#54: Superlinear Staking
💰Economics
Staking is Coming to Chainlink
Chainlink released their whitepaper for Chainlink 2.0 on April 15th. Chainlink 2.0 introduces the concept of super-linear staking (or quadratic staking) to ensure nodes are incentivised to always report correct values (as agreed upon by other nodes). One honest node now stands to receive all rewards of all dishonest nodes if they successfully notify a ‘second-tier’ of nodes that the aggregated value being reported is incorrect. This means the minimum a briber must pay to all nodes is the maximum amount one node could receive (making it quadratically higher). Chainlink 2.0 also caps the amount of fees that one node can earn to encourage further nodes. This is supposed to achieve economies of scale as new nodes are set up to capture the fees being generated and each new node that joins the oracle network provides security at a lower cost (due to super-linear staking).
On Staking Derivatives
Liquid staking is becoming a key narrative especially due to its success on Ethereum (together, all tokenized staking pools already have more than 10% market share). Paradigm, who recently joined the Lido DAO with a bunch of other notable investors, released an article on the topic that specifically covers Ethereum 2 staking and the role and rationale of staking pools differentiating between centralized and decentralized solutions. They conclude that staking derivatives are bound to exist and the crypto ecosystem would be best off if a non-custodial, robust solution will win this market.
Felix agrees with this notion. Specifically, I realize that custodial/exchange staking is one of the core dangers to decentralization. Current non-custodial staking implementations often have a bad UX and limit the user in their ability to use staked assets in DeFi. That is why we are excited to share that Chorus One is proposing to build a liquid staking solution for Solana with Lido. Read the full proposal here. If accepted, LDO holders on Ethereum would govern the liquid staking token (e.g. determining validators) on Solana. As part of the proposal, Chorus One as the main developers would receive LDO token incentives depending on milestones hit and a revenue share of the fee that the protocol will be charging.
🌐 Ecosystem
Corporate Staking
More and more corporations are becoming a part of the ecosystem of node operators in decentralized networks. One of the first players in this space was T-Systems, who recently also joined and invested in the Celo ecosystem. Gleb, who had led this initiative shared a tweet storm on his journey to get one of the biggest communications providers to participate in networks like Chainlink, Flow, and now Celo. Meanwhile, Ubisoft joined Tezos as a baker with the help of Nomadic Labs. It will be interesting to follow if this trend is to continue and what impact it will have on independent providers. In general, we feel these news are a vote of confidence in Proof-of-Stake and decentralized networks and are looking forward to more!
Injective Raises $10 Million
The Injective Protocol raised $10m from investors including Mark Cuban, Pantera, and others for their cross-chain derivatives exchange. The Injective Protocol, which is built on the Cosmos SDK, aims to create a front-running resistant exchange that is more efficient and allows anyone to create their own markets.
⛓️ Network Updates
Byebye Hosted service, Welcome Web3!
The Graph Foundation recently announced that nine more subgraphs are joining PoolTogether in the decentralized mainnet by moving over from the hosted service. This marks a very important milestone for The Graph and means that Indexers need to brace themselves for an increase in query traffic. The ‘Mainnet Migration Partners’ are a mix of DeFi, NFT as well as entertainment projects with prominent names such as Gnosis or Audius. The migration will happen in a multi-phase process in the course of the next months.
SKALE S-Chains Go Live
SKALE completed the Denali upgrade. The upgrade brings SKALE chains to the SKALE network. SKALE chains allow the deployment of Dapps to the network. So this upgrade can be seen as enabling real usage on the SKALE network, approximately 6 months after its mainnet launch. Validators had three days to complete the upgrade.
SKALE chains were first deployed to a testnet, which ran over the course of months. Only after the testing was completed did the mainnet migration happen. To Chris, this is a hopeful sign, as too many networks seem to be testing in production these days.
Brian from Chorus One and Chris from Chainflow participated in a related validator panel discussion hosted by SKALE. You can find 20 takeaways from it here.
Pyth Network to be built on top of Solana
On April 7th, the Pyth Network announced its mission of providing a reliable and fast oracle solution for financial market data. Pyth could be described as a mixture of Chainlink and The Graph running on top of Solana as it combines several stakeholders with different roles into an open, accessible marketplace for financial market data. In the upcoming Solana Season Hackathon, everyone is invited to tinker with Pyth amongst other things.
Oasis Cobalt Upgrade
The Oasis network successfully finished its first decentralized upgrade titled Cobalt and unlocking tools to bring DeFi and privacy functionality to Oasis, e.g. through the Parcel SDK. Read more about the upgrade here.
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Staking Economy is written by Felix Lutsch from Chorus One with contributions by Chris Remus (Chainflow), Robert Dörzbach (Staking Facilities), and Xavier Meegan (Chorus One). Join us in the Staking Economy Telegram to discuss staking.
Opinions expressed are our own and do not necessarily reflect the opinions of our companies. All content is for informational purposes only and not intended as investment advice.
Looking to break into the staking industry? Chorus One and Staking Facilities are hiring for multiple roles.
