This interview was done as part of the 2021 Staking Ecosystem Report by Staking Rewards.
The report was sponsored by StaFi Protocol.
Everstake helps institutional investors and regular token holders to profit off their crypto assets.
We operate in a wide range of Proof of Stake blockchains, providing our customers with numerous options to choose from.
Pick the most promising projects, delegate with Everstake and make 5%-20% annually.
Q: Do you think proof-of-stake based governance systems can be applied outside of protocol governance and grants? And how?
A: Theoretically, yep, but we should understand that everything depends on the people themselves. If people are not interested in doing something, they will not do it or, of course, will do it in the wrong way.
The answer to this question is more philosophical than accurate.
Q: How do we ensure and incentivize further decentralization within the staking ecosystem?
A: At the moment, there are a lot of platforms to promote staking opportunities, and we think their number will only grow with time. Social media channels provide enough space for smaller players to have a voice and promote themselves, which helps decentralization. Regulating next development phases through governance in various blockchains plays a big role too. Using an example of the Harmony Protocol efforts, the recent proposals discussed in the community and being presented under governance include reducing a minimum staking amount, setting up a minimum validator’s fee on a certain level and changing voting consensus balance – in the effort to incentivize decentralization and support smaller ecosystem players.
Q: What are the biggest challenges for Proof of Stake and Staking, that we still have to overcome or may still face?
A: One of the big industry challenges is having a lot of new projects appearing and being marketed as successful ones while they might not have a ground base for that, a strong team behind or enough invested funds to come to realization. Token holders make their choice every day and move from one PoS project to another, depending on their performance and market trends. The whole market fluctuates a lot, yet shows a lot of potential in terms of long-term adoption for the blockchain technology itself, as well as PoS and Staking concepts. However, in a few years we might enter into another market phase when many PoS projects would have to be declared as gone or below initial expectations of the end users. Along with possible efforts of the governments to regulate the industry (invent ways to implement taxes on staking, for example) it may affect the staking economy.
Q: What do you consider to be the most important aspects to attract users to your staking service offering?
A: Well, there are a lot of companies that do Proof of Stake business. And the main question is how not to be lost among them and how to find your users. I think we succeeded in it. Everstake it’s already a brand with a strong fintech team and many satisfied users. So what aspects help us? I will name a few of them:
- professional team
- our developers’ team can offer solutions for blockchains and users as well
- great experience in this field of business (4+ years)
- the users’ support 24/7
- we run highly reliable and secured nodes
- for one blockchain, the separate team works
Q: Besides validating blockchain networks, what are you mainly focusing your business operations on?
A: Everstake collaborates with blockchains and creates its own projects on developing software / products within the blockchain ecosystem, like bridges, wallets, apps for stake tracking, staking calculators and so on. We work closely and build on Solana, Terra, Cosmos, for instance.
Q: Which protocol has the most sophisticated token economic staking incentives design? And Why?
A: We could mention EOS here since originally it comes without an intuitive rewards mechanism. The voters were not supposed to be rewarded when voting for Block Producers. Also, staking resources with the goal to cover transactions while dealing with the network also doesn’t incentivise stakers. Bottom line, the concept of staking resources along with the voting for proxies that provide rewards was established, to make rewarding possible. Still, up to now, some users have questions about the actual process, so we’ve created guides for it.
Q: What is the biggest business risk for you? Are you worried about any developments in the industry?
A: The biggest risk for us, as well as for any other company, is to lose the trust of our customers
We are not even talking about profit generation now; at the moment, it is the reputation of the company and the team as a whole
Q: What do you think are the most important functions of Network Validators, besides running secure and performant infrastructure that validates the blockchain?
A: The first thing that comes to mind is the awareness-raising function, so to say the educational function. As network validators are the ones who take an active part in the development of blockchain technology and know it’s architecture, structure and how the blockchain functions from the inside, thus validators should be the ones who will enlighten ordinary users about the blockchain technology. No one knows better than network validators how to explain such a complicated notion as ‘blockchain’ in a straight-forward way, in order even newcomers of the crypto industry could understand.
This function we take as seriously as we can and produce tons of educational materials for users.
Q: How decentralized should a blockchain be? Is there a sweet spot tradeoff between decentralization and performance?
A: One of the fundamental tasks of blockchain technology is to be decentralized. It means to avoid often unnecessary regulatory authority and bureaucracy that follows from it.
Of course, in every blockchain, there is a compromise between decentralization, performance, and safety. But technology is developing rapidly and full decentralization is the goal to which we all irrevocably move.
Q: How can smaller Staking-as-a-Service companies differentiate themselves from large players like exchanges providing staking services (e.g. Binance, Kraken, Coinbase)? Is there a danger of centralization?
