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Breakthrough of PoS public chain: deep combination of DeFi and Staking



With the recent popularity of DeFi, the transaction fees of Ethereum have risen sharply, and various DeFi projects based on Ethereum have caused the entire network to be congested. In contrast, some mainstream public chains based on the PoS mechanism have not been able to use the development of DeFi to increase their popularity in 2020. Compared with the PoW (Proof of Work) mechanism that needs to lock "hardware" to generate computing power, the PoS (Proof of Stake) mechanism needs to lock "capital" to reach a consensus. Theoretically, the tokens of PoS projects can be 100% pledged to its network, but while achieving network security, it will inevitably lead to reduced liquidity, hindering the development of the DeFi ecosystem based on token mortgages. For example, according to MINTSCAN data, the pledge rate of Cosmos is as high as 64%, which means that its liquid tokens only account for 36%, and the liquidity of the token is greatly reduced. Moreover, it takes 21 days for Cosmos and others to redeem tokens from the network. The fluctuations in the secondary market may directly lead to the loss of many pledgers (stakers) on the legal currency basis, and they cannot obtain funds from the market for a long time. From the perspective of capital efficiency It is very low. Solution: shadow token As for how to release the liquidity of pledged tokens, the major development communities have formed a set of solutions, which is to issue a bond-like pledge certificate and return it to the mortgager as soon as possible. To solve the waiting and benefits of the "unlock period" from the demand side, a similar design is described as a "shadow token" in the article "The bAsset Protocol" by Korean blockchain developer Ryan Park. V God: DPoS systems like EOS are plutocrats: Twitter user Patrick McCorry said that in fact, delegated proof-of-stake systems (DPoS) such as EOS are more like democracies. For example, users pledge tokens online to elect validators. BTC and ETH avoid this. In this regard, God V God just replied that they are plutocrats, and they should not destroy the concept of democracy with a system where the official power of giant whales is thousands of times higher than that of everyone else. [2020/8/6] From the paper "why stake when you can borrow" from the blockchain economic model consulting agency Gauntlet, this new type of product is more fully deconstructed - staking derivatives and pledged interest-bearing tokens (Lien Token), using the increasingly mature DeFi product framework in the first half of 2020 to embed other PoS public chains to solve the liquidity problem of its pledged assets. For example: Polkadot is currently the largest PoS blockchain with a valuation of nearly 3 billion + US dollars. According to the data of StakingRewards, as of September 25, 60% of DOTs are pledged in the network. Imagine a scenario: If Polkadot's verification nodes are allowed to lend 75% of the pledged assets, but in the form of synthetic assets. We temporarily call it sDOT, and sDOT is equal to its initial market price to obtain short-term liquidity for verification nodes. V God: ETH transaction fee estimates in the past week have exceeded the rewards received by most PoS verifiers: On May 18, Ethereum founder V God tweeted that in the past week, Ethereum transaction fee income exceeded most The reward (estimated) that PoS validators will receive. ZK Rollups and sharding are coming to increase capacity, but even today this is an important milestone towards economic sustainability. (Note: ZK rollups is a hybrid scaling method that combines on-chain security and the second-layer network through smart contracts and zero-knowledge methods.) After [2020/5/18], in order to balance the balance of payments, verifiers need To recover his pledge return + block reward, sDOT is needed to buy back DOT. We call this "synthetic asset" "stake derivatives". The synthesized sDOT is a so-called pledged interest-generating token (Lien Token), which represents the proof of interest-bearing currency holding within a specified date in the future, and can be actively integrated into various DeFi applications. This design can greatly improve the PoS class. The liquidity of the smart contract platform. Pros and Cons of Staking+DeFi Derivatives Design If there are relatively mature derivatives in the staking process, similar to the pledged interest-earning token model, for verifiers, liquidity (funds) can be obtained to pay for expenses; for ordinary users, no need to pay attention The complicated process of staking and entrusting can directly obtain the synthesized interest-bearing digital assets in the secondary market, which is a very meaningful attempt for the revival of the PoS public chain. With the rapid development of various DeFi protocols in 2020, it is gradually becoming possible for complex on-chain derivatives to be recognized by the market. News | Hyundai-backed blockchain company cooperates with CasperLabs to develop PoS blockchain: According to coindesk, HDAC Technology, a blockchain company backed by Hyundai Motor Company, announced a partnership with blockchain startup CasperLabs to build and integrate Customized PoS consensus protocol. The two companies signed a memorandum of understanding (MOU) on June 28. HDAC, the issuer of the modern DAC token, is reportedly looking to switch from its PoW protocol to PoS. [2019/7/9] The article "What PoS and DeFi can learn from mortgage-backed securities" by Gauntlet, an economic model research institution, uses a model similar to housing mortgage-backed securities to model PoS networks. At present, the commonly used design in DeFi lending agreements is to mint stable tokens by mortgaging digital assets. If the mortgagor cannot repay the mortgage, it will be liquidated. Similarly, pledged derivatives allow nodes to obtain pledged assets. Assuming that many verification nodes borrow and lend their pledged assets at the same time, the security of the entire PoS network will be related to the default probability of each verification node that pledges and borrows. (Probability of defaulting) related. Simply put, if the PoS public chain conducts large-scale derivatives of pledged assets to obtain liquidity, then at the same time they will also inject mortgage loans into the entire system. The benefit is that validators have increased capital utilization, but if the network's lending standards are low, a default can trigger liquidation and greatly reduce the security of the PoS network. Dynamics | The amount of locked positions in Ethereum Defi surged 6 times a year