Merging DeFi and Proof of Stake
Last week, Chorus One released the Liquid Staking Research Report. It is the culmination of months of research into the interplay between staking and (decentralized) finance. The report dives into capital efficiency and protocol restrictions in Proof-of-Stake, explores how centralized exchanges are able to abstract these restrictions for their customers, and dives into the tokenization of stake and its implications as well as current projects in the space.
The full 88-page report includes sections on risks and benefits, as well as legal considerations for liquid staking (often also referred to as staking derivatives). This blog post explains the top 5 topics. Felix also spoke with Mirko, Founder of Staking Rewards, to discuss core insights from the report. You can find that interview here.
In addition, Tarun Chitra (Gauntlet Network) and Alex Evans (Placeholder) published a paper analyzing the mathematical similarities of tokenized staking derivatives in decentralized finance and mortgage-backed securities. One conclusion of the paper aligns with the Liquid Staking Report, which is that staking and DeFi are intrinsically linked, and what is in the process of emerging in the decentralized economy is not too different from what exists in traditional finance. Questions around whether and how this interplay will introduce systemic risk to the crypto ecosystem are important and I encourage everyone to check out the papers and to participate in the discussion, as this will likely become one of the most important topics to deal with as the decentralized finance and staking ecosystems become more interwoven.
Rocket Pool and ConsenSys Staking
Rocket Pool, a delegated staking protocol for Eth2, recently overhauled their design and will now also tokenize positions staked through the protocol, the liquid staking report above dedicates a section to describe their current design. In addition, ConsenSys announced a Staking-as-a-Service product that they will offer for Eth2 with partners like Binance and Huobi. For a current update on Eth2, make sure to check out Danny Ryan’s comprehensive post about the state and vision of the ambitious project.
European Staking Regulation
The European Blockchain Association released the Staking Infrastructure Provider Position Paper, the first project of the Proof of Stake Working Group (EUPoS), which seeks to educate European regulators about the staking industry to advance conversations to establish the EU as an innovation center for Proof of Stake. The EUPoS Working Group is analogous to the Proof of Stake Alliance (PoSA) in the US. European staking-related businesses are welcome to join the Working Group alongside current members that include among others companies like Cryptium Labs, Dokia Capital, Staking Facilities, T-Systems, and Chorus One.
- Decentralized Polkadot: After the Polkadot mainnet was launched with Web3 Foundation nodes a few weeks back, the transition to Proof-of-Stake successfully took place Thursday June 18 with the first 20 validator slots filled via the NPoS election scheme (e.g. featured in SE #15). Check out the network and the current 197 validators on the polkadot.js block explorer. If you are a DOT holder seeking to participate, read the Polkadot nomination guide and choose up to 16 validator nodes to back with your stake, e.g. the Chorus One validator(s) ;).
- Game of Zones Conclusion and Stargate: The Cosmos interoperability competition concluded and participating entities were awarded prizes for contributions, as well as performance during the different phases that took place in May and June. The upcoming Cosmos Hub upgrade Stargate will bring IBC capability and much more to the ecosystem. Read Figment’s overview post on Stargate here.
- Avalanche’s Denali testnet breached 1,000 nodes participating in consensus. The Avalanche mainnet is slated for July 2020. The team just raised $12m in a private sale with a public sale with the same terms to follow in mid July. Learn more here.
- Oasis Quest Conclusion and Amber Release Candidate: After the Oasis QuestNet competition concluded with over 400 participating nodes, the mainnet release candidate Amber launched Thursday June 18.
- Band, the decentralized oracle network built on the Cosmos SDK, launched its mainnet. Find more info on their block explorer.
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.