Opinion: Staking Profit Model of Productive Asset Tokens
Editor's Note: This article is from:Ethereum enthusiasts (ID: ethfans)Ethereum enthusiasts (ID: ethfans)
Summary
, Author: Fitzner Blockchain, translation: A Jian, reproduced by Odaily with authorization.
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Summary
This post will explore the rationale behind the productive asset token model. The so-called productive asset token model is that users pledge capital in the system in the form of protocol native tokens, and then earn income in the form of exogenous assets (such as ETH, BTC or DAI) by virtue of their contributions to the system.
In short, we found that:
Inflation of the native token is good for starting the network and incentivizing everyone to participate in the network;
The reward of exogenous tokens is conducive to establishing a clear value accumulation mechanism, limiting the selling pressure of native tokens, and making it easier for end users to grasp the demand for native tokens.
The combination of these two mechanisms provides a powerful engine for token economic design.
One of the most intriguing aspects of projects that issue their own native tokens is that projects can use rewards to attract key contributors to perform value-added work for the system.
From a more abstract point of view, this "stake-work-profit" model can be considered as a simplified version of "paying money to buy game skin (skin in the game, also means 'interestedness')", that is, users Bringing together to enhance the security of the economic system, improve the pledge rate and decentralization.
Because there is no access review for smart contracts, anyone can participate in these value-added work; it is conceivable that as products and services expand, this architecture will enable users to obtain considerable benefits.
In this article, we want to point out a trend in staking-based ecosystems; more pronounced in those that issue "productive assets" (assets that reward users with exogenous asset rewards).
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Productive Staking Model
Although staking models abound in cryptoeconomic systems, most protocols use the protocol’s native assets to reward stakers.
This model is fundamentally detrimental to the value accumulation of assets, because validators have to exchange rewards for cash at some point to cover various expenses; this forms a huge Selling pressure.
Provide rewards issued in the form of exogenous assets (such as ETH, BTC, DAI, etc.)
Does not rely on native assets to reward work
Establish a clear approach to value accumulation to mitigate selling pressure
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"Exogenous assets" are those assets that are not directly related to the native token and system.
In the following, we will refer to some exogenous assets (such as ETH, BTC, DAI, etc.) to issue rewards, but use native tokens such as ZRX (the token of the 0x project) or LPT (the token of the Livepeer project) to participate in the pledge Model.
If this is done, the participants in the ecosystem will have confidence that the rewards they receive have long-term value, because exogenous assets are liquid, useful, and have more diverse influences.
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In a productive asset-staking model, participants' rewards are no longer based on the long-term success of the projects they participate in.
Although it still "depends" on the obtained exogenous assets to some extent, there is reason to believe that the value storage basis of these exogenous assets is stronger than the pledge project itself.
After decoupling the dependence on the growth of the original asset value, participants should be more motivated to participate in the system, because they no longer have to worry about whether they want to all-in ("dedicate themselves") to a small project.
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value accumulation
Theoretically, the more income the project earns, the more value the token holders who pledge the original assets will get.
With these theoretical ideas in mind, let's look at some projects that employ this pattern.
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A token project that issues productive assets
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0x protocol
With the launch of version 3 of the 0x protocol on the Ethereum mainnet in early January 2020, the decentralized liquidity protocol began charging takers a small fee for each transaction. Market makers, on the other hand, can receive ETH rewards in proportion to the number of ZRK tokens they pledged and the protocol fees collected from their orders.
The current eppch ended on February 7, and 10.67 million ZRX have been pledged to compete for 31.06 eth (worth about $5,200) in the liquidity reward pool. In other words, each pledged ZRX token can get 0.0000029 eth; or in other words, the epoch return rate of the liquidity provider is 0.20%.
Ren Protocol
While this change created a solid model for value accumulation in ZRX, 0x had to shift its focus to generating greater transaction volume. The good news is that 0x just released a liquidity aggregator for the protocol, and people can now buy any token on all major decentralized exchanges with just one API.
