A short summary of our comprehensive Staking Ecosystem Case Study.
We 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 negative long-term implications for any protocol.
10. Education is paramount
Proof of Stake and Staking is still not very well 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 an 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.
We are keen to continue contributing to this amazing ecosystem and community. There are still a few hurdles, but these are all solvable. A little bit of experimentation, a tablespoon of innovation, a dash of UX, a hint of compliance and we should be set.
We already do have a woke and united community, innovative self-governing protocols, big compliant providers as well as novel grassroots stakers. Everyone we have spoken to is actively contributing to the ecosystem as a whole. It is great to see that there is definitely space for everyone. Let's stay inclusive.
For us it seems that we have already planted the seeds for a healthy, robust and decentralized ecosystem. Let's give it some more love and our industry will bloom very soon.
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