Building a healthy staking ecosystem

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 next required steps to support the long-term vision and success of PoS protocols, enabling investors to earn passive income.

If you would like to read a summary of the study first, feel free to check out our article 10 Key Take-Aways from the StakingRewards Case Study

We believe a united community, transparency and open concourse will help to let the new opportunities appeal to the mainstream.

Key Roles in the industry are Staking Service Providers and Users. Additional ecosystem players are Crypto-Funds, which help to bootstrap the ecosystem and of course the Institutions which support the direct protocol and ecosystem development.

We as StakingRewards are an independent intermediary that provides trusted data, research and tools to find the best protocols and service providers for your individual needs.

We have been asking staking providers different sets of questions, several major ones across the board, as well as some personalized ones to provide a more diversified insight into the staking industry.

For this article we have taken excerpts, categorized them and compiled them into a digestible study. The full interviews can be read here.

Disclaimer: If you feel like your answers were unfairly shortened, changed or applied in false context, please let us know and we will make corrections upon mutual understanding.

Outline

  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

Industry Growth Predictions

Staking on the Move

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).

Mentioned by: Tim Ogilvie (Staked), Vlad Makarov (Everstake), Julien Bouteloup (Stake Capital)

The Potential of Decentralized Finance (DEFI)

The next few years may be an important period for decentralized finance. Especially once many real-world assets have been deployed on blockchains, decentralized or open finance is bound to usher in a round of rapid development.

If decentralized finance allows a large number of assets to transit smoothly over to blockchains and completes open and transparent contract transactions in the market, it will inevitably ensure the safety and information transparency of assets between investors and borrowers.

This may solve a great problem of financial opacity.

Mentioned by: Discus Fish (Cobo)

“DEFI will not replace traditional finance but give an alternative solution to people. Open internet needs open finance.”

A lot of projects are currently building on DeFi, so we can likely expect around $2 billion being locked up in DeFI on one year (346% growth).

Quote by: Julien Bouteloup (Stake Capital)

Mentioned by: Tim Ogilvie (Staked), Discus Fish (Cobo)


How to ensure and incentivise further decentralization within the staking economy?

Education

Freely available and well structured information around staking, validators as well as easy digestible on-chain data for everyone to truly understand the protocols seems to be one of the most important aspects here.

  • Users have to realize the Importance of Decentralization for a healthy and secure network
  • Create an inclusive community that actively engages in governance and development
  • Incentivize informed and reflected decision-making for delegations and stake distribution
  • Foster interest in the technology rather than only promote associated yields

Mentioned by: Hendrik Hofstadt (Certus One), Edouard Lavidalle (POSBakerz), Alex Bond (P2P Validator), Wolfgang Albrecht (Staking Facilities)

Protocol Design

The incentives design of the protocol itself plays a major role by favouring behaviour that tends towards or away from decentralization.

We definitely need a lot more experimentation here. We may see a bunch of new protocols until the blockchain space has seen some models that combine efficiency and decentralization at the same time. Some proposed ideas are:

  • Adjust lock-up times depending on the size of the validator
  • Distribute a fixed reward to every validator, so smaller validators are yielding higher
  • Algorithmic reward reduction (delegate to a big validator = smaller reward)
  • Increase individual yields if the user delegates to more than 1 validator
  • Self-Bond Requirements for Validators
  • Lower the threshold requirements to become a validator
  • Allow an uncapped number of validators, who fulfill minimum requirements, in the network

Mentioned by: Chorus One, Figment Networks, GIN Platform, StakeWithUs, Staking Facilities, POSBakerz

Proactive Providers

Staking Providers have a key position in decentralized PoS Networks. Alongside comes a wide responsibility for the development, growth and health of the network. They may contribute to the ecosystem in various ways:

  • Active governance participation
  • Develop tools for the community
  • Develop dApps
  • Support smaller or contributing validator

Mentioned by: David Park (Cosmostation), Hyung (B Harvest), Gavin Birch (Figment Networks)

User Experience

Decentralization is driven by a large number of participants(stakers, validators, node operators, etc.) To create a pleasant on-boarding experience for interested parties we have to:

