Over 6 months back, Coinbase launched Tezos staking for its US customers and now they are rolling this feature out for its users in the UK and other EU member countries including France, Spain, and The Netherlands.
“With yields on savings accounts and government bonds at record lows — and in many cases negative — in the UK and across Europe, staking offers our customers a simple way to earn rewards on assets,” said Rhea Kaw, Product Manager.
In its official announcement, Coinbase pitched that staking Tezos on your own or via a delegated staking service can be confusing, complicated, and even risky.
This is where Coinbase comes in, which allows its users to have an estimated annual return of 5% with an initial holding period of 35-40 days.
Bitcoin Suisse – the Swiss crypto brokerage firm – has announced custodial and staking support for Tezos on May 19th, in order to lure more institutional clients to its platform.
Staking has been the hottest trend in the crypto space this year, given major exchanges across space have added support for Tezos [like Bitfinex and Binance.US] and other Proof-of-Stake based tokens. The broker platform would be using its PwC-audited high-security vault to store the staked coins.
The Swiss brokerage firm has over $1 billion worth of assets under its custody and the Tezos delegation and support will be made available via its Bitcoin Suisse Vault.
Proof-of-Stake (PoS) based blockchain platforms allow users to stake their coins for a fixed period of time and earn ‘interest’ on the staked tokens.
The crypto-verse calls it staking ‘rewards’ instead of ‘interest’ earnings to avoid regulatory clampdowns, but both processes are quite the same. The only way that staking differs over traditional Interest is that staking offers governing rights to stakers on the blockchain, with staked tokens being used to maintain the blockchain network as well.
Niklas Nikolajsen, the founder of Bitcoin Suisse, is a firm believer in Proof-of-Stake and even suggested that it is a superior consensus to Proof-of-Work. Nikolajsen believes PoW based blockchains, which is Bitcoin primarily, leads to the heavy loss of electricity and is less efficient when compared to PoS systems.
The Bitcoin Suisse platform has been offering Tezos staking services for almost two years now, first started in July 2018, however, under the newly announced scheme, they would use their highly secure and PwC audited vault.
The firm claimed that the decision was taken looking at the increasing interest of institutional clients in various crypto products, especially the staking services, with hopes that their decision would bring in more institutional clients to their platform.
Bitcoin Suisse was also among the partners that supported the latest product of Tezos called tzBTC, which is a bitcoin-backed token on Tezos blockchain.
Roman Schnider, CFO, and Head of Operations at the Tezos Foundation commented on the launch of Bitcoin Suisse secure vault based staking launch saying:
“Tezos was created with fundamental security features like formal verification that allow for institutional-grade smart contract security.
As more institutional adopters and investors get involved with the Tezos protocol, institutional-grade custody services […] will be an integral part of the ecosystem.”
Harmony extends staking options to users with a number of staking companies already expressing interest to partner with Harmony.
They will issue around 441 Million ONE tokens annually to go directly to stakers to incentive staking.
News has surfaced that Harmony has revealed they are extending staking options for their Mainnet users. They will reward users with extra tokens for locking their ONE token.
According to Harmony cofounder Nick White, this sort of arrangement would build trust levels with their client base without actually identifying them. Harmony’s top brass with a couple of trusted partners consists of the Blockchain’s oversight committee with the staking option to welcome more parties on board.
Their Token, ONE trading at $0.003407 has a market cap of $15.6 Million and registering trading volumes just shy above the $3 million mark. There are currently 4,596,807,869 ONE tokens in circulation as per this writing.
The base layer Blockchain in April 2019 disclosed that they had sourced around $18 million from their completed token presale. They were bankrolled by a variety of investors including the Consensus Capital Group of Silicon Valley, Bank Central Asia (BCA) Australia, Lemniscap VC of Hong Kong, and UniValues Associates from Singapore. The funds were injected into the development of their sharded Blockchain.
