Staking is the next wave of innovation trend of encryption currency

Editor’s note: This article from the green book (micro signal: gh_f96904a6adae), the Medium, the author: EON Soros translation: translation, proofreading & authorized reprint by Odaily group, the daily planet.

 Staking is the next wave of innovation trend of encryption currency

Anthony Ponformino (Anthony Pompliano) that financial institutions should “start from scratch” and invest in encryption technology. Until recently, people always think that money is not bound by encryption in a wide range of financial market asset types, and has played a role in the alpha generator portfolio. But with the broader financial market slump, this volatility began to collapse at the end of 2018. The problem is, since 10 years ago, encryption technology is born, has not had the financial crisis to test the encryption technology and elastic resistance. Because of this, this makes a lot of investment managers to suspend investment.

Although it is difficult to predict the crypto currency market performance, but we believe that Staking will be prompted financial institutions to seriously consider the main catalyst for the encryption currency as its investment portfolio in the asset class. Access to the rapid rise of encryption currency categories, and can gain in this position, this is a very compelling value view

In many ways, can be Stake encrypted currency is a new asset class – a similarly mixed high growth stocks pay dividends. Usually, the stock rose is at the expense of dividends, and vice versa. High Growth Company do not pay dividends, because they are either not profitable, or re investment to promote more profit growth (think Facebook, Twitter and Amazon). In general, the company paying the dividends grew slower, prices rose less (think of at & T, Chevron and Target). The first time we have a combination of these two attributes of assets.

This combination is very powerful, not to be ignored, especially in the macro environment of low interest rates. As shown below, including high dividend payments relative to the stock and REITs, financial products, high return staking.

 Staking is the next wave of innovation trend of encryption currency

Staking rewards may change, may not reflect the current state of. The reward information from the network, Staking, onchainfx, white paper award dividend.com and eon estimation.

Of course, considering the potential volatility of tokens, staking returns a high risk. Tokens may be of value in the client staking and receive payment tokens and exchange between the legal currency fluctuated significantly. In other words, the token holder must consider the volatility of the token lock and hold shares and earn rewards. Despite fluctuations, but the relatively high rate of return will attract pension funds and hedge funds and other asset allocation’s attention. As the POS ecosystem matures, we expect volatility will be reduced, which will further enhance the value of stability of staking encryption assets. With the launch of more of the network, will have more opportunities to obtain different staking ratio of return.

In addition, the design of block chain network is transparent, allowing participants in the network real-time monitoring of these networks and health risks. Compared with the traditional financial market, quarterly report of traditional financial market companies a financial results. Usually, the report is limited, the data is not accurate. In contrast, the blockchain is transparent – anyone can examine the source code, and can be real-time access to network data (for example, mining block, holding the token percentage, transaction cost, wallet index). This code in a completely transparent to create a password system with elastic (see Lynndie effect), higher data availability and quality, which will allow better pricing and risk modeling.

Staking this is interesting because it brings the possibility. Staking is the first version of programmable fixed income. The recurrent risk investment return on asset allocation is very attractive, we expected in the near future, the financial market will have a strong interest in risk investment, and promote the encryption of risk investment asset demand.

Staking will bring new possibilities

Staking is the first step. We see the future, loans, derivatives and structured products are based on the programmable investment return flow. Our assumption is that once we have a history of Staking reward a lot of data, then it will allow us to create these tools for modeling and.

The first thought is structured products. The tool bundled with a basket of assets (such as commodity, currency and stock), and lock the return range within a certain period of time (minimum and maximum). They are particularly suitable for Staking encryption can be used as assets, because they can limit the volatility of return and lock. Strong demand for these instruments, only in the United States in 2017 the issuance of approximately $50 billion.

Also, we design a kind of encryption of structured products, consisting of a series of PoS digital assets, 10-15% payment tokens denominated incentives, and to ensure the legal terms of 5-10% income calculation. It is important that this encryption of structured products will lock to currency denominated earnings ratio, which is most important to asset allocation for. The counterparty will take Staking to the other party and can profit in the outside of the specified range (or loss).

This is one of the many possibilities in staking. We are early in this movement, optimistic about the programmable potential returns, and through the introduction of new financial products to disrupt the traditional capital market potential. We encourage developers, fixed income professionals and anyone interested in changing the financial industry to join us on the journey.

The “green book” compiled EON released on Medium in a “300 POS” billion dollar economic potential, also mentioned the rise of the Staking economy.

EON considered in this article including Tezos, Polkadot, new block chain ecosystem Cosmos and DFINITY, are dependent on the number of proof of interest (PoS) consensus style. Fang also plans to implement Ethernet version 2 from the proof of work (PoW) migration to PoS. Obviously, PoS is not only fast on-line, but also get developers, entrepreneurs, investors and members of the community’s concern and support, they tend to build such a game changing technology.

Proof of work mechanism

Although bitcoin has been after ten years of fighting system testing, but the problem of PoW is now becoming more and more obvious. Fundamentally speaking, in order to participate in PoW, the miners only need to have professional mining equipment called ASIC, compared with PoS, and do not need to have mortgage tokens to mining. This is a fundamental difference between the PoW miners mining the sense of participation is not high, but compared to the PoS miners, their overall health network mining less of a vested interest.

