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

The Great Reddit Scaling Bake-Off

The third most popular website globally, Reddit, hosted a challenge to scale their Community Points system, which is currently based on Ethereum. Numerous layer-2 solutions like Matic, SKALE, and StarkWare, as well as a few layer-1 projects including NEAR and Solana submitted entries to showcase how one could use their project for this specific use case and how they would improve throughput and gas cost as a result. The Reddit team is currently reviewing submissions, find an overview of the challenge and the submissions here.

Competition and Trade-Offs

A minor Twitter war broke out between Avalanche and Polkadot following a post by Gavin Wood comparing the two protocols. Collin Cusce, engineer at Ava Labs, rebutted in a tweetstorm. Overall, the best reaction on this standoff came from Cosmos Co-Founder Ethan Buchman:

Staking Rewards Taxation in the US

In the US, four members of Congress sent a letter to the Internal Revenue Service (IRS), asking the agency to reconsider their current position on taxing staking rewards. Current regulations tax rewards when they are received. The letter makes the case for taxing rewards when they are sold, rather than when they are received.

Network Updates

  • Ethereum Medalla: Eth2’s Medalla testnet went live on August 4th. Medalla’s"the official public multi-client testnet" and intended to be the final testnet before Eth2’s mainnet launches. The network launched with 57% of the stake required to achieve block finality, less than the expected 80% participation. The 67% finality requirement was met not long after launch, in Epoch 6.
  • Cosmos Ecosystem: Messari published an analysis of the burgeoning Cosmos ecosystem showing how the Cosmos SDK has seen traction across many different verticals in the DeFi space. Check out this tweetstorm for an overview. In addition, Starport and CosmWasm 1.0 were released, and the first Cosmos community pool-funded development project of governance-controlled smart contracts (as reported on in issue #39) for Cosmos SDK chains was completed.
  • SKALE Token and Mainnet: SKALE announced it’s token sale will go live August 17th on the Consensys Activate platform. The token sale is a precursor to SKALE’s mainnet launch, which will happen 21 days after the launch date. You can learn more about SKALE’s Activate partnership by listening to the newest episode of Chris’ Staking Defense Podcast.
  • The Graph Mission Control: Ethereum indexing protocol The Graph, which has been serving billions of queries to various front-ends for DeFi projects like Synthetix and Uniswap launched phase 0 of their incentivized testnet. In this phase, node operators will familiarize themselves with the protocol and set up their indexer nodes. The competition will run for multiple weeks and trial the protocol’s staking mechanism and economics, as well as stress test the network by simulating queries. Learn more here.
  • Kava Downtime: The Kava network halted on July 29th at 14:00 UTC. The halt lasted approximately 8 hours. According to the post-mortem “this failure was relatively non-complex in terms of the logic involved, and represents a failure of robust testing in the Kava codebase.” It also sounds like the failure of one of the larger exchange validators to apply the required patch in a timely fashion contributed to extending the downtime.

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.