This newsletter is supported by Chorus One, an operator of validating nodes and staking services on Proof-of-Stake networks.

News & Updates

HARMONY STAKING - Harmony, the sharded PoS blockchain project that is in the process of doing an IEO on Binance, released information about their staking and incentive design. Harmony will utilize an auction mechanism to determine the stake required per voting share (validator slot). The aim is to have 400 validators at mainnet launch. Annual inflation through block rewards will in the first year amount to 6%. Check out the post for more details on rewards, slashing, and bonding periods.

AVA LAUNCH - Emin Gün Sirer and his team at Ava Labs launched a first testnet of their implementation of Avalanche, a novel, scalable consensus protocol introduced in May 2018. Ava Labs received funding of $6 million in February 2019.

PoS ALLIANCE - A movement to bring legal and regulatory clarity to the staking space. Formed by members of EON Staking, CoinShares, Battlestar Capital, and Tocqueville Group (TQ). Staking income taxes were a popular discussion during NYC Blockchain Week. See Chris’ recap below for more on this.

POLKADOT PoC-4 - Polkadot’s Alexander testnet underwent an automated upgrade that adds new staking features. These include session keys for validators allowing node operators to separate their online node from their funds and the implementation of Polkadot’s NPoS (featured in Staking Economy #15). The next Proof of Concept will include Interchain message passing (ICMP), which is Polkadot’s blockchain interoperability protocol.

TEZOS ATHENS UPGRADE - The first governance proposal on Tezos titled “Athens A” passed multiple voting periods and changes to the Tezos protocol will be activated on May 29th. Updates will lower requirements to become a validator (roll size will decrease from 10,000 to 8,000 XTZ) and the gas limit will be raised to enable more complex smart contract interactions.

Opinions & Observations

NYC Blockchain Week 2019 Staking Observations
Staking was a popular topic during NYC Blockchain Week 2019. Chris attended a number of staking events during the week. This post summarizes his observations. Here’s the TL;DR list:

  1. Many staking networks plan to launch soon.
  2. These networks recognize the need to recruit capable validators.
  3. Many seem to believe there are fewer 100 capable validators in the world right now.
  4. The active Cosmos validator set seems to be the go-to validator recruiting list.
  5. The battle for validator attention has begun.
  6. Almost all the networks planning to launch intend to run a Game of Stakes-like adversarial testnet.
  7. Larger staking companies dominated these discussions. This is one motivation behind the launch of the Decentralized Staking Defenders.
  8. A common response to the problem of stake centralization was "it's no worse than what we have now".
  9. Taxes regulation for staking is inadequate and needs to be figured out.

Cosmos Validator Overview
A post grouping Cosmos Hub validators into 9 categories. It is interesting to see that validators are operated by all types of ecosystem participants, e.g. wallets, exchanges, team members, projects, and funds:

An Overview of Cosmos Hub Validator by POS Bakerz.

Passive Income in Crypto
An overview of ways to utilize cryptoassets to earn income including examples and "old" world analogies. The post covers staking, resource provisioning, lending, market making, payment channels, security tokens, and algorithmic trading.

Discouragement Attacks
These attacks describe the situation where a network participant chooses to incur costs in the short term to discourage others from participating and to eventually get them to drop out. The post on cryptoeconomic research blog summarizes a paper by Vitalik Buterin on this subject with some great visualizations and adjustable diagrams. An example of a discouragement attack is a group of validators in PoS censoring other validators to receive a higher share of rewards after the censored group decides to drop out.

Smart Contract Delegation
Illia from NEAR describing how NEAR’s account system could be used to create sophisticated delegation mechanisms that e.g. allow the usage of staked tokens as collateral in DeFi applications. Financial products on top of staking protocols will exist in some form and we are excited about decentralized approaches to counter the potential centralizing effects of custodial offerings.

Is Algorand broken?
A paper that explores claims from the Algorand protocol comes to the conclusion that Algorand’s fork-free property doesn’t hold and that the protocol is susceptible to forking through a malicious adversary controlling less than a third of users.

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Staking Economy is written by Felix Lutsch from Chorus One with assistance from Chris Remus, operator of the Chainflow validator. 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.