A: Smaller validators are able to compete while proposing lower validator’s fees (at least in the beginning of their journey) and a more meticulous approach when it comes to marketing / servicing real delegators. We can see this happening in the dedicated Telegram or Reddit community channels where validators promote themselves. While smaller validators may run only a couple of nodes, they are narrowing their efforts to attract users. Applying enough time for self-promotion and assisting delegators with the staking process, they have good chances to win a big audience. In addition, the blockchains are normally built to promote and encourage decentralization, hence the smaller validators are being supported often in different ways. Blockchain core teams provide the space for validators to promote themselves, hold giveaways and use other marketing tools, encourage participation in the governance and so on.
Q: Which criteria are you looking at, before you start supporting a project with network validation? What can protocol team’s do to win you as a validator for their network
- Big players and other validators
- Projects around the ecosystem
Q: What are your thoughts on the permissionless nature of staking from a legal standpoint? (due to no sign-up, or verification process, delegators cannot be explicitly forced to agree to the terms of service)
A: We think that sooner or later, it will happen, and various government institutions will see a tasty morsel in staking.
The easiest way is to automatically agree to the terms if you are already steaking with the validators, but we understand that no one will even look at the terms and read them.
Another option may be to create a project or resources to carry out some easy form of KYC, but it will not happen until a few years.
Q: There is a winner-takes-all sentiment emerging around staking derivatives. What do you think about this thesis?
A: Disagree if we are talking about staking, because in this case, there will be many more winners; users can not group and choose one validator.
Q: An increasing portion of miner income on the current Proof-of-Work Ethereum comes from ordering transactions (often referred to as Miner Extractable Value). It is likely to assume that this will also continue into the Proof-of-Stake world. How do you think this will impact the staking market? Do you think the existence of MEV bears risks for the network? Do you think this can be mitigated?
A: It’s hard to predict a better look when everything works
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 be?
A: ETH2, Arbitrum, Optimism
Q: Which network or protocol in the current market has the most future-proof token economics? Why?
A: Solana, Polkadot, Cardano
Q: Which network or protocol has the most sophisticated staking mechanism or staking use case that is not a Proof of Stake Layer 1?
Q: Which protocol has the best approach towards governance? And why?
Q: Which network or protocol in the market has so far proven to have the best “product-market-fit”? And why?
A: Solana, because of team
Q: What could be done to increase overall awareness and participation in protocol governance?
A: the only thing that can make people do something is money or extra rewards
Q: Do you see staking yields competing with DeFi yields? What are the implications of this on network security? How can these be balanced?
A: I do not think it is worth comparing these two different branches and in our opinion staking is still safer but it is less profitable
Q: Are staking lock-up times of value for protocols? Or unnecessarily overthinking protocol security?
A: Actually, staking lock-up times are of great value. This could be simply explained. As we know, staking is locking funds in a decentralized crypto network to ensure the integrity, security and continuity of the network. In case the PoS protocol does not require the lock-up period there is a risk that people would stake when things are good and stop when there is negative price fluctuation. This could drastically affect the network security. It’s for security of the network, to prevent attacks, in particular 51% attacks, impulsive and ill-considered decisions. Almost every PoS protocol uses locking, slashing and other mechanisms to ensure the network stays secure.
Q: We have seen a lot of talk regarding PoW’s energy consumption in recent months. How important is energy efficiency for PoS’ case when it comes to long-term adoption?
A: Energy efficiency is extremely important for all areas of a future society. When it comes to the PoS concept, we’ll most likely witness more PoW projects sliding into PoS, and more and more PoS projects competing with each other, populating the relevant market. In this highly competitive environment, each slight functional advantage plays a significant role in attracting a crypto audience. When it comes to the possibility of building new products based on blockchain, the speed of transactions and energy efficiency become the major factors to choose between different protocols, which, in turn, define a future landscape of blockchain industry in terms of the long-term adoption.
Q: What is your vision of the staking economy/industry in 5 years?
A: Well, the modern crypto industry is focused on PoS protocol and it’s of no surprise as PoW protocols have lower transaction throughput, higher energy cost and increased strain on the environment, higher risk of centralization of mining pools. 5 years ago there were not many PoS protocols therefore it’s fair to say that actually it’s the beginning of the PoS protocols development and growth. The Proof of Stake mechanism is forwarding the nature of blockchain technology, making it both efficient and scalable. Having a decentralized, friendly environment, and rewarding consensus mechanism is what the industry needs.
Q: Ethereum 2.0 – What are you most excited about? What are you concerned about?
A: Ethereum 2.0 comes with an update that will make Ethereum better and faster.
The crucial thing to know about Ethereum 2.0 is that no one has completed such a sophisticated transition. It is truly difficult to predict how the transition to Ethereum 2.0 will impact the price of Ethereum. In order to avoid causing panic, the Ethereum Foundation did not announce the date of the big release of Ethereum 2.0. Therefore, it is not easy to guess the exact time of its release and its price
Q: With an increasing market-lead for proof-of-stake based networks, is there a future for proof-of-work besides Bitcoin?
A: We think it will always occupy its main niche as a payment instrument, we will certainly bite off the significant role of the market, but we think the situation will change even more when ETH2 comes to the game