Innovation in the blockchain and crypto space is starting to take off as consensus protocols of more and more platforms are moving from proof of work towards proof of stake validation. For many users, staking also presents a cost effective alternative to earn passively.
Recently, Coincrunch was part of a roundtable conversation on the topic State of Staking, powered by stakefish. Moderated by our founder Naimish Sanghvi, the panelists included experts from various organizations including Jun Soo Kim from Stakefish, Tushar Agarwal from Persistence, Dhawal Shah from Frontier, Minal Thukral from CoinDCX and Om Malviya from Tezos India.
In this conversation, we explored the fundamentals of Staking and its implications on the future of Blockchain and Crypto in India.
Fundamentals of Staking
Proof of Stake algorithms provide for a more scalable blockchain with a higher transaction throughput, while for users, Staking has proven to be a more cost effective alternative to mining and sometimes trading even. In our roundtable discussion, we uncovered some of the benefits of staking.
“Staking is more accessible when it comes to a lehman user, since mining requires powerful hardware and is energy exhaustive. In addition to this, PoS algorithms also prevent the 51% attacks that PoW chains are vulnerable to.“Jun Soo (JK) Kim – Strategy and Operations, Stakefish
Solving the Bootstrapping Problem with Better Validator Networks
Validator networks like stakefish allow individuals to act as validators on multiple chains, and as a result, they don’t have to run validator nodes themselves and can instead start staking by delegating their assets on a certain network. Although this may seem like it solves the bootstrapping problem and allows just about anyone to start their own network, here is a thought to keep in mind.
“The technicalities of launching a blockchain may have been made a lot easier thanks to Validator networks, however a successful blockchain project still needs to have the essential pillars covered. Such as a strong community, clear vision and a valid core concept.“Tushar Agarwal – CEO, Persistence
Adoption of Staking
With the rise in popularity of validator networks, the burden of having to herd validators for a chain has been relieved and an individual looking to start a blockchain network can choose to employ validator communities from these networks in turn for a reward for validating it’s transactions.
Considering this trend, we should also be seeing a proportional increase in the awareness and adoption of Staking amongst users however, this is not the case and here are a few reasons why:
1. User Experience
It is a well known fact that regardless of the utility of the app, if it’s user interface isn’t simple enough to use, it rarely achieves mass adoption. This is an issue that a lot of DApps suffer from, thereby restricting its user base.
Staking platforms don’t have mass adoption yet because staking isn’t as easy as it seems and DApps generally have a more complicated user experience than regular apps. There is also an apparent need to educate the users about Staking and its benefits.Dhawal Shah – CBO, Frontier
Taking a page from the “Pay on Delivery” model that Amazon introduced uniquely to the indian market, we understand that the trust factor outweighs most other features of the product, especially when it comes to investing funds into it.
“In the long term what is required is for a blockchain to be reliable. It has to offer you Decentralization, Security and Scalability and unfortunately most chains these days are able to solve only 2 of these issues. This kind of reliability we can see with Bitcoin since it’s been running for over a decade without any failures and we’re yet to see this kind of reliability from PoS blockchains.“Minal Thukral, Head of Growth, CoinDCX
3. Risk Vs Reward
The most basic assessment that an individual makes before entering into an agreement of exchanging effort for money is measuring whether the reward of completing the task is worth the effort or risk involved. Staking may still have some ways to go before it is able to ensure a constant and sustainable incentivisation for it’s validators.
“There’s two sides to this problem, where on one hand the more, the validators you have on the network the more secure it is and liquid staking will improve the mobility of the network, and on the other hand we have to consider if we’re there yet in terms of security. Since chain governance is a continuous process requiring the participation of all the stakeholders the validator community could also contribute to the health of a network.“Om Malviya, President, Tezos India
With the rapid evolution of staking and more protocols migrating to a PoS infrastructure, we get a glimpse of a truly decentralized governance model that rewards the validators while simultaneously keeping the network secure and reducing energy consumption. But only time will tell whether this future is utopian or realistic and where Staking will lead the Blockchain and Crypto space in India.
For more such insights in to the State of Staking, listen to the full discussion here: https://www.youtube.com/watch?v=NcWepEKehhU