Stakero Blog

Compounding Yield: Staking As a Business

Model

The opening to earn wealth in cryptocurrency is around us. Staking crypto is one of the higher mass means, to make a profit, locking coins for some time. Staking is the ground of servicing the network of certain coins for the validation of the transactions.
Nodes in blockchain gain their reward for verifying transactions by applying coins as collateral. The node which doesn’t match network regulations is punished by losing coins. Each node of the blockchain of such coins is rewarded for adhering to the rules, thereby ensuring the reliability of the platform.
The financing of startups is clearly for observation of current tendencies. Staked attracted $4.5 MM of initial investment from Coinbase and Pantera Capital. Staked gives customers the opportunity to compound tokens by staking.

The advance of Anything-as a Service

A business model named Anything-as-a-Service (XaaS) has transformed companies over nearly every business. XaaS is evolving similarly to the Internet. These technologies offer much-demanded services at much lower prices. XaaS empowers consumers to use the services they need that reside in the cloud without using traditional delivery methods. Most often this happens in the form of a subscription, which is billed every month or year.
Previously, such well-known software manufacturers as Microsoft, Oracle, Corel, Adobe Systems, IBM, paid much attention to the production of physical goods that contained software. Such products required attractive media and packaging, warehouse space and shelves in stores, which often had to be paid for to better promote the product. Today, the software is hardly sold as a physical commodity. In addition, most of the products of these companies are now sold digitally. Companies began to significantly save on this model of production and sales. XaaS has become the solution to many business problems.

Cryptonomics

How XaaS has transformed the IT services landscape is reminiscent of the cryptocurrency economy that connects computer networks, cryptography, and game theory. Now people can safely communicate and exchange assets without the need to trust any third party while being surrounded by third parties.

Decentralization of financial and other systems is both a motivator and a constraint at the same time. It stimulates the exchange of transactions of various kinds and at the same time does not allow violating the rules established in the network.

Bitcoin became the first and main crypto asset to this day, provoking a flourishing industry based on the use of distributed ledger technologies. The blockchain of the first cryptocurrency, which uses an algorithm for confirming the validity of transactions using proof of work (PoW), does not allow forging transactions, which means that the system's assets. It just doesn't make sense because of the enormous costs involved.

At the same time, Bitcoin allows the miners who power the network to earn money by generating new blocks in which transactions are recorded. To do this, miners need a lot of computing power, which is growing due to the constant increase in the complexity of computations. A 51% attack in the Bitcoin system is possible rather theoretically, but in reality, it is almost impossible to carry out.

The evolution of cryptocurrencies continued and over time, Proof-of-Stake (PoS) algorithm appeared. Systems running on this algorithm rely on another feature to ensure the functioning and security of the network. This allows significant savings in energy and resources, since it does not require a lot of computing power.

Whereas in PoW blockchains, mathematics (computing) and physics (energy resources) act as a constraint, then PoS systems use a psychologically constraining factor. Nodes need to lock their coins in the system to validate transactions. While the more coins the node has locked, the higher its validation priority, and therefore in receiving a reward.

It is not profitable for nodes to violate the rules of the system or to allow them to be violated by someone since this will cause users to fail confidence in the network. This will immediately affect the price of the system token and the validators will simply lose the money that was spent on the locked coins. These job security and reward schemes create new business opportunities and generate and develop new technologies.

Staking as a business model

The resulting technologies have become the backbone of the business for cryptocurrency exchanges in the first place. Exchanges are centralized or decentralized platforms for exchanging cryptocurrency assets. By providing the services of an order operator, and often holding assets (usually on CEX), crypto exchanges charge fees for various operations with assets.

The volume of transactions on the largest exchanges such as Coinbase or Binance allows them to earn millions of dollars every month, making billions in turnovers. At the same time, commissions for each user are quite small. Many exchanges use their own tokens for intra-exchange settlements and commission payments.

Staking also allows management companies to make money, which serves the accounts and manages the capital of users. By accepting a deposit from a client, such platforms block coins on their wallets for the purpose of ensuring network operation and liquidity. At the same time, customers of the platform earn staking rewards.

Moreover, staking can be applied to pay for the addition of the true data to the blockchain. Additionally, users can acquire higher status or admittance to particular peculiarities of staking systems.