tl;dr: Instead of having crypto sit around doing nothing, joining a proof-of-stake network and locking up tokens can generate respectable returns. The networks that simplify this process may generate an advantage in driving long-term adoption.
One of the ways that I first started acquiring crypto was through the purchase of a “mining-as-a-service” contract at Genesis Mining.
(If you want, use my affiliate code for a discount:xcUN4Q)
I bring this up not to sell you a mining contract.
I am reminded of it because I am seeing the slow maturation of services designed to help facilitate token staking in crypto networks.
The potential crypto/crypto returns (more than 5% and up to 155% in some cases) will attract some degree of new investment which will help bootstrap these networks.
To really go deep on this concept, see Jake Brukhman’s talk on Generalized Mining.
Top 7 Blockchain challenges to go mainstream in 2019 & more… – Data Driven Investor
Proof of Stake 101
By now, many people are familiar with the way that Bitcoin is produced, through Proof-of-Work. You know that computers solving complex computational problems is the way that the blockchain is secured.
One of the growing alternative methods for securing blockchains is Proof-of-Stake, which is where you “lock” up tokens as part of the verification process.
If it comes to light that you (or the representative to which you have assigned your tokens) is cheating, you lose them.
That’s your stake.
In return for staking your tokens, you are rewarded with a percentage of the tokens created in the next block, the so-called “block reward.”
The simplest way to think about it is a dividend or interest payment.
The ROI of Staking Your Tokens
Now, however, there is a growing awareness and interest in participating in these networks.
Along with it, more and more sites that are highlighting the benefits as well as providing clear instructions on how to participate.
I’ve touched on this in the past when I blogged about ARK where I’m getting about 5.5% APR.
Granted it’s all ARK/ARK but think of it like having a Euro or USD bank account that is outside of your normal bank and earning interest there.
Sites to Explore Staking Rewards
One of the sites out there to help you understand the various opportunities is Staked. It aggregates some of the leading networks’ staking opportunities and, when you click on each one, gives you instructions on how to participate.
It helped me get to Decred, for example, which has one of the most interesting community management models around.
Another is Staking Rewards, which has a more comprehensive list, much more detailed quantitative information about each token, and even a valuable rewards calculator.
So, here’s an example for Decred.
Next Up: Staking-as-a-Service
There’s still room for improvement when it comes to participating in these networks. Yet, with yields for LivePeer at 155% per year and Decred at 12.5% per year, I suspect two things will happen.
The first is that, as awareness grows, demand to participate in these networks will grow.
The second is that entrepreneurs will create ever simpler ways to participate in staking networks and staking rewards pools.
Eventually, it will be as simple as the mining contracts. They just needed Bitcoin or a credit card even to buy hashpower.
Soon, you’ll go onto to a Staking-as-a-Service site and using crypto or even fiat, you’ll buy a “staking contract.”
Then, you’ll have a predictable “fixed income” dividend on your investment which you can work into your overall portfolio.
People will come for the investment opportunity and the low volatility of dividends (not prices, necessarily). Many of them will then explore the networks themselves. Some of those will become active community members. The movements will grow.
I wonder if the Proof-of-Stake crypto-networks which offer the easiest on-ramps to staking pools will emerge as the winners by virtue of the fact that they grow their networks faster.
Regardless, the ROI is there and it’s an intriguing way to participate in the growth of crypto.
How Staking-as-a-Service Will Provide Fixed Income and Network Growth was originally published in Data Driven Investor on Medium, where people are continuing the conversation by highlighting and responding to this story.