Already some staking companies: Staked, Stake.fish, Blockdaemon, Everstake, InfStones have expressed their interests in collaborating with Harmony to manage their nodes. They have advised those who want to stake, to partner with their staking partners’. Although they have left space for individual investors by designing a protocol that is pocket friendly (doesn’t require High computing power) increasing its accessibility.
“A computer with two cores, 2GB of memory and 30GB of storage”
They have offered incentives to encourage staking committing to issue 441 Million ONE annually to the stakers’. This would translate to high yields for the stakers: 164% (at 5% staked) to 9% (at 95% staked) in just the first year.
According to their blog, White believes that high staking (above 60%) would ensure the Network isn’t vulnerable to 33% attack. This would ease their minds knowing that majority of the tokens are locked in. He also highlighted that staking would create an organic demand for the ONE token. The unstaking process only takes 10 days once it is initiated by the staker.
They highlighted that creating a malicious fork in their network was grounds for contract termination. An additional 1000 slots would be availed to accommodate more validators on Harmony later on.
Staking services have seen a surge in popularity over the past year, which is evident from the fact that major crypto exchanges around the globe have added new staking services for different Proof-of-Stake tokens.
Tezos, one of the popular staking crypto asset has seen a huge demand in the staking ecosystem, and Bitfinex has become the latest exchange to add a staking service for the altcoin.
Tezos ($XTZ) is now available for Staking on Bitfinex!
Bitfinex entered into the staking game in April this year where it added three tokens namely EOS, V.Systems, and Cosmos (ATOM) for staking, promising timely rewards payout as high as 10% for customers who would hold these tokens on the exchange. At the time of launch, the exchange has promised to add Tezos staking in May.
How Does Staking Service Work?
For Proof-of-Stake mining, the network participants are required to stake their asset on the network to gain a governing vote and have a say in important network decisions.
This works similarly to generating interest in your hedged funds in banks. However, due to regulatory hurdles exchanges prefer it to call as staking.
A user can lock their digital asset based on the staking service time period offered by a different exchange which might range from months to years. These stake periods carry incremental interest rates depending on how long you choose to lock your assets for.
Once you decide to stake your tokens, they would be locked in a smart contract for a certain period of time and at the end of the maturity period, users would receive their tokens along with the interest offered by the exchange.
The demand for these staking services has skyrocketed in recent times, with the number of major exchanges venturing in the field grows exponentially. Bitfinex being the more recent entrant, due to high customer demand.
The California-based Coinbase embraced the staking game as early as November 2019, when it added Tezos’ staking services to its portfolio. The staking services listing also led to a 70% price rally for the altcoin on the platform.
Kraken followed in the footsteps of Coinbase and introduced staking in December 2019, offering a 6% annual staking reward. Binance.US also listed staking services for Tezos back in April this year while its parent company – Binance Global – added the staking services back in September 2019.
The staking option is slated for inclusion after the scheduled Katalyst network protocol upgrades by the end of June. The new staking services are expected to offer more flexibility and control to the community members in the decision-making process.
Kyber Network Crystal (KNC), is an ERC-20 token which can be staked by its holders along with the voting powers With.US’s staking pool, ATLAS after the scheduled upgrade within 2 months.
Gerrit van Wingerden, CTO and co-founder of crypto asset management firm Caspian. lauded the partnership between the two firms and called it a step in the right direction. He explained:
“This seems like a logical tie-up and would allow KNC token holders who are either too busy or don’t feel comfortable enough to vote on KyberDAO initiatives to delegate their votes to an informed third party and still receive voting rewards.”
How the Upcoming Network Upgrade Helps Traders
The upcoming Katalyst network protocol upgrade would allow traders and KNC token holders to vote on important protocol upgrades and they would be awarded in Ether from the network fees.
This will also make it the only protocol with deflationary staking token where the traders would be paid out in ETH based on the number of KNC tokens they have staked. Kyber also noted that token burns and rewards would be determined by the growth of the DeFi ecosystem.
