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

Last week, one of this year’s largest technology-focused crypto gatherings took place in Berlin. Trending topics include DeFi and DAOs, as echoed by the amount of submissions from these categories during the ETHBerlinZwei hackathon. For most, staking is still a secondary topic. I expect this to change when more PoS networks (Polkadot, Eth2.0,...) go live. Many people in the space don’t yet see the connection between reward generating staking assets and DeFi protocols.

On the other hand, the staking community is growing. There were many talks and meetups featuring PoS projects. E.g. the Staking Summit (co-organized by Bison Trails, Chorus One, SKALE, and Staking Facilities) had representatives from both validator and protocol teams discussing the state and the future of the validation ecosystem.

Some of my key insights from that event and beyond:

  • The role of a validator goes beyond simply operating infrastructure (tooling, community building, governance, sales and support,...).
  • Price competition among staking providers is threatening to increase centralization.
  • The coming wave of PoS networks brings about a new situation for node operators, who now have to decide where to focus their attention.
  • To run a successful validation business, a strategy to differentiate from other providers and a sound portfolio management approach are essential.
  • Operating available and secure validators will continue to become easier due to better tooling and services like those offered by Bison Trails or Certus One’s SignOS.
  • Still, there is a lack of transparency w.r.t the security of validator setups. Ways to make it easier for token holders to evaluate validators need to be figured out (benchmarks, audits, risk scoring,...).
  • Current PoS designs largely fail to take into account players with incentives external to the protocol that offer staking services at a loss to gain power, branding, or clients for other revenue streams. Ideas like correlated slashing might help mitigate the impact of such strategies.
  • Financialization of Proof-of-Stake is coming and will help to create a more efficient market. As an example: slashing insurance policies could help to determine validator security by pricing risk, staking derivatives could provide improvements to the UX of staking and potentially increase stake diversification, etc. At the same time, such instruments may alter validator behavior and introduce new risk factors in PoS systems.

TEZOS AGORA - A UI and forum focused around blockchain governance, initially built to improve the governance process and experience on Tezos. The announcement post provides some great insights into the state of blockchain governance and what this project aims to achieve.

TERRA STAKING PRIMER - Stablecoin payments network Terra is an ambitious project with a unique go-to-market strategy focused on an alliance of partners in eCommerce. The network uses a variety of complex protocols involving the network’s staking token Luna. This post is an overview of the risks and rewards of staking Luna on the network, covering both the staking and stability mechanism.

BLOCKCHAIN INFRASTRUCTURE THESIS - Another great mammoth research piece from the Staking Rewards team. It starts out by explaining the state of the industry, then going into the case for stateless money, and finally going into how corporate players could become involved in permissionless networks as infrastructure providers.

AMA SERIES - There are frequent staking-related AMAs happening both on Figment’s Staking Hub and on the Chorus One Telegram channel. Join these channels to engage in the community, and learn more about what builders in this space are working on! Our approach is to do an Q&A session with our podcast guests following the release of their episodes. There are transcripts from our last two sessions with Matt Luongo from Keep answering questions on tBTC and Dean Tribble (with special guest Mark Miller) from Agoric. Staking Hub recently hosted Anatoly and Eric from Solana and Joe from Parity and Bill from the Web3 Foundation on Polkadot’s sister network Kusama (also reported on in issue #21). The Kusama network going live last week marks an important milestone on the road to Polkadot mainnet launch.

Solana held two Tour de Sol dry runs over the past two weeks. These are practice runs that help validators learn how to setup and run their systems. They also provide the Solana team with an active network to use for troubleshooting purposes. Around 30 validators have been participating in the dry runs, each of which lasts for a few hours. You can read a full debrief of Dry Run #3 here.

Chris published some ideas about how to build a better Game of Stake as a response to many staking networks announcing an intention to run their own “GoS-like” testnet before launching a production network. Read his suggestions here.

VALIDATOR SECURITY SESSION - Jesse Irwin, Tendermint’s Head of Security, shared a Validator Trust Maturity Model that validators can use for self-assessment during the first Cosmos Validator Security Office Hours. Other discussion topics included a CosmosCERT security module, on-chain security contracts, and new node monitoring tools. See this summary from Mira at Ztake for details.

SKALE DEVNET - The Skale Labs team announced their elastic sidechain devnet titled Fuji going public with support from top validators and infrastructure providers.

OASIS TESTNET - The privacy-preserving smart contract protocol Oasis just released their plans for a public testnet. Learn more about the testnet and check out the initial documentation as well as whitepapers outlining the platform here.

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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.