I believe that we are iterating towards a decentralized future on the blockchain.
Stress testing the technology and discovering through social experiments what works for our behavioral needs and community dynamics in this new paradigm of incentivized human interactions.
If you believe this as I do, then you need to come to grips with the idea of ‘mining’, as decentralized blockchain systems by nature require some way to verify transactions and gain consensus.
Without going out of my depth, this how I view mining, the migration from proof of work (PoW) to proof of stake (PoS), and where I think staking as a service is leading us.
Every public blockchain is a system of decentralized nodes (or computers) which need to be incentivized to continually confirm transactions.
With PoW, which is what both Bitcoin and Ethereum are today, there are miner nodes which compete to solve a complex mathematical problem, which once solved releases a group of verified transactions to the blockchain.
This works extremely well with the big catch that it takes massive amounts of electric energy to run, and centralizes this power in the hands of a few well-capitalized mining companies.
PoS works towards the same verification end, except the creator of a new verified block is chosen in a deterministic way, depending on its wealth, using its stake of coins as collateral. A person or group stakes capital so there is an economic incentive to verify the transaction honestly.
My initial attraction to proof of stake was the environmental necessity for a more ecological solution without depleting the planet’s resources.
Whether the blockchain community shares my environmental bias, they do seem to unanimously have adopted this direction.
The migration from the now dominant PoW to PoS will I’m certain be long, complex, and arduous but it is well under way. Hybrid MasterNode systems (like Dash) are becoming increasingly common, and new blockchains like NEO in China are being built on MasterNodes and PoS from the ground up.
This idea of Green Mining (as some call PoS) is a gimme and will certainly happen.
But there is more to this when staking as a service enters the narrative here.
There are an increasing number of blockchains using PoW in some fashion, and likewise an ever growing opportunity for more and larger stakes to be placed. We are already seeing staking as a service platforms popping up, where well capitalized individuals have these services build, host, and maintain MasterNodes, sharing a piece of the profit (and risk).
There has been a gap between how traditional financial services and our stock portfolios work, and crypto as an investment vehicle.
There is risk/reward certainly in the crypto investment space, but the idea of passive, less risky dividend-paying crypto vehicle wasn’t there.
Till now.
These numbers popped up in my feed a while back and are worth looking at as a sample of annualized dividend rates paid out by some PoS coins:
NEO–5.5%. OKCash–10%. Dash–7.5%. Reddcoin–5%.
The list is long and growing exponentially all the time. It will literally explode when the Plasma and Lightning networks come on board with incentivized nodes over the next few years.
With staking as a service, we are laying the groundwork for a more ubiquitous blockchain-wired world that is 100% energy efficient and less costly to run. While an equally secure means of verifying transactions as the original PoW systems.
And not least, the creation of a new, dividend paying, crypto asset class–the MasterNode.
But the narrative goes even a step further.
I’ve been bothered that one of the initial promises of the blockchain was the highly intoxicating idea of the democratization of money. A notion that not only the rich get richer in this new world.
Staking helps move this forward to some degree.
While it is less capital intensive to stake a node then to build a competitive mining company with acres of computers running customized ASICs, it is still beyond the scope of most. Even at today’s bearish coin prices.
I involved as an advisor with NodeSwap, a company with a broad vision building a new democratized financial future in this area.
They are equalizing the playing field further, being attractive to both large institutions and very small retail investors alike. Building a staking as a service exchange that will tokenize PoS coins and Masternodes. Allowing any retail investor, no matter their size, to build a portfolio of owned coin and MasterNode slots.
With a click. With less risk, with passive income in a more easily understood and approachable vehicle.
I’m quite partial to this project certainly, but honestly inspired by this greater idea of a different and better financial and ecologically sustainable future.
That in the replumbing of the transaction verification and consensus process on public blockchains, something truly better, for all is possibly coming on line.
This is a brand new direction obviously, with lots of players coming in and a future that is very much up for grabs.
But one that engenders loads of optimism.
We get to creatively experiment with a decentralized future. We get to power this financial future at close to zero energy cost. We get to build a crossover financial instrument at lesser risk with passive income returns that is usable by all people not just institutions or professional investors.
And just maybe (I’m betting on this), we get to democratize access to this stack of opportunity in a new way for more people, cross borders, and cross income divides.