  • Lower the threshold of staking with layer-2 solutions
  • Minimize the technical requirements to participate and run nodes

Mentioned by: Tim Ogilvie (Staked), Discus Fish (Cobo), GIN Founders

Token Distribution

A novel initial token distribution is probably the most important aspect to propose a decentralized structure from the start. In most Proof of Stake (PoS) networks, the majority of tokens is held by very few early investors. A wider token distribution may be achieved e.g. via incentivized testnets or mechanisms like the Edgeware lockdrop. Initial distribution of tokens should be as equitable as possible while preventing sybil attacks.

Mentioned by: Felix Lutsch (Chorus One), Michael Ng (StakeWithUs)

Node Distribution

For some, decentralization is measured by the number of distinct consensus nodes and their respective operators (people or group of people operating the node). Some ways of increasing the number of nodes is by making economic incentives more interesting for that segment of operators, as well as lowering the operational costs derived from operating a consensus node.

Mentioned by: Awa Sun Yin (Cryptium Labs)

Infrastructure Diversity

A diversified group of staking providers, where each provider has different setups is important to hedge certain risks, unforeseen events or downtimes. Networks may not be very decentralized when all providers operate their infrastructure on AWS with the same set up.

  • Politically motivated on different levels
  • Different Infrastructure Designs

Mentioned by: Julien Bouteloup (Stake Capital)


In our User Survey we have asked:

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

157 out 224 Users would like to run their own staking node if there are easy to use plug and play solutions available.

This implies that running a node is still way too difficult, which prevents further decentralization. It also leads us directly to our next chapter:

The biggest challenges for Proof of Stake and Staking

Education

With lock-up times and eventual slashings, their comes a great challenge to educate users about the associated responsibilities and risks.

In comparison to Proof of Work (PoW), we have the ungrasped opportunity that PoS is way more tangible and everyone can get directly or indirectly involved. Many users are not yet aware of their options.

Mentioned by: Hendrik Hofstadt (Certus One), Alex Bond (P2P Validator), Discus Fish (Cobo)

UX

We do not think that dealing with public/private keys is something that users want to do in their everyday activity.

By creating a non-technical on-boarding experience we may be able to improve the ease of use significantly.

Mentioned by: Alex Bond (P2P Validator), Vlad Makarov (Everstake)

Healthy Community

The Crypto Industry is very community and sentiment-driven. Even more important it is to focus on the users, keep them in the loop and educate them to maintain a healthy ecosystem and community:

  • Show sustainable value propositions
  • Show continuous development
  • Prevent and point out scams

Mentioned by: Alex Bond (P2P Validator)

Regulation

Staking as a niche industry is still mostly unregulated. A reasonable regulation will be vital for the global long-term success.

The community and staking providers alongside with regulators have to figure out subjects such as:

  • Relationship between staking providers and anonymous delegators
  • Tax Treatment
  • Disclosures
  • Consumer Protection
  • Custody of Users’ Funds

Mentioned by: Edouard Lavidalle (POSBakerz), GIN Founders, Jonas Lamis (Tezos Capital), David Park (Cosmostation)

PoS Security

Proof of Stake’s general viability has not been proven yet. We may remain skeptical until we have survived a black swan event such as an attack or multiple validator failure.

Furthermore staking cryptocurrencies require the blocks to be signed with private keys of the addresses that often hold large sums of coins. This exposes a great risk to the funds directly.

Mentioned by: Discus Fish (Cobo), Hyung (B Harvest), Gavin Birch (Figment Networks)

Network Stability

The security of the network depends on the quality of the staking provider operating it. Protocols are challenged to convince the best providers to operate on their network. Considering the often required deep understanding and active participation, providers have to allocate their resources smartly as they do not have capabilities to operate on all of them.

Mentioned by: Discus Fish (Cobo), Hyung (B Harvest), Gavin Birch (Figment Networks)

Adoption

Another huge challenge will be the broader adoption of staking mechanisms in real-world applications. Many PoS-based blockchain networks use inflation as the primary mechanism for staking incentivization. For users who do not participate in staking, this would mean that their share in the system dilutes as new coins/tokens are emitted.

