Original compilation: Kxp, Rhythm BlockBeats
Original compilation: Kxp, Rhythm BlockBeats
This article is based on the opinions of a16z protocol expert Porter Smith on his personal social media platform, which is compiled and translated by BlockBeats as follows:
Staking is a common part of Crypto Token design. But in fact, the pledge in the traditional sense was originally to ensure the security of the proof-of-stake blockchain, rather than embedding Token functions into the applications running on it.
So, what has changed, and what new design opportunities will it bring?
Broadly speaking, there are now two types of staking models:
1. Single-chain validator pledge
2. Staking within on-chain applications
To make the first mode understandable, I'll give a quick background for those who are new to Crypto. If you are already familiar with the traditional staking model, please ignore the following content.
Layer-1 blockchains are the main settlement ledger for different ecosystems, where we figure out who gets to add transactions to the ledger and how they are rewarded. Both Bitcoin and Ethereum are early Layer-1 chains, and currently rely mainly on proof-of-work systems to operate.
The mechanism of the Proof-of-Work system is: in order to add the transaction of the next block, the participants need to conduct a calculation competition, and there can only be one final winner. Participants must find the correct answer as quickly as possible and spread it on the network to win the game. Those who win can add the next block to the chain and get native tokens (such as BTC) as rewards. For others who competed, not only did they lose the game, but they also expended corresponding energy. And this is the so-called "mining".
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Relatively speaking, Proof-of-Stake (Proof-of-Stake) consumes much less energy because it fundamentally changes the way people are selected. Proof of Stake randomly pre-selects block winners based on one's share of native Token staked in the system, rather than forcing everyone to compete by expending energy. That said, there are no mathematical contests in Proof of Stake.
It's like a lottery where you put the tickets in a jar. If you misbehave, the dealer can take your ticket. Therefore, players will follow the rules, otherwise they will lose their tickets. In this case, the jar is a "smart contract" that both parties can trust.
Your probability of winning is proportional to the funds you invested. If your pledged amount accounts for 10% of the total amount, then your final winning probability will also be around 10%. People who compete in a proof-of-stake blockchain are also known as "validators".
The advantage of this system is that anyone can participate in rewards by staking Token. Even if you don't want to handle any technical work yourself, you can "delegate" your Token to the corresponding technical personnel. Doing so not only increases your chances of winning, but also achieves a win-win situation, because they can also get a share of your revenue (deducting the corresponding service fee), which acts as an incentive. Therefore, it is very important in the blockchain that workers must always be rewarded so that the entire system can continue to operate. But where do these rewards come from?
The answer is that these rewards come from Ethereum and are called "inflation rewards". The blockchain must issue Token rewards to those who do the basic work in a specific ratio. In an open network, anyone can get some rewards by investing in Token. We call this approach "validator staking".
If staking is based on inflation requirements specific to proof-of-stake chains, why do we see staking functionality in applications that are not blockchains themselves, but run on them?
This is actually a cultural continuation. It is not a "stake" in the traditional sense, but a new function derived from the existing paradigm, which can be realized with the help of Token.
Below, we focus on the second type of staking — in-app staking. Due to the existence of smart contracts, Token can be put into use in the application. Some specific application examples include: 1. Governance pledge, 2. Insurance pledge, 3. Fee pledge.
Governance pledge: Users can improve governance capabilities by locking Token. This concept is developed byCurve FinancePioneered, they designed the "voting rights escrow" model. In other words, the longer you stake CRV, the more governance voting rights you get.
andAaveanddYdX FoundationOther platforms have adopted this approach.
Fee staking: users lock their tokens to earn some revenue, no other conditions need to be met. This is often referred to as the "x" Token model, and several DeFi protocols have chosen to adopt this model.
As you can see, "staking" has nothing to do with the validators in these cases. The term has been carried over to describe any token use case in an application that needs to be escrowed by a smart contract.
Next, we will see more staking methods, including the lock-up release of DAO employees, the NFT mechanism, and theCosmosfor
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