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

News & Updates

The predominant form of how people think about staking is in the context of a Proof-of-Stake network, where participants gain influence and earn rewards based on the tokens they stake. But staking can be used in many other contexts; last year Felix wrote a post that explored a framework to classify these forms of staking.

Currently, we are witnessing staking being used in interesting ways: Edgeware’s lockdrop and the dxDAO reputation distribution are two examples. In both of these cases users stake (lock) tokens (in Edgeware’s case just ETH) in a smart contract and will receive a share of another token based on the duration and staked amount. The dxDAO distribution determines the stakeholders of the dxDAO, who will govern the DutchX exchange protocol (check the dxDAO whitepaper for more). In Edgeware’s case, the token will be used to govern Polkadot’s first general purpose smart contracting parachain. You can find out more about the Edgeware lockdrop in this analysis and follow this tutorial if you decide to participate.

Another even more intriguing example of staking is Nexus Mutual, who just launched their smart contract insurance on Ethereum. In this example, token holders stake to signal their confidence in particular smart contracts. Those that stake receive a share of the premiums of insurance cover buyers, but their stake is also used as collateral in case the smart contract they staked on is hacked. An interface to interact with Nexus Mutual is live and can be found here.

A couple new testnets built on the Cosmos SDK launched last week. The Regen Network launched their first public testnet. Iris Network launched their second incentivized testnet. Many networks plan to prepare for mainnet launch through some type of testnet competition. Felix covered the usefulness of incentivized testnets in this recent post.

LIVEPEER RECAP - Doug from Livepeer published a Decentralization Update. It provides a look back on the first year of the Livepeer network in operation.

TEZOS UPGRADE REVIEW - The Toqueville Group published a review of the Tezos Athens governance process. The Athens amendment passed on 30 May 2019.

Opinions and Observations

Core to every decentralized network are nodes that maintain the network, enable users to access it, or in any other way help the network to fulfill its role. Efficiently operating these type of nodes is a challenge that many teams need to solve. Especially the infrastructure required to participate in consensus has high requirements, e.g. with respect to uptime, security of key material, etc. Check out Figment’s architecture overview for a taste of the validator problem statement in Cosmos and how Figment is approaching it.

Viktor Bunin of Bison Trails, a team working on helping projects to easily launch and operate many types of blockchain nodes, wrote an insightful post about the challenges involved and how Bison Trails aims to solve them. The article covers five core areas software, hardware, maintenance, security, and operations and is a must-read based on the featured examples alone.

Haseeb Qureshi published a report on fees in blockchain networks that compares three models to create a sustainable fee market (the EOS “no fee” model, Ethereum’s proposed fee market (EIP-1559), and second-price auctions). As most projects aim to sustain themselves through fees in the long term, a self-sustaining fee model is probably one of the most important factors that hasn’t fully been figured out yet. The post features interesting insights into the history of blockchain fees and highlights the challenges that current and proposed solutions are facing.

As the number of staking networks continues to grow choosing which network to support becomes more and more complex. Bitfish provides data on staking’s growth in this post. The post also lists problems (or opportunities) and other observations on staking’s early evolution.

Especially for small validators with resource constraints, choosing which network to support becomes an important decision. Because of this, Chris started to form up some thoughts to help with selecting networks to validate on. If you want to learn more about the life of a solo validator operator, join and ask questions during Chris’ AMA on Tuesday 11th June at 2pm UTC.

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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.