David Freuden, a DAO enthusiast commented on the proposed upgrade and added staking option saying:
“It’s interesting to see staking providers, such as StakeWithUs, working closer with DAOs. The collaboration will lead to a healthy debate around governance and proxy smart contracts. Staking providers can also access a broader and potentially larger network of staking participants which will increase the size of deployable pooled funds.”
Binance.US, the US subsidiary of the Binance crypto exchange is all set to launch Tezos staking service on its platform from April 16. As per the official announcement, the Tezos staking services will be activated by 9.00 EST on Thursday.
Tezos staking has gained a lot of traction from around the globe in recent months and Binance being a leading exchange service provider had the Tezos staking facility on its global platform. The announcement also clarified that Tezos holders on the platform would not have to go through any complex procedures to start earning rewards. The exchange will be solely responsible for determining the rewards for Tezos holders.
Binance.US would take an hourly screenshot of Tezos holders on its platform to determine the reward for the customers. The process will be quite similar to other staking services available for different tokens on the platform. Binance would calculate the staking rewards on a daily basis, however, the allocation of rewards will be done on a monthly basis. At preset Binance.US support a couple of major Tezos trading pairs namely XTZ/USD and XTZ/BUSD, which are available on the Binance.US mobile application as well as website and API.
How Staking Services Help Customers Earn Reward
Binance as a global exchange offers a number of services, be it a fiat-crypto gateway to make trading easier or staking of various tokens without having to run a full node and earn a reward for staking those tokens. The global Binance platform introduced staking services on the platform towards the end of 2019, while its US counterpart introduced staking services in early 2020.
A users can avail the rewards by simply holding the available staking tokens in their exchange wallet for a certain period of time, the longer the staking time, bigger is the reward. Currently, there are two tokens available for staking, one being Algorand, and another being ATOM. With the Tezos listing on April 16th, the Binance.US would join the likes of Coinbase and Kraken who are offering Tezos Staking services.
Binance has become a giant crypto ecosystem in itself, right from having its own utility token BNB which was one of the best-performing assets in 2019 to have their own blockchain. The platform has also been on an accusation spree out of which CoinMarketCap is the latest one which created a lot of noise in the decentralized space on whether acquiring an independent crypto data monitoring services would be good for the crypto ecosystem. Recently, it was also revealed that Binance uses a significant portion of its profit for acquisition.
The announcement was made on April 3 and says the staking rewards offered by Bitfinex will be up to 10% per year on crypto assets that use the Proof-of-Stake (PoS) algorithm. Here’s what Paolo Ardoino, the exchange’s CTO, had to comment about the news:
“We’re committed to engaging our existing users and the wider community with new products and innovations. The Bitfinex Staking Rewards Program provides our users with another avenue to increase their holdings on our platform.”
Customer Demand for Staking Has Been High
Ardoino also mentioned that the exchange’s customers asked in very high numbers for staking, the service that allows traders to make passive income on the crypto assets they hold with Bitfinex. Staking here will support 3 cryptocurrencies: Cosmos (ATOM), V-Systems (VSYS) and EOS. It was specified that more stackable tokens are going to be added in the following months and that Tezos (XTZ) will launch in May.
Furthermore, Ardoino talked about the launch of P2P margin trading or lending-related products and derivatives sometimes soon. The promotion of the new staking service includes a competition in which Bitfinex branded apparel can be won.
Passive Income Options Are Now Everywhere
Crypto exchanges are in a fierce competition when it comes to offering their customers opportunities to generate passive income on the crypto assets they’re holding. Back in March, OKEx consolidated its Earn interface for staking, lending and term-deposit services, offering passive income streams for up to 32 crypto assets. OKEx’s director of financial markets, Lennix Lai, said that traditional banking could never offer the opportunity of staking when it comes to generating passive income.
Crypto.com launched on March 23 the Crypto Earn service that offers returns of as much as 12% per year on its platform’s deposited TrustToken stablecoins. Crypto.com’s CMO Sean Rach said the more products that help customers generate passive income with crypto are created, the more the crypto industry gets a chance to compete fairly with banks and traditional banking models.