The following is the main problems we found that the most common PoW:

1. ASIC. PoW mining has become an uneven competition field, the miners were able to have the capital production and / or purchase of mining equipment (ASIC), which makes them relative to the mining commodity hardware (GPU) has a significant advantage. In theory, PoW mining can be performed by anyone with a computer (GPU), but PoW mining for GPU has become uneconomical. The use of GPU PoW as mining attempts to use Prius (GPU) and Lambo (ASIC) competition.

2. energy expenditure. The mining process is computationally intensive, resource intensive and capital – energy. Bitcoin current estimated annual electricity consumption of 49 TWh – and Singapore power consumption for the United States or to about 450 million households power supply (source).

Block 3. reward. PoW miner has evolved into a large mining business, these businesses have deposited a lot of money to build a strong mining infrastructure. For this reason, the miners seeking to maximize the return on cash and pay operating costs. Essentially, they mined and lock in profits. The value of the network caused enormous downward pressure. A counter is of the opinion that PoW miners have a strong incentive to support and protect the network they are digging, because they invested a lot of money and resources in the mining equipment, if there is a fault in the network may become useless or worthless. Although this can be used to maintain network security (and value) of the economic power, but the miners will focus on the payment as soon as possible to recover the investment and operating costs, so they tend to immediately sell their mining reward.

In addition, the recent focus on priority issues they will reward the monetization behavior will lead to the incentive mechanism of the misalignment and associated with more extensive network of stakeholders. The priority of miners is the support network or network change proposal, these proposals will optimize the block monetization and recent profits, and this may not consistent with the broader community of developers. This creates a network of bifurcation (e.g. BTC and BCH). Similar behavior is very common in listed companies, in these companies, the management team will tend to short-term interest prior to long-term interests (i.e. the principal-agent problem).

4. In PoW network, 51% of the attacks are becoming more common. The core of the problem is the fair competition and scale economy of mining PoW. As mentioned above, access to capital and cheap power miners had an unfair advantage in the mining block of rewards. This makes the use of commodity hardware PoW mining has become uneconomical. The mining has become increasingly concentrated. The top three bitcoin miners control network energy – nearly 51% of this hash is the main index shows how much energy has been used to block the acquisition. The miners stress is high, they have more influence on the network. Usually, this is not a problem, unless they have most of the work force, which will allow them to control network. However, a group of miners can collusion attack and double spending. Although the bitcoin network did not attack, but the miners use their resources against smaller and double PoW network. Recently, the etheric Fang classic (ETC) attacked by 51% (source). Double block chain network payment is trying to prevent problems, and avoid the act as “honest broker” third-party. Access to the center of the state and avoid double attack is the reason for the existence of block chain network.

In short, PoW has sought to solve the basic problem in block chain failure: go to the center of the trust.

Proof of interest mechanism case

PoS is an elegant solution. In the PoS network is also a verifier token holder, and therefore have more skin in the game. Because of the value of direct mortgage, a powerful incentive began to appear. Generally speaking, rights must be their tokens locked for collateral, in exchange, they have the right to obtain verification block and obtain mining reward.

This process is often referred to as “Staking” or “verification”. Block reward is what we call “Staking awards” or “reward” the.PoS network has a built-in inflation rate to pay the reward as the main motivation verifier verify the network and network protection. If the verifier misconduct, they will lose the deposit (or slash) or a Staking bonus to be punished.

According to the network and other parameters (including the participation rate and time) of different investment returns can range from 5% per year to 50%. Staking is good, as long as they hold, token holders can be rewarded. In addition, if the token holder does not choose Stake, the token value will depreciate with the network expansion. Therefore, Stake incentive is very strong.

Who can invest

PoS network can verify their holders ghostwriter or delegated like EON Staking-as-a-Service (StaaS) on behalf of their provider to verify. Most people love more trust.

Staking is a time-consuming process, need technical knowledge, best practice safety and continuous normal operation monitoring. In some networks, if the node offline verifier may lose its collateral – a process called reduction (Slash). Other network requirements to maintain a minimum balance of collateral verifier, the number of tokens for most individual holders may be too high or limited verifier participants. In view of these factors and the complexity of most token holders to choose outsourcing and cooperation with EON StaaS provider.

The rise of the Staking economy

 Staking is the next wave of innovation trend of encryption currency

We estimate that in the next 12 to 24 months, PoS network will be 300 billion dollars in value (i.e. market value). The network’s annual inflation rate will be maintained at between 5% to 15%, which is equivalent to the payment to the holder of the token 1.5 a year to $4 billion 500 million reward quota. We predict, with (1) to introduce more of the PoS network, and (2) encryption market recovery over time, Staking will significantly increase the reward amount.

Any investment in the PoS network to Stake holders should. In the Staking on the power of compound interest reward may be related to the underlying price appreciation tokens of the same or more powerful.

We are in the early stages of this paradigm shift, and the emergence of PoS and Stake and token holders believe these rewards for a decentralized network of long-term vision and excitement. We invite the token holder, and any developers are interested in more people to join our journey.

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