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


💰Economics

Ethereum 2 - The Internet Bond

Buzz around Ethereum staking after the ETH2 deposit contract was deployed (see below) is picking up. Vitalik Buterin shared a blog post with some calculations on why Proof-of-Stake is less costly in providing security for a decentralized network compared to Proof-of-Work.

Furthermore, Collin Myers and Mara Schmiedt shared their paper on the economic valuation of ETH2 as an “internet bond”. A summary of their findings was published on Bankless. A main contribution of this valuation method is that it takes into account the illiquidity of ETH2 staking rewards in the first phases of the launch by modeling ETH staking as a deferred debt agreement.

Finally, the deployment of the deposit contract reignited the discussion around the one-way bridge and whether ether on the PoW chain and beacon chain ether are fundamentally different assets. Liquid staking solutions like Rocket Pool or the recently announced Lido make this distinction quite literal by tokenizing staking positions that are entered into via these protocols.

We are planning to host an event for Staking Economy subscribers to cover the basics of ETH2 staking, as well as choices (self-staking vs. pooling through an exchange or a protocol) for those seeking to participate. We’re aiming to finalize the date and participants for this by the next issue — if you have any questions on ETH2 you’d like to have answered reach out to us and we’ll make sure to address them! If you haven’t yet, subscribe to the Substack newsletter and you’ll receive an invite straight to your inbox.

🌐 Ecosystem

Multi-Network Wallet Lunie to Shutdown

Last week Lunie.io, a multi-network, non-custodial staking and governance interface, announced that they will shut down their services by the end of November. Their flagship product was a web app that offered a seamless staking experience for networks such as the Cosmos Hub.

Over 3 years, the team constantly delivered and grew to support 12+ mainnets and testnets. We always enjoyed using their product suite and appreciate the team’s contribution to the overall staking ecosystem. In the blog post linked above, the Lunie team provides users of their services with alternative staking solutions as well as tutorials about how to move over.

To end on a brighter note, the Tendermint team announced that they will be hosting the next Cosmos version of Lunie, namely Lunie 3, which will support Stargate and IBC.

Staking Provider Figment Raising $2.5 Million

Canada-based node operator Figment closed a second round of venture funding totaling $2.5 million. The funds will be used to grow their team, scaling their infrastructure and to further invest in the development of their developer services. The investment round was led by Bonfire Ventures and joined by FJ Labs, XDL Capital Group, Leminiscap, BKCM, and angel investor Stephan Patnernot.

Your Portfolio on Staking Rewards

Staking Rewards, a data-provider for staking assets, introduced their portfolio feature that allows users to choose assets and providers to track their positions and to estimate monthly and yearly rewards. In addition, “Hearts” were introduced. These are a sort of loyalty token that is rewarded to users for each daily eligible visit on Staking Rewards. Hearts are not crypto tokens and more of an experiment to increase the engagement between Staking Rewards and its community. Hearts can currently be redeemed for merch and be used to vote, e.g. on new project listings. More here.

⛓️ Network Updates

  • Eth2 Deposit Contract: The Eth2 deposit contract was deployed with a minimum genesis time of December 1, 2020, 12pm UTC. 16,384 32 ETH validator deposits must be received 7 days prior to this time for the genesis file to activate. If this threshold isn’t met 7 days before this time, the genesis file will activate 7 days after the threshold is met. You can track how much has been deposited here.
  • Inflation Parameter Upgrades: Time in decentralized networks is structured in blocks. Since block times can differ this often leads to divergence between the advertised network inflation rate and as a consequence also the staking rewards. Both NEAR and Cosmos are currently discussing adjusting parameters to more closely match theorized and practically observed inflation rates.
  • Tezos Delphi Passed Quorum: Tezos is gearing up for the facilitation of an DeFi ecosystem to establish on top of their self-amending protocol. Recently, the Delphi Upgrade, which will bring i.a. performance improvements to the Michelson interpreter & the gas model, passed quorum. Delphi intends to “enable novel applications on Tezos that target areas like DeFi, collectibles, and gaming” by helping to break loose of smart contract limitations due to gas constraints.

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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.