Are the staking strategies of Cosmos token holders diversified? A set of data tells you the answer

The distribution and diversification of tokens are two important dimensions to study the degree of decentralization and ecological development of the PoS blockchain network. It can also allow us to further understand the staking economy and the practice of many token theoretical designs.

stake.fish is one of the main verification nodes on the Cosmos network. It will not only use its abundant professional knowledge to carry out safe and effective verification on the network, but also explore various ways for the diversification of the network ecology.

stake.fish's selected analysis articles this week use data to clearly summarize the characteristics of staking on the Cosmos network. Using the data such as the choice of the commission rate by the holder, the entrustment of the same address to different verification nodes, etc., it reveals the different characteristics of the staking of large and small holders on the current Cosmos network. After reading this article you will learn:

• Whether the overall Cosmos network staking is diversified;
  

• The difference between the size of the verification node and its setting commission;
  

• The choice of commission for different token holders;
  

• Diversified staking characteristics of large and small token holders;
  

• Examples and interesting findings.

Original title: Analyzing Stake Distribution and Diversification on the Cosmos Hub

Compile: stake.fish

Compile: stake.fish

Decentralization on PoS networks is a multi-layered topic. Many theories and designs have been proposed to achieve the decentralized distribution of ecosystem network power among different entities, and the Cosmos Hub has been practicing some of these theories and designs in the past few months. The following will discuss mainly the distribution and diversification of staking on the Cosmos Hub, so as to analyze the status quo of token holders participating in the early PoS network.

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speak with data

In order to understand how ATOM token holders participate in staking, this article uses the Stargazer API (provided by Certus One), and uses the snapshot data on September 5 to analyze all active delegations, scales, corresponding delegators and validators addresses were analyzed. It should be noted that addresses are not equal to participating entities. The funds in different addresses may come from the same holder, or there may be different holders (such as the practice of exchanges and custodians) sharing the same address. Similar situations do not will be reflected in the analysis of this paper.

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Explore staking token distribution

Before diving into the diversification of staking, let's first look at the distribution of staking. The following chart shows the distribution of ATOM tokens being staking. The chart is sorted by validators and colored according to the commission ratio. The ratios are "0-5%", "5%-10%", and "more than 10%" three intervals.

The staking distribution of the 100 active validators on the Cosmos Hub. The Gini coefficient is 0.7366. (September 5, 2019)

[Editor's note: The Gini coefficient is usually used in the traditional economy to measure the characteristics of income distribution. The coefficient is between 0 and 1. The smaller the data, the more inclined it is to the average distribution within the system. 】

We can see that the largest verification node in the figure sets the commission rate in the range below 5%, and there are nodes with a similar scale setting the rate above 10%. This usually means that the node has its own funds for staking, or is more focused on large currency holders.

[Editor’s Note: The picture shows the Cosmos main node ranking intercepted by the editor from the Stargazer browser on September 20. Among them, stake.fish ranked third. The commission set by stake.fish is below the 5% range mentioned in the article, and a 4% commission is charged in the block rewards obtained by the delegator. For example, if the delegator receives 100 ATOM tokens as a reward, stake.fish will charge 4 ATOM tokens as a transaction fee, and the delegator will receive 96 ATOM tokens. Among the nodes that provide strong verification services, stake.fish is one of the nodes with the lowest fees. 】

Looking at the set of validators sorted by staking, and visualizing the number of addresses delegating to them, we can see that low commission ratio validators are very popular, especially for small stakers. Arranged by the number of commissions, the top 3 verification nodes do not charge or set lower fees:

The number of delegators on the top 100 active validators on the Cosmos Hub. (September 5, 2019)

The graph also contains some interesting outliers:

For example, Huobi Wallet, which ranks 43rd, has 636 entrusted addresses. Let’s take a look at Coinone Node, which ranks 15th, with 745 delegation addresses. Both validators belong to exchanges.

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Reveal the diversity of staking

Now that we have an overview of the staking distribution among validators, let's take a closer look at delegation and its address origin:

Cosmos Hub staking distribution data summary (September 5, 2019)

These data help us to draw some interesting insights.

First, only about 1/4 of the addresses are diversely staking, but these addresses collectively account for 64% of the total amount of tokens staked. This means that addresses that diversify staking on different nodes hold 5x the amount of tokens than those that do non-diversified staking. We can conclude that large token holders are more inclined to delegate their tokens to different nodes.

Taking a closer look, considering their active order count and counting the number of addresses, we see a rapidly descending curve. Currently, there are 786 addresses with 2 entrustments, 347 addresses with 3 entrustments, and addresses with more than 5 entrustments are relatively rare.

Some interesting outliers are not represented in the plot. Specifically, there was an address maintained by B-Harvest that was used for tracking and monitoring purposes, and 119 commissions were made, but there were relatively few ATOM tokens in it. There are 6 other addresses with a similar pattern (less than 500 ATOM tokens delegated among 67 to 83 validators).

Address statistics based on the number of delegated verification nodes. The X-axis represents the number of commissions, and the Y-axis represents the number of addresses (September 5, 2019)

Finally, if we visualize the number of ATOM tokens staking from these addresses, sorted by the number of validators staking diversely from these addresses, then we see some more salient data points:

Sorted by the number of entrusted verification nodes, see the distribution of ATOM token holdings. The X-axis is the number of commissions, and the Y-axis is the number of ATOM tokens. (September 5, 2019)

The first high point in the right half of the figure contains 36 entrusted addresses, from the Tendermint team, and the amount of staking is about 21 million ATOM tokens;

The second high point contains 46 commissions from ICF addresses, and the amount of staking is about 7 million ATOM tokens. The most diverse addresses staked tokens to 51 different validators.

In the left half of the figure, two large token holders with two addresses with 16 and 18 entrusted transactions have also achieved better diversified staking.

in conclusion

in conclusion

Overall, the data presented clearly shows that ATOM holders are largely not diversifying staking across multiple validators. In addition, we also see that smaller token holders are more inclined to choose validators with lower fees.

The team believes that the diversification strategy of staking is very important to build a prosperous collection of verification nodes, which can achieve full network participation and contribute to the development of the ecosystem.

Perhaps it is because token holders do not pay attention to the diversification of staking and do not understand the benefits of doing so, or it may be simply because it is more difficult to do so, or because the risk of slashing is low, diversification requires further research on verification nodes, the delegation process and It is not worth doing for many reasons, such as the poor user experience of multiple transaction processes for extracting rewards.

Currently, we are also researching ways to increase staking participation and diversification, and continue to pay attention to the data and correlations on other PoS networks.