The Future of Staking From Mirko Schmiedl - Staking Rewards

[Music] all right I hope you can hear me um thank you very much for joining I hope you're all are still awake uh looking forward to a presentation here um about the future of staking um exciting topic uh my name is merco I'm the co-founder of staking ws.com um I got very excited about staking like a few years back because it's basically a way how anyone can participate in like uh creating decentralized systems like with a very small Capital amount and like really helping to secure these system which I think is absolutely uh fascinating and uh yeah really um really amazing and um I always love to see like take a little bit of a step back uh look into like what happened like how did Proof of stake happen and where is the proof of stake and staking industry basically going into um I'm I'm co-founder of uh staken ws.com uh we are one of the uh largest research platforms forms and staking platforms you can stake uh into over like 10 different assets from our website into like uh a lot of different providers we have an API that's used by 21 shares and grayscale and so on um we have a certification program uh for staken providers with over 80 Partners on the board it's basically like an industry standard for staken provider certification we also organizer of the largest uh staken related conference in the world the staking Summit uh the next one is going to be in Dubai in April um and at the same time we also help to like onboard institutions into staking we have a institutional product sing whats Prime uh we basically do like strategy sessions with like large token holders to help them optimize their staking portfolio um we also founding member of the hyper looping Collective on hyper liquid um it's basically a standard for creating looping products um on hyper liquid but then also like subsequently uh we launch it on other chains including ethereum um I just want to like kind of paint the picture for staking overall uh currently it's around like a $300 billion industry in terms of staking market cap like the the capital that is being staked um what's kind of obviously like ethereum is the biggest one they have uh around like 75 billion dollar staked um interestingly uh Solana has higher Revenue in terms of like annual rewards generated than ethereum um because the the reward rate is just higher uh currently it sits at like $5 billion annual reward on theum it's around $3.3 billion annual rewards um and yeah it's kind of fascinating like the industry uh the staking industry grew from like I think 90 billion like one and a half years ago to around 300 billion now um I think it will grow like much much further um probably like 10x from here until like 2030 so it's also like a it's a huge industry that keeps growing and um is helping to make uh yeah the the blockchain systems resilient and and decentralized secure basically with a lot of like Economic Security um if you look at kind of the the history of proof of stake everything started in like 2013 uh with peercoin was one of the I think even earlier 2012 probably one of the first proof of stake uh coins um and then uh it went into like um yeah different chains like it was in I think 2014 or 2015 when vitalic uh talked first about uh moving ethereum to proof of stake obviously that took quite a few years until it actually happened um and then I I think it was in like 2018 2019 when like we had the first delegated proof stake networks um with teos Cosmos and then poka do came out um and then like we we had the ethereum uh Beacon chain um one and a half year years later the ethereum merge and this is when like the biggest um like the second biggest blockchain in the world also moved to proof of stake um I think the the trend will continue now I think we have like most of the biggest um blockchains in the world are all based on proof of stake and even like some some old chains like for example Iota like they also had another consensus they're also moving to proof of stake now so everything is going in that direction um I think there's even a possibility for Bitcoin to move to proof of stake which is maybe going to take like 20 years or longer but uh it's definitely a possibility um and yeah interestingly now we are kind of in a phase of like modularization um of staking uh we have more more like shared security protocols um and marketplaces and so on so there's a lot happening uh in in that space and I think it will continue to grow I guess the the next phase would be like the the expansion uh really like tapping into new use cases for proof of stake and staking um and I yeah like the the key challenges that I see for proof of stake for the next five years uh basically unlocking staking full potential I think there's still a lot to be unlocked um second is like making infra more efficient remaining resilient uh I think we we see it that like uh everyone wants like very high performance and one of the key challenges is how can we deliver very high performance um while maintaining decentralization and resilience of these systems because that's what it's all about right um third key challenge I think is um unlocking universal access making all of these things uh more accessible um for for everyone to participate um I think it's mainly going to happen via abstraction so I just want to break down these uh three three key challenges uh during the presentation um first one is like unlocking uh stakings full potential it's all about like yeah creating more use cases for proof of stake and staking um so yeah the the the question is like what will Stak can be used for uh either there's like no use case at all or it's like um yeah kind of a very diverse use cases into like yeah online collaboration and so on um and currently I guess we are somewhere in the mid middle uh we use it for like proof State consensus there's already uh ways for example Ave they're using staking mechanism to to do the insurance and so on um my prediction is like it will be way way more diverse um and uh we will tap into like digital labor markets overall in the end it's like staking I think can enable uh to secure any type of like digital labor relationship um I think it can secure intents agents Insurance governance and V uh content moderation there there are so many different use cases that can use uh yeah capital and guarantees online um and I I think this is this is definitely like a a pass um that we