and is expected to continue to increase after the launch of PoS: According to BlockBeats, about 3.2 million ETH has been locked in DeFi, ENS and Edgeware, accounting for about 3% of all ETH in circulation . This is 6 times the total locked volume a year ago. With the launch of the PoS mortgage system 6 months later, the ETH bear market will be self-defeating. [2019/7/4] Therefore, in the design of such protocols, it is necessary to carefully design the pricing function of derivatives to strike a balance between liquidity and network security. Can these verifiers who want to obtain liquidity lend How many. Case The currently active-zce projects in this field are distributed in China, the United States and South Korea. Many design proposals for pledged derivatives come from PoS node organizations, such as Wetez, Liebi Pool, Chorus One, etc., who have accumulated a lot of experience in the PoS field. Realize that innovation is needed to balance the security of the competition chain and the vitality of the ecology. In 2019, these institutions grew up in the last round of "staking economy" and accumulated relevant technical experience. Professional verifiers in the industry seem to have reached a consensus in the new round of decentralized financial cycle - Governance Engineering Realize the solution to the problem of "liquidity of pledged assets". According to the classification of the well-known PoS base layer service organization Chorus.One, the design of "stake derivatives" is divided into four categories: dynamic | The SPoS consensus mechanism introduced in Era has now been used for full-node minting tests. It is reported that the full version of the SPoS white paper and its main network will be launched in the near future, and part of the code and test network have been open sourced. [2018/9/13]1. Native class (credential concept proposed by Sunny of Cosmos); 2. Non-native class (more mainstream, including Stafi/Bifrost/Acala/Everett, etc.); 3. Synthetic class ( The design of derivatives, the pledged interest swap contract synthesized by the transaction between the two parties); 4. Custodial category (centralized institutions control private keys to issue securitized products of pledged assets). From the perspective of protocol design, in addition to the central custody institution, the design of the decentralized pledge liquidity protocol is divided into two schools: 1. Pursue the native class design that is easy to use and still retains governance rights for token holders; 2. Pursue Non-native design across PoS networks but may require stricter security risk controls. The delegation voucher is a design based on the original chain. The developer and researcher Sunny of the Cosmos community and the node Chorus.One have many researches and proposals in this field, and the Matic Network team is also working on this type of design. Engineering realized. Many new development teams are more focused on the design of "non-native" staking derivatives with incentive models. For example, the teams that have implemented projects in this direction include the substrate-based pledged derivatives protocol Stafi and Bifrost teams. Stafi has launched its governance token and Q4 will release a series of rTokens. The number of hourly nodes exceeded 100. As far as the team is concerned, Wetez, founded by the founder of the Stafi team, Kaba, is an early PoS mining pool in the Asia-Pacific community and has accumulated years of industry experience. Different from other projects, Stafi cooperated with the centralized trading platform for crowdfunding and financing, which accelerated the speed of its application landing. The international community operation designed by Stafi this year, such as the StakingDrop event, ended on August 31. In the StakingDrop event, 1700+ addresses bound 200 million US dollars of pledged assets to the network. Stafi Protocol recently released its roadmap for the fourth quarter. It will launch an ERC20 bridge that crosses assets to Ethereum, which can convert FIS or rToken into Ethereum tokens and circulate them in Ethereum's decentralized exchanges, such as Uniswap. And its rToken will be connected to Polkadot/Cosmos and other mainstream PoS chain ecology. rToken will be implemented on FIS first, rFIS is planned to be launched at the end of November, and rDOT and rKSM will be developed after it runs smoothly. The rFIS scenario will also be opened up on Ethereum, and will focus on the Dex decentralized exchange business, followed by other Defi application scenarios. Unlike the Stafi team, which focuses on DeFi finance and multi-chain diversification, Bifrost focuses on the construction of the Polkadot ecosystem. Its founder, Lupris, won the third prize in the 2019 Polkadot Shanghai Hackathon. Before Bifrost was connected to substrate, Bifrost had issued PoS mining rights similar to Staking derivatives based on smart contracts. In the Bifrost Asgard CC2 incentive test network that ended in August, the cross-chain exchange volume of EOS to vEOS exceeded 8 million. The Bifrost development team attaches great importance to product realization and decentralized community incentives. From the PoC testnet in March 2020 to the later Asgard incentive testnet, after half a year of stable operation of the testnet, the team has accumulated a lot of experience including Runtime fork-free upgrades, Dapp Product development, network block stop rehearsal and repair and other valuable experience, joint community media held several technology sharing sessions, shared the Substrate development experience accumulated by Bifrost in the development process, and helped its testnet gain a large user base in the early stage, So as to educate potential developers and users on how to develop and use vToken based on Bifrost. At present, Bifrost has officially launched the third round of testnet incentives. A total of 18,000 BNCs are encouraged from the number of blocks produced by Validator, cross-chain and vToken exchange. After the release of the new version of the node client, the testnet has broken through 100 nodes. Bifrost said that it will gradually access other well-known PoS public chain ecosystems except Polkadot/Cosmos to provide liquidity. With the approach of Phase 0 of Ethereum and the launch of various PoS competition chains (Celo / Solana / Near), we have seen a lot of rapid progress in the design of staking economics (staking economics), which will help more proof-of-stake based PoS The public blockchain ecology is active, and LongHash will continue to pay attention to this field in the following content. This article was sponsored by Stafi and Bifrost.


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