Staking Economy is a monthly recap of important developments and observations from the world of staking cryptoassets supported by Chorus One, an operator of validating nodes and staking services on Proof-of-Stake networks. You can find a collection of previous issues on Medium.
Staking Rewards is partnering with Staking Economy to bring a monthly overview from the frontlines of Proof-of-Stake research to its platforms' users.
News & Updates
COSMOS GoS HARD FORK(s) - As part of the incentivized Game of Stakes testnet a final network upgrade (GoS-4) was scheduled to happen today (1st of February 2019). The Cosmos validator community took this opportunity to coordinate a fork that aims to remove the stake of a cartel of nodes that managed to sybil attack the testnet's registration process, which enabled them to accumulate almost 54% of the total stake in the network.
Discovered through thorough research based on registration patterns and node behavior (kudos to the Certus One team and everyone else that contributed), validators belonging to the cartel could be identified. For details about the timeline, further evidence, learnings from this impressive attack, and support statements from the Cosmos validator community check out the GoS-5 fork Github PR and Stake Capital's rundown of the events.
The new cartel-free GoS-5 blockchain, which is scheduled to launch tomorrow (2nd February), would be the world's first demonstration of one of the amazing properties of Proof-of-Stake: the removal of malicious actors after discovering their offense. In the Proof-of-Work context this would be akin to burning down the ASIC farm of an attacker and reversing all the double-spends that he managed to carry out in the process of the attack.
The following day will show if the Cosmos community will be able to gather enough support to stop the "cartel chain" (GoS-4) from producing blocks (this requires at least ~34% of the total stake not joining this fork), or if there will be two competing chains after the GoS-5 fork takes place tomorrow.
TEZOS YEAR IN REVIEW - After about half a year of operation, Figment Networks took a look at some statistics of what happened in the Tezos network. Key facts include a steady increase over the year in staking participation from around 20% of the supply to 60%, with a total of over 11,000 addresses delegating their Tezzies to about 450 bakers (validators).
Arthur Breitman also reflected on the platform in a YouTube video sharing what is planned for 2019, key things include exploring asynchronos consensus protocols (e.g. Tendermint), introducing zk-SNARKs and improvements of the mempool and storage layer.
Finally, the first governance proposals (amendments) are rolling in and are being discussed on the discussion platform Kialo.
VALIDATOR FUNDING - Staking-as-a-Service provider Staked closed a $4.5mn Seed from notable investors like Pantera Capital and Coinbase to support institutional crypto holders in participating in interest-earning opportunities with their cryptoassets.
LOOM x COSMOS — The Loom team announced their plans to build a token bridge between their PlasmaChain and the Cosmos Network. This integration will allow for interoperability between the networks allowing users to migrate assets between the two blockchain ecosystems.
PROJECTS BUILDING ON POLKADOT — A curated list of projects building on Polkadot using the Substrate framework. 2 of the top 40 coins by market capitalization are included, 0x and ChainLink.
- Polkadot released their third PoC, which is the first testnet that uses their bran-new GRANDPA consensus algorithm.
- SKALE, a layer 2 scaling project build on Ethereum, published a rundown of their sidechain consensus.
- Fake Stake: A reminder of the complexity of Proof-of-Stake; several early PoS networks have been found to be vulnerable to an attack that can cause nodes to crash by exhausting its resources.
- CBC Casper: Vitalik explaining Casper CBC and Ethereum 2.0 at Blockchain Connect and Vlad collaborating with Casper Labs to speed up CBC upgrade.
- Charles Hoskinson with an update around staking in Cardano, covering the testnet roll-out process and the creation of a stake pool taskforce to collect questions that will be answered by the IOHK team.
Opinions & Observations
Ryan Zurrer, who coined the term Keepers for actors that provide utility in cryptonetworks, published another blog post on the topic covering observations he is making in this space. The first part of the post is focused on how he sees this market playing out, e.g. regarding the different levels of complexity of Keeper services and their potential profitability.
In the second part, Ryan lists directions he would like networks to explore:
- experimentation with token inflation remunerating other applications beyond network security,
- more research and modeling of cryptoeconomic design.
An overview of how profitable running a validator after Ethereum’s move to Proof-of-Stake, also referred to as Serenity, will be. Collin Myers from ConsenSys published a comprehensive overview of ETH2.0 client teams, staking costs and risks, comparison to other interest earning opportunities (e.g. DeFi and other staking tokens). The main contribution is a yield analysis based on the ETH2.0 spec and differing assumptions regarding validator operation cost, staking participation rates, and ETH prices. Collin concludes that with the current spec and an ETH price of $125, the net yields are unlikely to attract small validators.
Chorus One CEO Brian Fabian Crain gave a talk about Proof-of-Stake as part of Mainframe's Decentralized Summit. The talk goes into how PoS differs from Proof-of-Work including a rundown of the Cosmos Network and the relationship between validators and delegators.
A central part of the talk is about what Chorus One as a validator is focusing on: security, uptime, governance, as well as research and analysis. Listen to the talk hereto learn more about us and how we plan to assist PoS networks and our delegators.
Staking and Custody
I agree with this view and would like to see more networks embracing this thought, as the alternative are custodial solutions that re-introduce trust or rely on off-chain legal constructions that favor highly capitalized entities.
An analysis of third party layer 2 payment channel services economics, which are referred to as watchtowers in the Lightning Network or monitoring service in Raiden. These services are required for scaling off-chain channels enabling users with funds in channels to go offline without risking to lose their money. The article by LocalEthereum's Sam Aiken covers what watchtowers are and why they are needed, as well as how they operate and the underlying economic challenges.
A possible solution to allow for compensation of this crucial service could be to introduce a form of staking and slashing that rewards watchtowers doing their job and penalized those who don't, see e.g. Celer Network's state guardians.
Opinions expressed are my own and do not necessarily reflect the opinions of Chorus One. All content is for informational purposes only and not intended as investment advice.