Interview with GIN Platform Founders – Alexandru, Emil, Alex & Dragos

      We asked GIN team’s opinion regarding several topics such as decentralization, incentivisation, challenges and staking awareness in context of our Staking Ecosystem Case Study.

      The GIN Platform is a web application that allows you to create cold wallet masternodes for GINcoin and other masternode coins, without  having to deal with servers, terminals or Linux. This lowers the entry  barrier to the masternodes market for non-technical people.

      SR: How do we ensure and incentivize further decentralization within the staking ecosystem?

      GF: Blockchain infrastructure companies will have a very important role in the decentralization process.

      We see three types of decentralization: (1) pure decentralization (eg. Bitcoin or Ethereum block chains); (2) delegated decentralization; (3) confederation( eg. Libra)

      While pure decentralization remains at the core true to the ideals of decentralization, other forms of validation appeared for the purpose of increasing the efficiency of distributed ecosystems. Another relevant aspect relates to an increasing power in the hands of a few mining pools, which in time leads to an oligopolistic mining even in the most decentralized networks.

      Masternodes are a hybrid model where the passive income was playing as a strong incentive to further decentralize the network. On the other side, many coins used the system to lock-in value and increase the value of the coin, without ever considering the decentralization purpose of the whole mechanism.

      What we see with delegated decentralization is an increasing efficiency (speed, voting, governance led decisions) while maintaining the desiderate of a vast network of participants. Like the confederate governance, the aim is to have as many participants as possible but not necessarily as node owners. The new model consists of many people having a stake in the network. The oversimplification leads to an easier adoption, as less and less tech knowledge is needed to become a participant in a blockchain. Owning a POS or dPOs coin makes you a part of the network, even though by yourself you are not able to provide an infrastructure role for the blockchain.

      By creating platforms for Node as a Service or staking as a service, the role of blockchain infrastructure providers will increase and should speed up the process of adoption for many blockchains.

      As we can see from the panoply of different POS mechanisms, we are far from standardization. We see a lot of experiments as part of a protocol race. The protocols are proposing new governance models which boil down to consensus and validation roles. We believe that the protocol race will continue until the blockchain space will have a couple of models that will respond to efficiency and decentralization at the same time.

      Education and information, beyond hype have a fundamental role in understanding how the governance models blend with the tokenomics. In our opinion, the main driver force should come from the user and her needs. For now, we need to build the baseline so that anyone wishing to participate in a network can do so with minimum technical hassle.  

      SR: What are the biggest challenges for Proof of Stake and Staking, that we still have to overcome or may still face?

      GF: The protocol race brings many disparities in technology. Basically, each relevant POS coin proposes another technical approach, thus a lack of standardization – which for now it is not a bad thing. However, the whole puzzle includes custodians, exchanges and dapps. Fragmentation as a result of lack of interoperability is among the main challenges in staking. A time will come when all major exchanges and enterprise grade wallets will communicate and stake for their clients within the major blockchain ecosystems. Even banks and stock exchanges will have solutions for their clients who want to invest and collaborate in new forms of companies and ventures built on top of blockchains.

      Regulatory disparities among jurisdiction where the infrastructure participants are based can bend mass adoption. However, a sound state prudential approach is needed once staking becomes more adopted then mining for example. The pioneers of this space had in general a heightened knowledge of crypto. More we go into mass adoption, more education, consumer protection and rules for a sound & secure custody and validation will be sought for. We also believe that a time will come where pure trustless solutions will be technically available along the whole value chain. But until then, standardized regulation cross-borders are very important if we want this space to take-off globally.

      SR: What do you consider to be the most important aspects to attract delegators to your staking service?