To overcome this, rewards need to derive from transaction costs or such. So with a wide usage, protocols could lower down inflation rates. We may want to:

  • Increase availability (Exchange Listings with liquid trading pairs)
  • Incentivise network usage
  • Create a simple Onboarding Experience

Mentioned by: Discus Fish (Cobo), Hyung (B Harvest), Gavin Birch (Figment Networks), Wolfgang Albrecht (Staking Facilities), Vlad Makarov (Everstake)

Protocol Design

To find the right balance between participation, security, and economic incentives, we do have to collect more empirical data derived from applied real world use cases. We may or may not find an “optimal” version of Proof of Stake. On-chain governance is an equitable way to consent and form it. Still we may consider some elements of centralization in critical periods to act and solve problems fast.

Mentioned by: Tim Ogilvie (Staked), Alex Bond (P2P Validator), Michael Ng (StakeWithUs)

Decentralization

Many protocols have the technical ability to support a sufficiently decentralized validator set. But with a limited degree of decentralisation due to the initial token distribution we do face a big challenge to transition from early adopters of staking tokens to a wide range of token holders.

Also finding a good incentive mechanisms without losing ground on decentralisation will be a challenge.

Mentioned by: Wolfgang ALbrecht (Staking Facilities), Felix Lutsch (Chorus One), Awa Sun Yin (Cryptium Labs), Julien Bouteloup (Stake Capital)

Custody

In some protocols, it is required to maintain staking ratios, which means that in order to scale a staking provider, you need to consistently add further coins into your self-bond. You can whether choose to keep buying these coins yourself(which will come to be a lot of investment at some point), or invite somebody to finance this self-bond in exchange for a higher yield. While staking and delegation is, in most cases, non-custodial, in such a case it will generate extra risks and processes for validators and their clients. We might see further security issues arising from this in the future.

Mentioned by: Edouard Lavidalle (POSBakerz)

Stability

One of the biggest challenges for Proof of Stake and Staking is sustainability. Operating a validator node entails various operation costs, which includes server & infrastructure costs, employee payroll, rent, and much more depending on the setup of the validator. In most cases, these costs are paid for after staking rewards are converted into fiat.

For this reason, in Proof of Stake chains, price volatility of the protocol’s native token could bring extreme difficulty in bringing sustainability for node operators.

Mentioned by: David Park (Cosmostation)

Standardization

Basically, each relevant POS coin proposes another technical approach, thus a lack of standardization. Fragmentation as a result of lack of interoperability is among the main challenges in staking.

Mentioned by: GIN Founders


How to design an optimal incentives model for Proof of Stake Blockchains?

Another use case, another incentives model

The more input a blockchain gets from within the blockchain ecosystem, the more resilient the system becomes. For high-throughput chains like on hosting a stablecoin, a system with low inflationary incentives makes a lot of sense. Fees within the network incentivize infrastructure provider.

Whereas Secure Base-Layer Protocols have often not yet figured out a specific use case for their native coin or the usage is still very low. For these blockchains the security and stability is crucial, so high inflationary incentives have to be applied to “force” stakeholders to participate (non-participants suffer from high dilution).

Mentioned by: GIN Founders, Hendrik Hofstadt (Certus One)

Experimentation needed

Sustainable models should have the desire to stake and participate in the network higher than desire to speculate. There is no magic formula, everything is experimental and such models were never tested before in real business. Time will show what has to be changed in order to reach a balanced and efficient ecosystem. Effective governance mechanisms will help to maintain these experiments.

Mentioned by: Alex Bond (P2P Validator), Gavin Birch (Figment Networks)

Participation Rate more important than Inflation

By targeting a specific participation rate protocols could adjust inflation rates dynamically and maintain network efficiency at all times.

If the participation rate is lower than the target = Inflation keeps rising

If the participation rate is higher than the target = Inflation keeps falling until a minimum is reached.

A well-considered algorithm could ensure a target participation rate (ie. a “magic formula”), and that formula could also be fine-tuned with a reliable governance mechanism.

