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

The first double-signing and subsequent slashing of around $50,000 worth of Atoms occurred due to a validator misconfiguration on the Cosmos Hub. An interesting discussion around this penalization ensued, e.g. below Vitalik’s tweet. In some of the responses, one can see different philosophies as to how to achieve a robust BFT network. One is to avoid validators that run backups through light penalization of uptime and combining “fragile parts into a sturdy whole” (Vitalik). Another view is to incentivize individually strong and highly available validator setups, e.g. by means of penalizing downtime more strongly.

As this incident shows, there is a thin line between enabling high availability through failover instances and avoiding double-signing due to misconfiguration. We just published a comprehensive guide to the Chorus One infrastructure including how and why we designed it the way it stands today. The document is covering a lot of the nuances of this problem statement, check it out if you are interested to dive deeper.

On a related note, SKALE’s Liang Wu wrote about how to best approach securing a decentralized network making the argument that especially in the early days, quality of network maintainers should be prioritized over quantity.

Poloniex started to offer Atom staking rewards to non-US customers. In the beginning, Poloniex will stake a conservative 25% of Atom deposits to be able to manage withdrawals for customers. On these 25% at stake, Poloniex will charge 25% commission in total (10% fee and 15% to validator partner Infinity Stones). As a result, staking rewards will come out to an annualized 2.8% for non-US exchange customers. While this is more than 3x less than simply delegating to a 15% fee validator (8.8% annual rewards), it shows that exchange staking is coming. Over time these offerings will probably get more efficient. The UX advantage of not having to wait out the unbonding period could easily push lots of users to use custodial offerings.

PoS communities need to seriously think about implications of this and consider working on staking designs that allow non-custodial staking to compete (*insert shameless delegation vouchers plug*).

After somewhat pivoting from 1protocol’s original idea of a staking marketplace, Vest finally released their first product: a type of futures contract on staking rewards. The core idea is to be able to buy staking rewards from a counterparty that is staking with fiat, BTC, or ETH without having to stake tokens yourself.

The specification for Phase 0 of Ethereum’s move to PoS is finalized. Implementation teams are working to get their clients ready and the beacon chain is scheduled to launch around January 3rd 2020. Check out this succinct overview of the different transition phases and timelines.

Quite a bit of action revolving around Edgeware’s lockdrop (covered in issue #18). While remarkably successful (~$280mn locked and ~$370mn signaled), there was also a bug that had to be fixed, which could have jammed the lock contract’s function. Additionally, a lot of backfire against letting contract owners signal to receive part of the distribution. Notably, Nick Johnson signaling on behalf of the TheDAO withdrawal contract in protest and the emergence of an “ethical” fork of Edgeware, Straightedge.

Sharded PoS blockchain project Harmony impressively launched their network with 4 shards and 150 external nodes shortly after their IEO on Binance. Mainnet may be a bit of an overstatement, as currently neither token transfers nor the actual staking mechanism are live. These are planned in the second phase of the network.

WANCHAIN STAKING BETA - Interoperability-focused Wanchain also launched their PoS beta network including a staking wallet and upgrades to their block explorer. Read the detailed rundown of how to join the testnet if you’re interested to join. Also, check out this short image film explaining Wanchain’s vision.

TOUR DE SOL DETAILS - Solana released details on their testnet competition Tour de SOL, which aims to push the boundaries of layer-1 blockchain scalability. At Chorus One we are already warming up our GPU validator and are excited to compete in this event starting August 5th (check out the announcement and register until the 21st of July to participate!).

TENDERMINT DELEGATIONS - The development team of the Cosmos network (Tendermint) delegated the largest part of their Atom holdings (~20mn) to currently 36 out of 100 validators. Following this, community member Hector posted an interesting analysis classifying validators based on who they received their delegations from.

We released the first episodes of the Chorus One Podcast, which will provide a consistent outlet covering projects and topics we are working on. Staking will obviously be one of the major themes of the podcast. As an example, the second episode features a discussion between me (Felix) and Alfonso Cevallos from the Web3 Foundation on Polkadot’s Nominated Proof of Stake algorithm that seeks to maximize decentralization in the network.

Other staking-relevant audio/video content that was released includes cryptoasset custody provider Anchorage on the A16Z podcast, Coinbase Custody on Tezonomics, as well as a panel discussion on Staking Economics and Validators between representatives of Tezos, NuCypher, SKALE, and ICON.

PS: The Chorus One team will be in Seoul, Korea in two weeks around the time of BUIDL 2019 / HackAtom Seoul (which we are also sponsoring). We will host a workshop titled “Design Concepts for Staking Derivatives” at 2:30pm on the 21st of July during the hackathon and Brian will also be speaking at BUIDL. Reach out if you’re also there and want to meet up!

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