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State of Stake #2

“We strive for a value-securing system that is not pegged to an external resource and where security is not derived from burning energy in the physical world, but from the value stored within the system itself.

In a sense, a PoS system is recursive, augmenting the value it stores implies better security which further allows the value to increase..” David Yakira, Orbs Head of Research

Market overview

Source: stakingrewards.com
Source: stakingrewards.com
Source: stakingrewards.com

The value locked in staking by asset, $

Source: stakingrewards.com
Staking Yields
  • Staking Yearly Yield is the annualized yield for staking at current supply levels, as calculated by stakingrewards.com.
  • Real Staking Yield is the annual yield expected from staking, after accounting for the network’s inflation. Real Yield is calculated as the nominal staking yield adjusted for the inflation rate.
  • Token Staking is the number of tokens currently staking on the network, as reported by stakingrewards.com.
  • Network % Staking is the % of current circulating supply that is currently staking, using data provided by stakingrewards.com.
  • 5 Years Yield is counted like compound interest.

Think & Stake

  1. Industry Growth Predictions
  2. Ensuring a decentralized staking economy
  3. User Survey: Would you run a staking node?
  4. The biggest challenges for Proof of Stake
  5. An optimal incentives model for Proof of Stake Blockchains?
  6. The most important aspects to attract users (from provider perspective)
  7. User Survey: Aspects to choose a staking provider
  8. Exciting upcoming protocols
  9. Protocol Governance
  10. User Survey: Protocol Governance
  11. Staking as a stepping stone for governance mechanisms in the real world?
  12. Value-added services, tools and products provided
  13. The impact of large corporations
  14. User Survey: Custodial Services
  15. How to increase awareness about staking?
  16. Staking Terminology
  17. Staking is Passive Income?
  18. Explain Staking to a 7 years old
  19. Conclusion
  20. Credits

The value of funds locked in staking depends on two major factors: underlying asset price and the stake ratio.

Within the next year Ethereum will bring ~$30B liquidity into the existing ~$20B staking marketcap in addition to others such as Polkadot and DFINITY (ca $1B marketcap each) will bring more liquidity as well.

Considering these current prices and around 40% (currently 38%) of all funds being staked on average, this would bring us to $19 billion locked in staking within one year (271% growth).

Would you run your own Staking Node if the setup would be just plug and play?

The most important aspects when choosing a staking provider (from user perspective)

To which extent Users want to be involved in Protocol Governance

Would you use a custodial staking service?

Do you consider Staking a form of passive income?

They have interviewed 16 Key Opinion Leaders and surveyed 224 Users in the space to determine the current status of the staking ecosystem and to figure out the next necessary steps to support the long-term vision and success of PoS protocols, enabling investors to earn passive income.

1. Value-added contributions are key for staking service providers

Large and medium Holders choose Providers that align with their vision for the industry and provide the most value to the networks and ecosystem. Small Holders choose Providers with the lowest friction and good native tooling such as dashboards, rewards monitoring, etc.

2. We are super early

We are still early and have to overcome a lot of hurdles for the industry. Proof of Stake has not yet proven itself and we need a lot more education of users (but “not to 7-year olds”) and way more focus on UX. The “optimal” protocol-incentives designs are not yet figured out and regulation still remains largely a grey area.

3. Small Players need to find niche markets to survive in the long run

Big Players such as established exchanges and wallets are all starting to provide staking services. The key for small validators and providers will be to build communities in niche markets for specific protocols as well as differentiate themselves with value-added services.

4. UX is crucial to foster healthy and decentralized networks

On-boarding to staking is still difficult and even though many people want to run nodes themselves, they are not able to due to the immense technical challenges and risks. The focus of protocol development has not been focusing on UX/UI layer, which is understandable, but it has started to change with staking service providers building more user-friendly interfaces.

5. We need more real-world use cases to stress-test PoS

There is a lot of experimentation going on and a lot of great incentive-models have been figured, but Proof of Stake and the staking mechanisms have not yet seen a black swan event and we are yet to see where these networks converge in the long run.

6. Watch out for new protocols

Ethereum 2.0, Polkadot, Dfinity, Solana, Keep, NEAR just to name a few will bring tons of new protocol approaches and use cases to the table. They are all innovative and some have rather creative approaches to interoperability, scalability and governance.

7. Decentralization is hard work

It is a shared opinion that there is a great value to decentralization for the networks long-term success. There are various ways being suggested to address centralization concerns on protocols level via incentive mechanisms, but it is still hard to balance the interests of all stakeholders.

8. Rapid Growth for Staking and Decentralized Finance (DeFi)

Both industries are expected to grow with almost 300% assuming today’s prices. This is going to receive even more momentum as more real-world assets would be tokenized and start being moved on-chain. This is extremely important however not to create a second Wall Street, but allow DeFi to stay as a viable alternative to the existing financial system.

9. Humans stay Humans

Despite the tech being there, we as human species often prefer convenience to security, which has been shown with 52% of Users being able to trust custodians with their keys. This represents a risk to the system as it incentivizes centralization. We as humans, being used to instant gratification are often short-sighted as well. This includes voter apathy among token holders, as well as fees being the main factor in choosing a staking service. All of these have a negative long-term implications for a protocol .

10. Education is paramount

Proof of Stake and Staking is still not very good understood in the communities. And we have seen one of the common denominators across most points is the need for education. This is crucial to allow Users to make the right long-term oriented trade-offs and govern the protocols in educated manner. Many staking providers are directly contributing to User education as it directly leads to a healthier, more decentralized ecosystem and a long-term viability of the existing staking business models.

  • Ceteris Paribus tweeted “The term “passive income” for PoS coins needs to die.”
Source: messari.io
  • Interview with Gavin Birch of Figment Networks — Figment Networks is a security and compliance focused staking service provider. Drawing on years of data center, software, and security experience, they offer industry leading best practices to keep your tokens safe and optimized for maximum network awards. Based in Canada, they provide transparency, legal stability, and regulatory clarity.

Latest Staking Update

  • Harmony Protocol — Harmony network uptime is steadily 100% since the Mainnet Day ONE launch on June 28. See post.
Screenshot from 25.07.2019–11:16

As per their history and philosophy, it can be said that Ethereum Classic is a conservatively run system, focused on security, and the upcoming Ethereum 2.0 is a progressively run system, focused on performance. This clearly differentiates the market positioning for both blockchains.

Following is a diagram that compares both networks:

Sentinel — Pre-final list of gentx validators, validators for resubmission, doc to start chain on 7/24, final genesis for sentinel pushed, instruction to start Sentinel Hub available & block height

More info via the link.

Cosmos — Updating testnet node

Sentinel — Released sentinel hub v0.1.0, important dates to know, be a genesis validator, accepting submissions from 21 validators, stats & Swixer coming soon

Learn more here.

This is not financial advice.

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