Mentioned by: Gavin Birch (Figment Networks)


The most important aspects to attract delegators (from provider perspective)

Community

The success of the project is highly correlated with the community around it. Pursuing tasks or activities that contribute to the community, the developer ecosystem or the core protocol is a key differentiator for staking providers.

Empowering the community with education, useful guides, articles, materials to self-sovereign decisions, is in the interest of users, providers and the ecosystem itself.

“We try to foster a community that wants to help us build a more sustainable, open, transparent and fair financial system.”

Quote by: Felix Lutsch, Chorus One

Mentioned by: Chorus One, Cryptium Labs, StakeWithUs, P2P Validator, Tezos Capital

Tooling

Various Tools and Products that help to lower its entry barrier and enhance user experience will make the staking networks itself more valuable and drive adoption. Providers are building tools such as:

  • Block Explorers
  • Governance Dashboards
  • Tax Reporting (Accounting)
  • Access to unique research and data
  • Reward Monitoring
  • Open-Source Layer-2 Solutions
  • Wallets

Mentioned by: Cosmostation, B Harvest, P2P Validator, Figment Networks, Stake Capital

Security

Providers thrive for technical excellence. A rock-solid infrastructure will ensure security and uptime, which are crucial for the staking provider business.

The responsibility of staking providers is to ensure the security of the funds, e.g that the principal will not be attacked, their hot wallets will not lose assets, and to ensure the security of assets when they are in charge of private keys. Many have designed complex multi-layer solutions with HSM encryption machines.

Mentioned by: GIN Founders, Discus Fish (Cobo), Tim Ogilvie (Staked), Hendrik Hofstadt (Certus One)

Expertise and Track Record

Another factor is the soundness of the technical team in case a problem arises. And we are talking here about strong infrastructure engineers and knowledgeable analysts with proven track records. Relying on strong expertise is very important especially for B2B services. Years of systems and security experience will provide the most stable and secure services.

Mentioned by: GIN Founders, Discus Fish (Cobo), Tim Ogilvie (Staked), Hendrik Hofstadt (Certus One)

Liquidity

Because we know that PoS cryptocurrencies are generally locked for a long time, and there will be a sharp price fluctuation for digital currencies. Some users may not be able to use this asset when they need it. So it will have a liquidity risk, and liquidity may be greater than its return. Cobo will provide a series of derivative services in the future to meet their liquidity needs, so that users can further improve the liquidity of their assets.

Mentioned by: Discus Fish (Cobo)

Customer Service

Daily communication with clients is a great marketing strategy that keeps users in the loop and sets grounds for long-term customers. Staking Providers are the focal points that accumulate all the latest information about the blockchain networks they operate in, so with their expertise they can assist well with direct help and support.

Mentioned by: GIN Founders, Vlad Makarov (Everstake), Julien Bouteloup (Stake Capital)

Reward Rates

The return on investment is considered an important aspect to attract delegators. It implies a performant and secure infrastructure as well as reasonable fees.

Mentioned by: Edouard Lavidalle (POSBakerz)

Variety

Many users value the breadth of assets covered and also the streamlined reporting across those assets.

Mentioned by: Tim Ogilvie (Staked)


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

It is clear that to most users the Fee is the most important factor when they decide to use a certain staking provider. With Security Setup, Tooling and Community Involvement we have seen, that providers are addressing the right aspects.

Users seem to care less about Team Size, No. of supported protocols, the country where the team operates or the amount of funds the service controls natively.
About the Fees we feel Providers still have a lot of potential to educate users, that it is not predatory. Otherwise some very important aspects stay out of focus and everyone loses.

The most exciting and overlooked upcoming protocols

Interoperable Blockchains

Projects that enable cross-chain communication are very exciting, as they are going to open up the design space in terms of what can get build. Cosmos and Polkadot are two of the most interesting projects here. As a "sleeper" project, Keep has the chance to really surprise people by enabling new functionality.

