17th, where the ATOM price hit its year-to-date all-time-low to $1.55 — a 69% dump. One can only infer that those first wave of undelegators were the ones who sold off to the bottom of the market.

The 4th IRIS Token Burn is Completed — On March 31st, 2020, the IRIS Foundation completed the 4th IRIS token burn under a one-year token burning plan with 14,230,476 IRIS burned. The current total supply is 2 billion IRIS. This is also the last burn in a one-year token burning plan announced in 2019. Until now, 62,754,558 IRIS tokens have been burned. Every burn maintains an original balance of 2 billion IRIS to keep the actual inflation rate as 0.
Incentivized Testnet Launch — Node & App Partner Program.

After over 18 months of development, Pocket Network team are excited to announce that the Pocket incentivized testnet is ready to launch! Pocket Network is an independent, application-specific blockchain. It is a Proof-of-Stake (PoS) protocol using the Tendermint consensus engine with a native cryptocurrency, denominated as “POKT”. Both Applications and Service Nodes must stake POKT to access or provide work to Pocket Network.

The launch of the testnet will be rolled out in two phases:

The first phase will include a smaller focused group of node operators and application developers who will help with the testing of the initial validation and security parameters within the network. This phase will include a preliminary permissioned implementation of the Pocket blockchain along with the Pocket coordination layer.
The second phase will begin the following month with a larger set of validators and node operators. The goal of the second phase is to, once again, test validation and security, but under a more hostile environment by scaling up the amount of activity and relays flowing through the network. In parallel to these testnet phases, they will also be running their own thorough audit, as well as contracting a third-party firm in order to ensure the security of the network in preparation for the Pocket Network Mainnet later this year.

Gate.io HODL & Earn Launches SERO PoS & Earn（Issue 3）, Annual Interest Rate 20%. Gate.io launches SERO PoS & Earn as a part of HODL&Earn, a series of crypto-asset management tools that promises stable profit and lower risks.
Regen Network-validator updates 25.03.2020 — monitor the progress via the link.
Everstake Weekly Update Recap (March 23, 2020):

{Tezos}

Tezos Foundation settles $25 million lawsuit
Tezos Grants $37 Million to Ecosystem Developers
Tezos Foundation published its biannual report
Atomex added FA1.2 Tezos token standart
Tezos-starter-kit is fully Carthage-proof now

{ICON}

ICONLOOP sets a goal to reach 1 million users
Broof has been successfully introduced
ZenSports app implemented ICON public chain
ICON Integrates with Dapp.com

{EOS}

CoVax app will assist the world in COVID-19 vaccine research
Jacques Whales releases a video podcast regarding COVID and DIY liquidity pool
Thomas Bertani conducted an AMA session
Block.one CEO criticizes EOS Worker Proposal System

{Cosmos}

Cosmos community member has published ATOM staking guide through Lunie
Cyber Congress is one step ahead of decentralized search engine
ETHDenver2020 has been successfully finished

{IOST}

IOST Network will be interviewed by AWS China
IOSToken conducts Binance Giveaway
Swiss Business Hub in Japan endorses IOST
IOST officially launches BaaS platform

Everstake Weekly Update Recap (March 30, 2020):