Going forward, it will be interesting to see how much adoption DEX aggregators gain and what impact they will have on the protocol fees created by ZRX liquidity providers.
The Ren Protocol is a cross-chain decentralized exchange that provides a private and interoperable liquidity layer for DeFi. The protocol implements dynamic handling fees. Users must pay at least 0.1% handling fees when transferring tokens across chains. At the same time, they can choose to increase the handling fees by 0.01% to encourage Darknode to prioritize their transactions.
In Ren's dynamic fee mechanism, all fees are paid in the form of tokens (BTC, ZEC, BCH or DAI) transferred by users; this makes the protocol's native tokens a pooled liquidity productive assets. Ren token holders can stake REN and obtain income in the form of exogenous assets, because the income is not distributed in native tokens, and naturally there is no selling pressure from rewards.
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The Graph
- REN's return on exogenous assets in the near future -
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Livepeer
The Graph has established a mechanism for querying blockchain data on a decentralized network, starting from Ethereum. With Graph, dApp teams no longer need to run a centralized server to query data, they can use a trust-free, open infrastructure, and easily obtain data for a specific blockchain.
The protocol's native token, GRT, has been relatively unnoticed; however, GRT provides a solid value-accumulating economic model while abstracting away the need for end users to hold native tokens: users can use ETH or DAI is used to pay for querying data, and validators earn income by staking GRT and operating infrastructure. In addition, Graph indexer can also get GRT inflation rewards.
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Orchestrator and its delegators can earn inflation returns in the protocol's native tokens, as well as broadcast fees in the form of ETH and DAI. When people pay a fee to the network, both Orchestrator and its delegators receive a proportional portion of the fee.
Augur
Livepeer has almost the highest staking rewards with an adjusted return of 18.60%. And the protocol recently implemented a Streamflow upgrade and launched a token holder master.
However, we have been unable to find data on the number of exogenous fees the platform has created so far. If you have data sources, please get in touch and we'll be happy to update this article!
Augur is a permissionless, decentralized prediction market platform built on Ethereum. On this platform, the results of the prediction market that people participate in are determined by Augur’s REP token holders, who will bet on the results they observe and earn fee income accordingly.
Kyber Network
Augur was one of the first token economies to reward its token holders with exogenous assets. In the Augur v1 era, REP can act as an arbitrator for the prediction market and earn ETH fees for reporting results honestly. However, in the subsequent v2 version, their team plans to integrate DAI as the basic asset for betting in the prediction market.
Therefore, the earnings of REP token holders will be converted to pay in DAI. While Augur's prediction markets have so far struggled to acquire users (in large part because of their oracle problems), upgrading to Augur v2 should simplify their token economy with a solid value accumulation mechanism, At the same time, the oracle machine of the agreement is decentralized (creating a more secure data supply mechanism for the prediction market).
Kyber Network (a leader in the decentralized exchange industry) has also recently introduced a new set of application scenarios for their native token KNC.
looking to the future
"Kyber will introduce a new staking mechanism for the token model. From now on, KNC holders will be able to obtain a part of transaction fees by staking KNC and participating in KyberDAO."
Although they did not clearly indicate that the transaction fee will be collected with exogenous assets such as ETH, we very much expect this model to come true with the release of KyberDAO.
looking to the future
We realized that these patterns had some nice properties to ponder. Most importantly, by decoupling native assets from staking rewards, projects will be fully incentivized to create a good model to capture the fees reflected in the form of exogenous assets.
The most compelling aspect of the staking model for non-productive assets is that these projects do not necessarily collect exogenous assets and distribute them as rewards. In the eyes of many founders, it is much simpler to distribute tokens minted by their own projects than to introduce mechanisms to capture the value retained in more mature tokens.
Second, we believe that native token inflation is a good way to maintain native token price balance. While we would like to see a 1000x return, slow and reliable growth over the long term is more feasible. Recognizing this, having an issuance schedule is a good way to avoid low liquidity due to strong staking incentives (as was the case with Synthetix).