Mentioned by: Tim Ogilvie (Staked)

Enablers for dApps

Hopefully new protocols will unlock the true potential of decentralized applications by being cost-efficient at scale and by providing a better developer experience. There are many talented researchers and engineers developing interesting protocols that fall into this camp, notably Ethereum 2.0, Polkadot, DFINITY, Solana, NEAR, etc.

Mentioned by: Felix Lutsch (Chorus One)

Scalable and Governable Blockchains

Tezos (Liquid Proof-of-Stake) and Cosmos (Bonded Proof-of-Stake) offer good scalability, interface for smart-contract development, and proven community governance features. Other interesting protocols, which are currently in Testnet, include Polkadot and Algorand.

Tezos (Liquid Proof-of-Stake) and Cosmos (Bonded Proof-of-Stake) offer good scalability, interface for smart-contract development, and proven community governance features. Other interesting protocols, which are currently in Testnet, include Polkadot and Algorand.

Mentioned by: Edouard Lavidalle (POSBakerz)

Innovative Blockchains

DFINITY is moving away from the idea of building 'just' another high-performance blockchain is instead aiming for a decentralized cloud computing platform.

The Team behind Polkadot has strong expertise in building high-quality blockchain software.

And Solana is leveraging key innovations in multiple areas such as data propagation and networking, run-time parallelization, and the underlying ledger data structure Solana aims to scale a single blockchain (no sharding!) and make it insanely fast.

Mentioned by: Wolfgang Albrecht (Staking Facilities)


To which extent should users be educated about Protocol Governance

Responsibility of Staking Providers

Protocol governance in a PoS system is like a government. In a democratic government, people who wish to acquire information about politicians, the decisions they make, the overall sentiment of the legislature and certain policy changes seek for information from sources provided to them. They process accessible information and act or express on their own behalf.

Even if a person does not vote, it does not change the fact that this person is a citizen of a certain country and therefore will be affected by the policy changes and power dynamics of the decision makers.

Staking Providers have a responsibility to provide the basic information and discussions going around in regards to protocol governance to the delegators and community members. Information should be accessible to those who seek it, and it should also present itself in a readable way.

Mentioned by: Awa Sun Yin (Cryptium Labs), David Park (Cosmostation)

Simplified Education

Education and Information about Governance Decisions seems a necessity, but presenting them at a high overview level is important for a higher voting participation. Decisions have a unique impact and extent for different types of stakeholders. Well-structured statements outlining possible outcomes will make it easier for users to make an informed decision.

Mentioned by: Gavin Birch (Figment Networks)

Hybrid Model

Decisions with lots of stakeholders are not very scalable and even voting participation in the real world e.g. with presidential elections is often low. With a clear communication of decision-making processes to the wider community, a hybrid model combining the bottom-up democracy and the parliamentary democracy approach such as in the Cosmos Hub might be a good compromise.

Mentioned by: Felix Lutsch (Chorus One), Hyung (B Harvest)


To which extent Users want to be involved in Protocol Governance

33.2% of all users want to be involved and vote directly for decisions that change or adjust the protocol parameters.

For 44.4% of the users it depends on the case. They want to be informed but may decide in some cases to trust their Provider’s Expertise with the decision.

Only 22.4% don’t want to be involved in protocol governance at all and prefer to choose a trusted Provider to vote for them.


Will Staking enable new governance mechanisms in the real world?

Crypto Governance as a test bed

We see staking as a means for enabling experiments in governance that may, one day, be useful for experiments in traditional governance.

But messing with traditional governance is likely to impact most heavily upon those most vulnerable in societies, for better or worse, and it may be unethical to experiment with so much at stake. Typically (we think--or at least hopefully) the money in cryptocurrencies is more acceptable to risk on things like governance experiments, simply because it’s arguably risky to be invested in cryptocurrency in the first place.

Mentioned by: Gavin Birch (Figment Networks)

Different Value Proposition

We also suspect that the possibilities and constraints for governance in distributed systems are different from those in traditional nation state governance and economics. One problem with plutocracy (ie. government by the wealthy), for example, is that it’s harder for citizens to exit such a nation state than it is to exit such a PoS-based network when backed or run via highly liquid cryptocurrency. Since the problem space is potentially very different, we’ll likely need to test our existing assumptions with new incentive mechanisms and governance experiments.

