Building a blockchain is not just about software and hardware development. It’s also a combination of architectural design, incentive mechanisms, game theory and governance, which together make a robust decentralized system.
Staking is one incentive design that aligns participants in the network towards a common goal such as making valid commitments to the network. Below we will explore the most anticipated staking networks* launching in 2021. Let’s get to it!
*Listed projects in no particular order:
Chainlink (LINK)
Chainlink consists of blockchain ‘oracles’ that serve as a bridge between on-chain and off-chain data. They typically perform a wide range of tasks compared to nodes of many other decentralized platforms.
Chainlink oracles provide external data to smart contracts and receive remuneration in LINK tokens. Currently, users have to launch their own node to receive rewards in LINK. However, in an interview with The Defiant, Chainlink CEO Sergey Nazarov, discussed staking as a way to align incentives for node operators and has presented how a staking system would work in the context of Chainlink.
It’s expected that staking LINK natively in a decentralized manner will be available in 2021.
However, in the meantime, you can use the Crypto.com to stake. Depending on the length of time you stake and your CRO balance, you can earn anywhere between 1.5-6.5% yield on LINK.
Mina
Mina dramatically reduces the amount of data each user needs to download to sync a node. Instead of verifying the entire chain from the beginning, participants fully verify the network and transactions using recursive zero knowledge proofs (zk-SNARKs).
Nodes can then store just this proof, as opposed to the entire chain. Mina stays accessible and can be trustlessly accessed by anyone even a smartphone will be able to sync and verify the network in seconds. The entire Mina blockchain will always be about 22kb, compared to Ethereum for example which is currently measured in the Terrabytes and growing!
DFinity (ICP)
DFinity is a blockchain-based cloud computing project that aims to develop an open, public network, referred to as the “Internet Computer.” The Internet Computer will allow developers to deploy and run applications through the use of canisters, which are similar to smart contracts on Ethereum. DFINITY’s network runs on specialized hardware managed by independent data centres.
It is anticipated that ICP staking will be available early in 2021. You can delegate your stake with Staking Facilities, a trusted Proof-of-Stake infrastructure provider and validator to reliably stake your coins and earn rewards. They also support other networks like Tezos, Cosmos, Aion, SKALE, Edgeware, Kusama, and Polkadot.
Regen Network (REGEN)
Regen Network is a global marketplace and contracting platform for Earth’s ecosystem assets, services, and data. It is built for verification of claims, agreements & data related to ecology which enables multiple registries to communicate and transact with each other producing a public ecological accounting system.
Regen’s Registry allows land stewards to sell their ecosystem services to buyers around the world, functioning to reverse climate change through incentivized carbon removal.
Those who delegate XRN to a validator are eligible to receive block rewards for each validated block. When they unbond from a validator, there is a three-week period that the tokens are not eligible for block rewards or fees.
XRN will be the fee token on network launch, and there will be the possibility to use other whitelisted fee tokens, such as ATOMs or Terra, a Cosmos-based stable coin.
Centrifuge (RAD)
Built on Parity Substrate with a bridge to Ethereum, Centrifuge Chain aims to be the gateway for real-world assets on the Blockchain, enabling off-chain assets to access financing through DeFi.
Tinlake is a set of smart contracts that enables borrowers to draw loans against assets, such as invoices, royalty payments or receipts.
In theory, anything that can be represented as a Non-Fungible Token (NFT) can be financed using the Tinlake infrastructure. Investors can participate by depositing an ERC20 token such as a stablecoin like DAI and in return receive a token that represents their share of the pool.
The Radial token (RAD) is the native asset of the Centrifuge Chain. RAD gives users a stake in the Centrifuge network and can be used to pay for transaction fees and participate in on-chain governance. It also incentivizes validators and nominators to participate in the block production and transaction verification process through the block reward.
Acala (ACA)
Acala is a Polkadot based parachain which aims to be the decentralized finance hub and stablecoin platform powering cross blockchain liquidity and applications. aUSD, the native stablecoin will serve as Polkadot’s DeFi building block. aUSD is an over collateralised cryptocurrency similar to DAI which can be minted by created a Collateral Debt Position (CDP) using assets as collateral from blockchains connected to the Polkadot network including DOT, BTC and ETH.
the ACA token serves three key functions within the Acala system:
- It is the native fee token that Acala users can use to pay for transaction and computation costs.
- ACA owners can also stake their holdings to act as a network collator or receive oracle data fees.
- ACA gives holders voting rights with Acala to weigh-in on core network decisions such as Treasury spending, Council member elections, and improvement proposals. This voting power extends to the Acala lending application, where ACA owners can adjust the stability fee or liquidation ratio and add new collateral types.
The Homa Protocol built on the Acala Network establishes a decentralized staking pool where users would lock their DOTs to gain staking yield while receiving L-DOTs as a receipt that are liquid and tradable. Homa acts as a staking pool that tokenizes users’ staked assets as an L-Asset (e.g. L-DOT as locked DOT), which users can invest or use in other applications. L-DOT is cross-chain capable and can be used to participate in other network activities such as lending or as collateral in Honzon Stablecoin Protocol.
Polkadot network targets 50% active DOT staking with a 20% annual return, you can check the best staking providers and rates here.
