This interview was done as part of the 2021 Staking Ecosystem Report by Staking Rewards.
The report was sponsored by StaFi Protocol.
Atomic Wallet is a decentralized Crypto Wallet with 3M users
Q: Do you think proof-of-stake based governance systems can be applied outside of protocol governance and grants? And how?
A: Difficult to answer this question as I’m not the protocol inventor, mostly the technology adopter. But I think we can look at the real-life cases like when people vote for councils, governance makes a decision, etc.
Q: How do we ensure and incentivize further decentralization within the staking ecosystem?
A: It’s a simple economical rule – the more people are involved in the ecosystem with their money, the more stable the system. The more stake is distributed, the less control in one hand, the more decentralized the system is.
Q: What are the biggest challenges for Proof of Stake and Staking, that we still have to overcome or may still face?
A: I think the majority of people who stake have a sort of misconception about the process. Staking isn’t only a way for a semi-passive income but it’s to make a certain blockchain more protected, secured, accessible and sustainable in a long-term perspective as well. Though, this isn’t only a problem of users, companies who create any form of PoS should also think not only about the immediate benefits but the impact in the future. I believe the PoS projects should popularize the idea of the network’s governance, determining the assurance factor, and the power of the PoS participants in the decision-making process in the network.
Q: What is the biggest business risk for your company? Are you worried about any developments in the industry?
A: The main risk is the market behavior. The fluctuations, the down or upward trends impact the market, and it affects us as well as any other crypto company. Also, there are security risks. To ensure stability of the service Atomic wallet offers we regularly use the code-audit tools.
Q: What are the main concerns or questions of your users around staking? How are you trying to address them?
A: We’ve supported 13 top PoS assets so far, offering decentralized staking with zero fees and probably with a higher APY than average on the market; that’s why staking is one of the favorite features of our users. But of course, there are some concerns we’re often addressed. Atomic, being simply an interface for private keys and to sign transactions, doesn’t make terms for staking of one or another asset. But many users get confused why they need to spend tokens while staking coins or unstaking them if the staking is feeless, not assuming that they pay for the network fees. The second big concern is why tokens are not getting unstaked or why the staking isn’t working. But again, Atomic is a decentralized wallet, and the stability of the staking depends on the node of the blockchain that provides staking. The same is with the terms for the staking-unstaking process. For example, you can instantly unstake TRX, you need to wait for 14-25 to unstake ZIL, 21 days to unstake ATOM, or you don’t need to unstake XTZ at all as you’re free to move your deposits staked or not.
Q: Which upcoming protocol projects are you most excited about and why? Is there a protocol that no-one is paying attention to but should?
A: I’m very excited about the Ethereum POS. It’s a major project for the ecosystem. Scalability will make DeFi products available for the wide audience. It really has a chance to build a new decentralized banking system.
Q: Which network or protocol in the market do you think has the most future-proof token economics? And why?
A: In terms of staking mechanics, I like the Cardano implementation. The chain has thousands of validators, many of them are independent holders, which is cool for the chain decentralization.
Q: Which network or protocol has the most sophisticated staking mechanism or staking use case that is not a Proof of Stake Layer 1?
A: Various projects have staking via smart contracts, like Zilliqa. I can say it’s mostly an option for blockchain to attract users rather than a main feature for distributed governance or so.
Q: Which protocol has the best approach towards governance? And why?
A: I like how Tezos is built, it has truly decentralized governance with distributed protocol update. In terms of the governance implementation, I like Polkadot with their council voting system, pretty similar to real life.
Q: Which network or protocol in the market has so far proven to have the best “product-market-fit”? And why?
A: Honestly the most popular chains are Ethereum clones with POS implemented that have a large audience and aggressive marketing behind them. For instance, Binance chain or Tron, even if they are pretty centralized in terms of validators, being related to the founders.
Q: What could be done to increase overall awareness and participation in protocol governance?
A: Normally not so many regular users are ready to participate in governance. The main thing is to make the process as simple and clear for newbies, as it can be. Tools with an easy interface, voting proposals, and council system will probably increase adoption.
Q: Do you see staking yields competing with DeFi yields? What are the implications of this on network security? How to balance these?
A: Most of the DeFi yields are highly speculative even if they offer higher rewards. It’s simply more risky for users rather than locking funds for staking. So it’s not a direct competition, these are just different ways to make money work.
Q: Are Staking Lock-Up times any good for protocols? Or unnecessarily overthinking protocol security?
A: Definitely, yes. It incentivizes participants to remain with the network, assuring its stability and security. Though, for users the lock-up periods can be risky due to the market changes or the liquidity-illiquidity of the asset.
Q: We have seen a lot of talk about PoW’s energy consumption in recent months. How important is energy efficiency for PoS’ case when it comes to long-term adoption?
A: I don’t think energy consumption is such a huge problem. People spend a lot to mine gold. It’s similar to Bitcoin, which has the most secure chain at the moment. However, for daily small transactions you don’t need such a level of security, so speed and small fees are more important. Thus, PoS is better in this case.
Q: What is your vision of the staking economy/industry in 5 years?
A: I believe in mass market services people will use PoS chains, they’re cheaper and faster. We will see many private or corporate chains. However, the large transactions will be going through PoW chains as the most secured.
Q: Ethereum 2.0 – What are you most excited about? What are you concerned about?
A: With changing the protocol, we’ll be sure the gas fees won’t be insanely high in the upward-trending market. It’s a key for DeFi services adoption on the mass market.
Q: With an increasing market-lead for proof-of-stake based networks. Is there a future for proof-of-work besides Bitcoin?
A: Apart from Bitcoin, the other blockchains are more vulnerable in the sense of the hashrate security. To avoid potential risks, the majority of the projects will probably switch to PoS sooner or later. But they need to work on the issues like initial distribution, long range attacks, etc.