Coinbase has managed to move the Tezos Staking Bakery, the largest validator since its launch in 2019 which the exchange has been operating since launch, from the United States to Ireland in less than 60 seconds on March 31. The move of staking Bakery was done in the light of regulatory requirements of the Swiss digital asset product provider, Amun.
Coinbase has been offering its custody and baking service to Amun ever since they launched their Tezos-based exchange-traded product on Swiss exchange, SIX. The regulatory changes in the Amun were the sole reason behind the recent move, which required all its staking products and services to be operational within the European Union.
Coinbase Cites Two Prominent Strategies Which They Took Under Consideration Behind the Move to Ireland
Coinbase noted that they pondered over two strategies before deciding to move the Tezos Bakery from the United States to Ireland. The first one was to stop any activity of its US-based validators before deploying the Irish validators. Although the process required nearly an hour in downtime, it ensured that the security risks were minimal.
The second strategy was to initiate the Irish validators before shutting down the US validators and stop the US validators when the Irish validators were completely in control. However, this move would have exposed the validator network to significant security risks. In the end it was decided that the way to go about it was to decouple the validator’s endorser from the node which eventually helped in making the migration process to complete in under 60 seconds.
As a result of decoupling, the exchange found that voting on blocks was being done from Ireland while new blocks were being produced from the United States. Coinbase finally saw a couple hour window suitable for moving the baker to Ireland and eventually completed the migration. Coinbase explained,
“A Tezos validator has two main components: the baker, which produces new blocks that include transactions in the digital ledger, and the endorser, which votes on blocks that other validators produce […] Large Tezos validators typically only produce or bake new blocks every few minutes or hours, but they need to vote or endorse almost every minute.”
Algorand’s 200 Million Algo staking reward program’s first 6-month session completes today
US, China, Canada, and other countries not qualified to receive the rewards
ALGO currently trading in the red, but the release of nearly 9% of ALGO circulating supply not expected to bring in more losses
For participants of its Super Rewards staking program. Algorand will be unlocking 50 million of its ALGO tokens.
However, the Algorand Foundation has explained that the pool of 200 million ‘reward’ ALGOs will not increase the total ALGO supply. The Foundation explains that this is because
“it comes from the pool that had been assigned to auctions, which are suspended for this quarter.”
These 50 million tokens equal 9% of ALGOs total circulating supply. Currently, the token trades at $0.333, down 2.06% in the past 24 hours. This new influx of tokens could add increased selling pressure for ALGO’s price.
But reportedly, if Super Rewards move out even a single ALGO token from these rewards and previous staked ALGO, they would be disqualified. This means users won’t be getting any more ALGO from the remaining 150 million tokens to be distributed in the next three, 50 million, token releases.
“TLDR: Due to the Disqualification clause, I highly doubt people would unlock their tokens for selling. So nothing changes much and those 50 MIL remain locked more or less,” said Thomas in the Algorand Community Telegram.
A 200 Million ALGO Staking Reward Program
Algorand’s 200 Million ALGO staking reward program was a success, which received “overwhelming[ly]” positive response, and was fully subscribed by its deadline of Aug. 31, 2019.
Under the program, those participants that completed their KYC (know-your-customer) will receive at least 1 ALGO in rewards for every ALGO staked over the course of four 6-month periods.
These rewards will be given on March 1st with the completion of its first cycle. But to be eligible to receive their staking rewards, the participants needed to undergo KYC/AML checks by Feb. 23, 2020.
The staking reward will be calculated by the staking reward ALGO for that period, which is 50,000,000 ALGO divided by the total number of tokens across all qualifying wallets.
The trading of the tokens and auctions are, however, unauthorized for participants residing in the United States of America and its territories, Canada, Democratic People’s Republic of Korea, Cuba, Syria, Iran, Sudan, Republic of Crimea, and People’s Republic of China. As a result, they are unqualified for the staking rewards.