Mentioned by: Gavin Birch (Figment Networks)

Value-added services, tools and products provided

Everyone we asked is actively building tools to further grow the ecosystem and to help the networks succeed and reach adoption. They are developed to make staking more accessible and efficient.

Delegator Dashboards

Companies often provide Analytics Tools, Tax Reporting, Reward Monitoring and Tracking, so users have transparent access to individual metrics

Examples: Dashboards by Staking Facilities, POS Bakerz and many more

Educational Content

Guides, Tutorials and Open Research allow users deep understanding and insights into the ecosystem

Example: Cryptium Labs Blog

Community Building

Forums, Meetups and Hackathons help to foster the alignment with user values and helps to figure out their wants and needs

Example: Staking Hub by Figment Networks

Wallets

With integrated staking features they lower the entry barrier for many newcomers.

Example: Cobo Wallet

Security Research

Continuous Research on the security side helps to strengthen the stability of the network infrastructure.

Examples: Certus One

Liquidity Tools

Protocol-Developments such as the recently developed Delegation Vouchers from Chorus One could even provide a decentralized alternative to potentially centralizing offerings that custodial services will offer in the medium term.

Examples: Delegation Vouchers

Block Explorers

Explorers enable insights and understanding of on-chain data, thus making the whole ecosystem more transparent

Example: Mintscan by Cosmostation

Open Source Tools

Open-Source Tooling and Libraries have benefits beyond the users perspective, but also foster a strong community within the staking providers industry.

Example: Cosmos JS Library by Cosmostation


The impact of large corporations entering the market

Watch out for the sharks

All of the bigger players will offer some form of staking in 2019. Small players have to move fast to compete with their comprehensive offerings. Clear value propositions and innovations are required to differentiate from the big.

Mentioned by: Tim Ogilvie (Staked), David Park (Cosmostation)

Exchanges have trade-offs

Majority of the interviewed agrees that exchanges, custodians and wallets will dominate the staking market, because they naturally have capital advantages with a large number of users placing their assets there. Still it might not become super attractive for them, as they mainly generate revenue from exchange fees. The cost to stake with custodians is often high and there are a lot of risks involved.

Furthermore Staking on exchanges has some trade-offs. First of all you need to trust the exchange. If you store tokens there, even if the larger amoogunt is staking from cold wallet, there will be parts which will be available for immediate selling.

Not everyone is willing to take such risks, especially if they have large holdings.

Mentioned by: Discus Fish (Cobo), Alex Bond (P2P Validator), Edouard Lavidalle (POSBakerz)

Niche Markets as Differentiator

Small companies have an advantage that they can focus on the ecosystem of certain chains, such as one or two chains, without the need for an all-in-one model. They may be able to do very deep involvement in some ecosystems, which may achieve differentiated competition.

Both can grow together when smaller providers find a niche market, provide localized customer service, develop tools for the ecosystem and operate strategically in areas bigger players would find too small or specific.

Mentioned by: Discus Fish (Cobo), David Park (Cosmostation)

The Novel Approach

Smaller Staking Providers definitely have their place amongst larger players.

They are recommended to pursue novel approaches to staking, primarily leveraging development tools, smart contracts, or contributing to the core protocol. E.g. Cryptium Labs is working on a few changes to the core protocol that will enable programmable staking, which allows staking providers of any size to write smart contracts that implement different policies or terms of service.

The small companies have the chance to be pure player, and as such, they can take the lead on educating the communities, taking part in governance, and ensuring their infrastructure is top-notch.

If protocols become too centralized we have trust in communities to set up better incentive mechanisms towards decentralization.

Mentioned by: Awa Sun Yin (Cryptium Labs), Edouard Lavidalle (POSBakerz)


Would you use a custodial staking service?

Surprisingly, more than 50% of all users are keen to try custodial staking providers as long they are trusted.


How to increase awareness amongst people about staking?

Usability

Many of the operations on the chain are extremely complex, users have doubts about its security system, including its convenience.