Persistence (XPRT)
Persistence is a platform to power debt marketplaces that match those with surplus capital such as lenders to those that require capital like borrowers. It aims to bring real world assets to the blockchain in a global, instant and always available manner.
Business documents such as Invoices, Bills of Exchange and Bills of Lading are regularly used as collateral to take out loans in traditional finance. Persistance aims to bridge the gap between decentraslied finance and traditional finance by leveraging the power of Non-Fungible Tokens (NFT) as a way to collateralise real world assets and tokenize them on their Tendermint-based Blockchain.
Persistence is currently in the process of their Stakedrop which started October 26th, 2020 and will last 12 months. You will be able to delegate your XPRT stake with Dokia Capital, Cosmostation, SG-1, Stakefish, Figment, Sikka, Iqlusion, Stakewith.us, P2P, Certus One, HashQuark.
Crypto.com Chain
Crypto.com Chain is part of the Cosmos Network as it utilizes Cosmos SDK and the Tendermint Core consensus engine. There are two types of nodes, validators which are responsible for validating transactions and committing new blocks to the Blockchain. Full nodes are responsible for fetching data and serving it to the client.
To incentivize validator nodes to operate, CRO rewards are distributed according to their performance and amount of staked token and a slashing penalty is imposed when validators’ act dishonestly on the network.
CRO owners can delegate their tokens to active validators and share part of the reward obtained by the validator. This allows token holders to take part in the consensus process without running a validator themselves.
It is important to point out that delegators and the validators share the same risk and reward. In particular, part of their delegated token could be slashed due to validator’s misbehaviour. So it’s important to choose a reliable validator to delegate. You can check here for a list of trusted validators to stake with once CRO staking goes live.
Ethereum 2.0
The biggest change in Ethereum’s history is underway starting with the Medalla public multi-client testnets and then the launch of the Beacon chain in December. The process towards mainnet ETH2 is now well underway with over 3M ETH (+$5.2B) staked in the deposit contract – already making it one of the largest staking economies in the space.
ETH2 is expected to launch over 4 phases. Starting with Phase 0 which contains ETH2’s PoS consensus, it tracks the validators and their balances and is the current phase we are in now.
Phase 1 handles adding, storing, and retrieving the data associated with ETH2’s shards. Shards spread the network’s load across 64 new chains. This will reduce network congestion and increase transactions per second.
Phase 1.5 updates Ethereum as we know it today from PoW to PoS by making Ethereum a shard in ETH2.
Phase 2 adds execution to the remaining ETH2 shards which enables smart contracts to run on all of the shards, expected 2022. There is also an ongoing discussion and point of research for the Ethereum community around the final phase.
The continuous transition to ETH2 will look like the following, with one of the most important aspects being the docking of mainnet to the beacon chain expected later in 2021 or early 2022.
Staking on ETH 2.0 requires technical expertise and infrastructure costs as well as slashing and offline penalties if the staking is improperly managed. Self-staking also brings with it a minimum deposit of 32 ETH and a token lock-up which could potentially last years.
Through the use of liquid self-staking services, users can eliminate these inconveniences and benefit from secure, non-custodial staking backed by industry leaders. Check out The Ultimate Guide to Staking on Eth 2.0 for more details around the ETH2 roadmap and staking pools.
You can join staking pools to earn staking rewards without locking assets or maintaining staking infrastructure yourself.
Yields on ETH2 currently sit at around 9% APY and will trend down to 4.9% when 10M ETH is deposited.
Diem
Diem is a project initiated by Facebook, previously known as Libra. The project will be made up of three parts:
- Diem Blockchain payment system which aims to serve as a foundation for financial services that meets the daily financial needs of billions of people to enable open, instant, and low-cost payments around the world.
- Diems Coins initially, the Diem payment system will support only a few digital currencies, such as ≋USD, ≋GBP and ≋EUR, which will have the same value in the country’s respective currency. The Diem payment system will also support a combination of these digital currencies, ≋XDX. Over time, the Diem payment system intends to support additional digital currencies.
- Governance by the independent Diem Association and its subsidiary networks.
Novi is the digital wallet that integrates Diem with Facebooks messenger products and is expect to launch in 2021.
Free Ton
Free Ton is a community lead project based on the proposal developed by the team behind the messaging app Telegram. Previously called the Telegram Open Network (TON), Free Ton consists of a PoS master chain and the Free TON Crystal (TON) as its native token.
The network launch roadmap will be divided into three stages:
- Stage I ”Raging Bull” — The current stage of the project with an incentivized beta network.
- Stage II ”Rumble Fish” — Incentivized Beta Network with validator voting for Network Configuration
- Stage III “Fight Club” — Decentralized Main Network, at the point where decentralization is sufficiently achieved.
Conclusion
In 2020 staking has gone from a research field within cryptocurrencies to one of the dominant forces in the industry with several of the largest networks demonstrating PoS is no longer just an academic pursuit.
2021 will see the culmination of years of development time come to fruition with the launch of eth2 sparking a new generation of DeFi apps that can leverage the benefits of a much faster and cheaper network. Along with a number of improvements, including energy efficiency, lower barriers to entry, stronger crypto-economic incentives, and greater revenue-generating capabilities for a broader set of users. Staking is set to make crypto more accessible to a wider base of users and investors and we’re still only in the early days of this movement.
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