      GF: Up-time and customer service are two relevant aspects. Another factor is the soundness of the technical team in case a problem arises. And we are talking here about strong infrastructure engineers and knowledgeable analysts that can show a strong background. There are many guides, guidelines (do-it-yourself) which are welcome. However, relying on strong expertise is very important especially for B2B services. Also this business should be seen at its full potential, in the mid-term. The commission fees should be adjusted to the innovation effort put in the solution provided. We are not in a commoditized space yet, thus you will see fees discrepancies. Fees should not be predatory, otherwise everyone loses.

      SR: What do you consider sustainable incentives models for proof-of-stake blockchains? At which point gets a high inflation harmful for the blockchain ecosystem? What is the best trade-off to reward blockchain keepers sufficient, but don’t dilute holders too much? Is there a magic formula to this?

      GF:  Two simple words: scarcity & use cases that provide substantial added value within a particular blockchain ecosystem.

      First, from a macroeconomics perspective, scarcity ensures that the pricing of an asset is determined by the relation between offer and demand. Economics 1.0. As we see, there are no limitations on demand, as the current ecosystems can “mint” new crypto coins/tokens (with the exception of Bitcoin – will come back to this below).

      The full power of incentivisation represented by strong tokenomics model lays on solid use cases, killer aps. The solid use cases & killer apps should be substantially created within the value chain of a blockchain ecosystem. Let me try to explain: the more a use case enhances the blockchain ecosystem and gets the input from within the blockchain ecosystem, the more resilient the blockchain ecosystem becomes. If the network must rely on third party providers or where services cannot be paid for delivering a use case within the native coin, then the ecosystem is likely to not attain the equilibrium for offer and demand of that native coin. As such, when demand is based only on hype, once the hype is over, the ecosystem will tend towards rebalancing an increasing offer of coins with less and less demand as no real use cases are being fueled within the ecosystem.  

      SR: What do you suggest will increase awareness amongst people about staking and earning interest on crypto assets?

      GF: The interest should spearhead the fear of hacking and technological hurdles. Thus, secure custodial infrastructure, sound blockchain protocols and platforms that allow people to stake are essential. Second, from the outside world,  crypto is seen as a whole investment product. Knowledgeable institutional investors and funds will have a material role for mass adoption. As these funds will seek to diversify their portfolio in the “exotic” crypto-markets, the more people will jump in. Also, exchanges and lending platform will have a crucial role for incentivizing customers to become stakers.

      A second, more fundamental trend is within the realm of main cryptocurrencies. This is a theory, not yet backed by economics data, however worth mentioning it. We have seen that people need a store of value. Weak monetary policies led to hyperinflation in a couple of countries around the globe.

      For example, as of July 1, 2019, Bitcoin is sold in Zimbabwe on p2p platforms with staggering USD 75,000. This means that a decentralized currency which has inherent scarcity can become a store of value for companies and households. This is by now an undeniable fact as seen with Bitcoin, Dash etc. in a couple of countries in financial crisis.

      On a more debatable subject, the global economic approaches the peak of its current economic cycle. We might experience a sharp increase in demand for cryptos who can behave as repositories for store of value. Further extrapolating, if the crypto world will be able to weather the people in strained economies or during an  international financial crisis, then the awareness towards new models of governance -staking, decentralized economies and crypto intrinsic value can only increase. Some signs are already appearing, however this model remains to be seen.

      SR: How do you explain Proof of Stake and Staking to a 7 years old?

      GF: Haha, it is a known matter that techy guys and lawyers are not the most creative minds out there. However let’s try:

      We are in the village of Stakopia. The parents leave for work and the 3 kids of the family are left alone at home. The household has a fountain/well. The parents left two pairs of keys to the fountain to the younger brothers. The older brother, as he is stronger, received the instructions to help the younger ones to get the water from the well.

      Thus at any moment in time, any of the younger brother will unlock the fountain, and with the help of the older brother, will get the water from the well. None of them could get water without the water, however both will have water to drink.

      About The Author

      Staking Rewards Research

      is a team of analysts dedicated to analyzing the economics, profitability, risks, and yield potential of various cryptocurrencies.