#40: Staking is DeFi

Felix Lutsch
Jun 26 · 4 min read

This newsletter is supported by Chorus One, a provider of staking services in decentralized networks.

Image for post
Image for post

Merging DeFi and Proof of Stake

Last week, Chorus One released the Liquid Staking Research Report. It is the culmination of months of research into the interplay between staking and (decentralized) finance. The report dives into capital efficiency and protocol restrictions in Proof-of-Stake, explores how centralized exchanges are able to abstract these restrictions for their customers, and dives into the tokenization of stake and its implications as well as current projects in the space.

The full 88-page report includes sections on risks and benefits, as well as legal considerations for liquid staking (often also referred to as staking derivatives). This blog post explains the top 5 topics. Felix also spoke with Mirko, Founder of Staking Rewards, to discuss core insights from the report. You can find that interview here.

In addition, Tarun Chitra (Gauntlet Network) and Alex Evans (Placeholder) published a paper analyzing the mathematical similarities of tokenized staking derivatives in decentralized finance and mortgage-backed securities. One conclusion of the paper aligns with the Liquid Staking Report, which is that staking and DeFi are intrinsically linked, and what is in the process of emerging in the decentralized economy is not too different from what exists in traditional finance. Questions around whether and how this interplay will introduce systemic risk to the crypto ecosystem are important and I encourage everyone to check out the papers and to participate in the discussion, as this will likely become one of the most important topics to deal with as the decentralized finance and staking ecosystems become more interwoven.

Rocket Pool and ConsenSys Staking

Rocket Pool, a delegated staking protocol for Eth2, recently overhauled their design and will now also tokenize positions staked through the protocol, the liquid staking report above dedicates a section to describe their current design. In addition, ConsenSys announced a Staking-as-a-Service product that they will offer for Eth2 with partners like Binance and Huobi. For a current update on Eth2, make sure to check out Danny Ryan’s comprehensive post about the state and vision of the ambitious project.

European Staking Regulation

The European Blockchain Association released the Staking Infrastructure Provider Position Paper, the first project of the Proof of Stake Working Group (EUPoS), which seeks to educate European regulators about the staking industry to advance conversations to establish the EU as an innovation center for Proof of Stake. The EUPoS Working Group is analogous to the Proof of Stake Alliance (PoSA) in the US. European staking-related businesses are welcome to join the Working Group alongside current members that include among others companies like Cryptium Labs, Dokia Capital, Staking Facilities, T-Systems, and Chorus One.

Network Updates

  • Decentralized Polkadot: After the Polkadot mainnet was launched with Web3 Foundation nodes a few weeks back, the transition to Proof-of-Stake successfully took place Thursday June 18 with the first 20 validator slots filled via the NPoS election scheme (e.g. featured in SE #15). Check out the network and the current 197 validators on the polkadot.js block explorer. If you are a DOT holder seeking to participate, read the Polkadot nomination guide and choose up to 16 validator nodes to back with your stake, e.g. the Chorus One validator(s) ;).

Follow Staking Economy on Twitter or subscribe to the newsletter to make sure you don’t miss an issue.

Staking Economy is written by Felix Lutsch from Chorus One with assistance from Chris Remus, operator of the Chainflow validators. Join us in the Staking Economy Telegram to discuss staking. Opinions expressed are our own and do not necessarily reflect the opinions of Chorus One. All content is for informational purposes only and not intended as investment advice.

Staking Economy

A twice monthly recap of news and observations focused on…

Felix Lutsch

Written by

Business Development @ChorusOne. Editor @StakingEconomy. @FelixLts on Twitter.

Staking Economy

A twice monthly recap of news and observations focused on Proof-of-Stake networks.

Felix Lutsch

Written by

Business Development @ChorusOne. Editor @StakingEconomy. @FelixLts on Twitter.

Staking Economy

A twice monthly recap of news and observations focused on Proof-of-Stake networks.

Medium is an open platform where 170 million readers come to find insightful and dynamic thinking. Here, expert and undiscovered voices alike dive into the heart of any topic and bring new ideas to the surface. Learn more

Follow the writers, publications, and topics that matter to you, and you’ll see them on your homepage and in your inbox. Explore

If you have a story to tell, knowledge to share, or a perspective to offer — welcome home. It’s easy and free to post your thinking on any topic. Write on Medium

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store