We need to focus on the end users who should be able to utilize the benefits of the network without tech knowledge. Ideally, people would not recognise they are interacting with blockchains.

Mentioned by: Alex Bond (P2P Validator), Discus Fish (Cobo)

Secure Custodial Solutions

The interest should spearhead the fear of hacking and technological hurdles. Thus, secure custodial infrastructure, sound blockchain protocols and platforms that allow people to stake are essential.

Exchanges and lending platform will have a crucial role for incentivizing customers to become stakers.

Mentioned by: GIN Founders

Compliance

Clarification of regulatory compliance is also important. It might release enormous capital from institutional investors, pension funds etc.Total market capitalisation is still too small and can be easily manipulated.

Mentioned by: Alex Bond (P2P Validator)

Dilution of Non-Stakers

Since holding staking tokens and not staking them incurs a significant cost (it's a tax on not helping to secure the network) every investor and business will need to get familiar with the concept of staking. Consequently, products and services around it will inevitably be a major topic over the coming years.

Mentioned by: Wolfgang Albrecht (Staking Facilities)

Pioneers

Knowledgeable institutional investors and funds will have a material role for mass adoption. As these funds will seek to diversify their portfolio in the “exotic” crypto-markets, the more people will jump in.

Mentioned by: GIN Founders

Education

We can make Users realize the profitable opportunities via staking and that participation has a greater contribution to the ecosystem itself. They should acknowledge well about qualities of each validator on multiple dimensions and also should be kept informed about current issues and governance on the network.

Mentioned by: Discus Fish (Cobo), Hyung (B Harvest)

Economic Meltdown

We have seen that people need a store of value. Weak monetary policies led to hyperinflation in a couple of countries around the globe.

If the crypto world will be able to weather the people in strained economies or during an international financial crisis, then the awareness towards new models of governance -staking, decentralized economies and crypto intrinsic value can only increase.

Mentioned by: GIN Founders


The preferred Terminology for rewards generated via staking

ROI is suggested as the easiest term

In the long-term it will make sense to differentiate between the Interest Reward and the Fee Reward.

We as StakingRewards would like to propose “Reward Rate” for the pure Rewards being received annually and “1Y Network Share” for the Reward after Inflation, as it represents the percentage of the total token supply that ones network share increases or decreases over time.

Please let us know in the comments or directly if you think we should use other terms.


In our user survey we have asked:

Do you consider Staking a form of passive income?

Most users (58%) see Staking as a pure form of passive income.

We personally tend to agree with passive income analogy, but only if no big set up effort is required.


How do you explain Proof of Stake or Staking to a 7 years old?

“You don’t, a 7 year-old should be learning fundamental things such as basic algebra.”

Quote by: Awa Sun Yin, Cryptium Labs


Conclusion

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.

We have wrapped up a summary of the study in the article 10 Key Take-Aways from the StakingRewards Case Study. Make sure to check it out!


Credits

First of all we would like to thank our amazing Community which has always been supportive and it’s is amazing to feel all your appreciation for our work.

And of course we want to say thank you to all our friends in the industry who we had the chance to interview for this study:

These are incredible builders and we are humbled to see their dedication to support the vision of building a healthy ecosystem around staking and all the passive income tools for crypto. Feel free to check out the individual interviews with all of them.


The independent research platform tracks all digital asset staking rewards & dividends. It enables investors to explore new streams of income through passive earnings on their digital asset investment portfolio.

The team behind the site is putting great effort into providing the most useful and most accurate information for the staking industry.

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About the Authors

Gleb Dudka is a Blockchain Analyst exploring meaningful Enterprise blockchain applications at T-Systems. He is proponent of Application-specific blockchain vision, powered by Interoperability Protocols. As an Editor and Research Analyst at Stakingrewards.com, he has a big passion for Staking and Generalized Mining.

Mirko Schmiedl is the Co-Founder, CEO and Product Lead at Stakingrewards.com. Researching decentralized technologies since 2013, he has led a Bitcoin Mining Operation in Southeast Asia and founded the Staking Provider Company HotStake, which got acquired by Stake Capital in April 2019.