This newsletter is supported by Chorus One, a provider of staking services in decentralized networks.

Key value propositions for blockchains are decentralization and censorship resistance, but while the former facilitates the later, they do not come naturally or by default. There is an inherent conflict of interest for node operators on blockchain networks: on the one hand, validators want to attract as many delegations as possible to be more profitable. On the other hand, taken to the extreme, this would lead to a centralization of the network, ultimately jeopardizing its security. This becomes even more apparent with big centralized exchanges that offer staking solutions and are becoming behemoths in terms of voting power and control over networks.

Two interesting approaches to tackle these issues have recently been suggested in the Solana ecosystem:

  1. Stake-O-Matic: a delegation token matching program that automatically splits and delegates tokens from a master stake account across several whitelisted validator nodes. Hence, validators could spread part of their delegations across a set of other validators that meet their quality requirements, have that part matched by the foundation (up to a certain percentage) and therefore even increase their returns while improving decentralization.
  2. Validator Yield Throttling: this proposal would see staking rewards earned by validators and their delegators get programmatically reduced after having reached a certain percentage of the network's overall active stake, disincentivizing delegators to stake with validators with a large voting power (see e.g. also Harmony’s token economics that already implement this kind of mechanic).

Both of these initiatives are in an early stage and exploratory but could set a precedent for how to facilitate a healthy, decentralized and censorship resistant network. The Solana forum is a great place to engage in discussions and share your thoughts on this.

Network Updates

  • NuCypher WorkLock: The contribution phase for the NuCypher WorkLock concluded with over 2,000 participants locking ~350,000 ETH, who will receive and be able to stake their NU tokens with mainnet launch Oct 15. Check out this Dune Analytics dashboard from eliasmos for some more data on participation levels.
  • SKALE Mainnet: The SKALE mainnet launched on October 1, with the first month-long epoch starting that day. According to SKALE, the launch happened with over $80 million USD locked from over 4,000 users. From a validator perspective, the launch introduced a new responsibility: having to accept delegations, rather than having them accepted automatically. In addition to the time and attention this took, the gas fees associated with these transactions was also a significant consideration. Fortunately, the SKALE team covered them this time around for the validators.
  • Avalanche Mainnet: The Avalanche mainnet successfully launched Sep 22 and the AVAX token has been listed on various exchanges. At the time of writing, the network has over 5,000 active addresses and 540 validating nodes with a staking ratio of above 60% (check the stats out yourself here).
  • Dfinity Sodium: Dfinity reached the final milestone before the mainnet launch slated for later this year. During the Sodium launch event, the team showcased various technologies they built, as well as revealed some details about the governance protocol and token economics. At the time of writing no recordings were available, but they may become accessible at a later point here.
  • Spedala Final ETH2 Dress Rehearsal:  ETH2 took another step closer to becoming reality when the Spadina testnet launched. Although it was mainly considered a failure (isn’t that what testnets are for, anyway?), it set the stage for the next testnet Zinken, scheduled to launch on October 12. These are intended to be part of the final series of ETH2 tesnets, in advance of mainnet launch of the beacon chain
  • Flow Token Sale: The community phase of the Flow token sale on Coinlist concluded with a record participation of 12,000 individuals. On October 6, the auction phase, which allows for higher contributions, will begin - learn more about the sale and the state of the Flow project here.

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Staking Economy is written by Felix Lutsch from Chorus One with contributions by Chris Remus (Chainflow), and Robert Dörzbach (Staking Facilties). Join us in the Staking Economy Telegram to discuss staking. Opinions expressed are our own and do not necessarily reflect the opinions of our companies. All content is for informational purposes only and not intended as investment advice.