We’re back from an extended Christmas break with our first issue in 2021:
Liquid Staking on Ethereum
Between the last issues and now, a lot has happened with respect to Ethereum 2 staking. There is now almost 3m ETH, roughly 2.5% of the total supply, in the deposit contract and participating in consensus on the Beacon Chain making Eth2 the #1 in terms of total value locked (TVL) in ETH surpassing Maker by a tiny margin. As Eth2 matures, we’d expect this lead to increase further.
Some of this growth can be attributed to liquid staking protocols like Lido and Stkr that enable Ethereum staking without some of the downsides solo stakers face, such as the initial inability to liquidate staking positions and the requirement to stake 32 ETH (at the time of writing >$40k, so by no means a minor amount). At this point, such protocols account for an estimated 7% of the staked ETH, with the larger share controlled through exchanges (~28%) or staking provider offerings (~20%)*. We have written about tokenized stake before, and now we are beginning to see some of its possibilities in a live environment with Lido’s stETH being integrated into a wide variety of DeFi protocols on Ethereum. Check out the Lido ecosystem page to learn more.
Many staking offerings differ largely in their design leading to different risk profiles. The recently formed Ethereum Due Diligence Committee (ETHDDC) aims to objectively evaluate different options to help potential stakers evaluate the protocols or platforms they are staking with - more information and an initial rating will go live on the official website soon.
The Solana community is voting to activate inflation, which will mean SOL holders will finally begin earning staking rewards on the Solana mainnet. Inflation will start out at 8% and will decline to 1.5% over 11 years. At the current staking ratio, SOL stakers are expected to earn up to 27% APR before commissions. Learn more about the proposed design and process in this FAQ.
Bison Trails Acquired by Coinbase, Empowering and Benefitting or Dooming?
Bison Trails, one of, if not the, largest third party staking infrastructure provider was acquired by Coinbase on January 18. According to Bison Trails’ announcement post, the acquisition will “expand our impact as a standalone product line: the foundation of Coinbase’s infrastructure suite to advance the crypto ecosystem.”
Coinbase’s announcement was consistent in their messaging -
“The acquisition will enable Bison Trails to accelerate its mission to provide easy-to-use blockchain infrastructure that strengthens the entire crypto ecosystem.
Bison Trails will serve as a foundational element within Coinbase’s ecosystem suite of products, powering all participants in the cryptoeconomy.”
Chris had a different take on the acquisition. Rather than “strengthen the crypto ecosystem” and “powering all participants in the cryptoeconomy”, he feels this acquisition might be the first of many that accelerates stake centralization. Read more about the Decentralized Doomsday scenario he envisions here.
⛓️ Network Updates
The Graph Launch
On December 17th The Graph mainnet launched after three years of development work.
With 162 Indexers, more than 3,800 delegators, and 2 billion GRT staked, the network already has a track record of its own. Currently, only the PoolTogether subgraph is live on mainnet. However, in the course of the next few months, more subgraphs are going to transition from the hosted service to mainnet, bringing the network closer to realizing its vision of providing a fully decentralized indexing and query layer for Web3.
Anyone looking to become an Indexer, can test the waters on the recently launched Graph testnet. Stakeholders can monitor the network and delegate tokens through the Network Beta Dapp. On The Graph Forum you can share ideas, ask questions, dive deep into the research, and even vote on which Layer-1 The Graph should integrate with next. Some more great content and tools were created the community within days of the launch, such as:
- an explainer video by Finematics
- A knowledge base called The Graph Portal
- Analytics & Stats Dashboards by Staking Facilities, Ryabina, Stake Machine, and Zashton
- Reward Calculators by Suntzu or an anonymous community member
Cosmos Stargate Upgrade
The Cosmos Stargate upgrade was postponed from January 28th to a proposed February 18th date. Prop 35 proposed the 28th date and Prop 36 explained reasons for the postponement. Details of the proposed February 18th date are in Prop 37.
Curiously, Prop 35 still passed, even though it listed the wrong upgrade commit hash. More than 57% of token holders also voted to pass the proposal before audit results were released. Fortunately, the governance system is still maturing, i.e. the upgrade process requires manual intervention to initiate, rather than being fully automated.
The results of Prop 35 emphasize what some long-standing validators have warned against, namely that it’s important to review the details of the proposal, including the code, in order to make an informed decision. It seems like, at least in this case, the zeal and excitement to launch IBC put this suggestion on the back burner.
The Proof-of-Stake Year 2020 in Review
In case you crave more content looking back at what has happened in staking in 2020, here is a collection of annual review blog posts we found from some of the largest Proof-of-Stake networks:
* data from Nansen tagged wallets, >40% are unknown
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.