Algorand Inc. and the Algorand Foundation do not qualify for this program and are not participating, states the website.
Staking is an incentive mechanism by projects to encourage users to participate
2020 would see users from POW world exploring staking for the first time
With Ethereum slated to switch to PoS crypto space will be forced to reckon with staking sooner – Binance
Experts predict, staking fees to be close to zero by end 2020 & emergence of staking derivatives
Staking gained momentum in 2019 with Tezos (XTZ) having its more than 70% circulating supply being baked that has its prices soaring. Cardano has been the latest one to launch Shelley incentivized testnet that saw 5 billion ADA tokens staked.
This has Binance Research’s latest report covering “The Rise of Staking” and if “staking’s maturing ecosystem is compelling enough for widespread adoption”?
Staking is basically locking the cryptocurrencies to support the operations of a blockchain network and receiving rewards. It is used as an incentive mechanism by projects to encourage users to participate.
2020 would see users from POW world exploring Staking
Staking was first introduced as a concept in Peercoin (PPC) that started as a hybrid of Proof-of-Work/Proof of Stake chain only to transition to fully PoS.
In its research, Binance segmented stake-able coins into five core categories, Proof of Stake (PoS) like Algorand, Delegated Proof of Stake (DPoS) with assets like ICON and EOS, Distribution model with assets like Stellar, Dual-coin systems with assets like NEO/GAS, and Masternode with assets like Dash, TomoChain, and ZCoin. Caleb Kow, CEO of Tezos Southeast Asia predicts,
“Many who never came from the POW world would also start to explore staking for the first time and enjoy the seamless process.”
Staking Amount beats DeFi by 548%
When it comes to the largest 10 crypto-assets that support staking represents a cumulative market cap of $25.8 billion. Excluding Ethereum, the cumulative staking market cap is worth $11.2 billion with $6.4 billion being staked.
“With Ethereum slated to switch to Proof-of-Stake in the not-too-distant future, the blockchain space may be forced to reckon with staking sooner, rather than later.”
The highest yields are offered on Synthetix at 61.9% and Liverpeer at 102.7%, as per StakingRewards.
Staking rewards unlike block rewards in PoW blockchains are distributed to PoS participants often proportionately to users who stake coins on the network.
In comparison to the growing DeFi sector where $982 million is licked in volume, a whopping $6,368 has been staked.
But according to Xin Xu, CEO of Sparkpool, it will be very interesting to look into how to combine DeFi and Staking together.
When it comes to staking ratio, it is the amount staked at a single point in time divided by the circulating supply to the crypto.
With 81.7% ratio, Synesthetic is at the top. Meanwhile, among the assets listed on Binance, Tezos, Algorand, and Cosmos have the highest staking ratios at more than 70%. Coins like Tron and Qtum, on the other hand, have a staking ratio of under 25%.
Staking Derivatives & Zero Staking Fees Coming Up?
When staking coins, users have to consider the risks of unlocking restrictions, frequency of reward payouts, custodianship risk, opportunity costs, staking reward rate in comparison to holding other coins, security risks, interest rate uncertainty because “what you see may not always be what you get,” and price uncertainty.
Also, you can either go for staking pools which are much like mining pools where on-chain addresses delegated candidates to accept pledge support or delegation services. Dedicated custodian solutions are another option that can help to stake on the user’s behalf in exchange for a cut, similar to delegation services.
However next year, according to Kelvin Koh, Co-founder and Managing Partner of Spartan Group’s prediction,
“Staking fees will be close to zero by end 2020 and half of the independent stakers will be out of business.”
It would, however, just be the starting as Colleen Sullivan, CMT Digital emergence of staking derivatives just like Tiantian Kullander, Founding Partner of Amber Group. Kullander sees this happening after the cryptos like XTZ, ATOM, DOT, ALGO prices sees decoupling from the rest of the space.