will go on um yeah I think uh eum can lead the the global Innovation here because it has a very like unique and composable uh Defi and staking ecosystem so uh yeah I think it's all about like generalized labor markets much more than just blockchain validation that's uh where we are today um more kind of uh sophisticated is like General insurance and then um I think the the intense use case uh is very huge uh basically staking can like guarantee any any labor relationship even intense um where you basically um yeah guarantee a certain outcome and then um anyone could like stake on that outcome in order so for someone to give someone the guarantee that this is actually going to be uh completed work um so yeah I think staking and intense is like it's a perfect match in heaven um you can think about like um a probably very pragmatic use case for intents it's like um you give an agent like a task like buy me a train ticket or like a flight ticket to Denver for like under $1,000 um and then the the agent or like yeah the agent could stake on that outcome so it gives you the guarantee hey it's actually going to happen um the agent can decide what's the like Hood um if it's not like if he's not able to fulfill this goal of buying the flight ticket under $1,000 to Denver he's going to get slashed um and if he does fulfill it uh he's going to get a reward so you as a user can basically have a guarantee um that you're going to get a flight ticket under $1,000 from for example an AI agent um and this can go like obviously way way further uh you can think about like yeah crazy use cases like um asking an agent to to give you like or like bring you an a green frog from the from the rainforest or something like this um for a certain price um and then the agent could stake on it so it gives you like that guarantees and uh I think it's a really interesting use case um furthermore I think yeah this is kind of how how we make like the um yeah the infra oh yeah this is also about uh unlocking the full potential I think what we see right now in like shared security protocols it's mostly about security um the problem is like security is actually very cheap um it's very easy to like unlock like the um this uh the the supply s side um of the uh shared security protocols um but there's still like very little demand um so yeah this is this relatively low people are um very comfortable staking for a relatively low yield um but what protocols actually want they don't want security because in the end everyone is launching their own token anyway um actually everyone wants liquidity uh all the protocols and that's what's happening right now with liquidity prot calls um it's really like they're they're incentivizing liquidity to come into their networks um and they're willing to pay for it in terms of tokens so I think if like the the reaking protocols today like I layer symbiotic and so on should should focus way more on like uh shared liquidity because this is what what's actually um needed right now like what's what's demanded right now from a lot of networks and services um and it can really help to bootstrap like uh entire ecosystems it's uh we see it with baroch chain proof of liquidity and also the cosmos Hub is moving more into like being being a shared liquidity Hub and so on and uh I think ethereum also should look into how to not just like uh kind of re repurpose and recycle security and uh Economic Security like e u but also liquidity how to make these tokens accessible um to different defi apps and so on um yeah the the the second challenge is obviously making infra more efficient while remaining resilient um there's a lot of things to it um first um we can look into like who will and should run validators on one side it's like either like yeah pure kind of Institutions on the other side it's like yeah everyone uh and the mom Stakes on on a retail smartphone uh currently we are probably here there's a few large validators um and I think my prediction is like it will go way more into like uh everyone being able to stake maybe they can uh run a valid data on their on their router uh in their computer at home I think uh this would be a very uh common thing um or like you can even like yeah run it in your in your Tesla with styling um we we already see that as well so I think these things will be uh will become much much more accessible and I know also ethereum is pushing uh yeah very hard into that Vision um which is great because I think in the end like the the most decentralized chain will win um so we have to look into like how can we uh remain entirely decentralized and and resilient because yeah if if there's a lot of financial applications being deployed on a blockchain it has to be a very resilient and decentralized ecosystem I think ethereum has like a very unique value proposition here with their staking economics as well and um can be seen as a as a clear leader in terms of decentralization uh which really sets us apart and the accessibility will continue uh already there's a lot of Home staking on eum which is not seen on any other chains um and uh that Trend will will continue on the other hand um blockchain infa will be like aggressively streamlined I think um it's U yeah it's all about like uh streamlining like better set of rules um to like incentivize um performant ecosystems uh decentralization and so on uh I think things like liquid staking for example we see is a very common use case we probably internalized in the protocol um and the the bad news here is like the the very simple basic infrastructure provision is like relatively cheap right it's uh kind of commoditized um and it will be kind of erased to the bottom there um good news is here like uh infrastructure providers can really differentiate like by by going into different ecosystems and by creating more value in like specialized Services um creating like high performance uh validators and uh really um yeah doing more stuff on like decentralization scalability and and security uh so I think yeah we'll talk about this in a bit but we also need to find ways to incentivize for example decentralization way more um and yeah incentivized home staking um yeah the the yield will go down um I think yeah obviously there will be a lot of other yield opportunities uh according to different risk profiles but the general inflation rate of blockchains I think right now um there there's a lot of like inefficiencies in the market and u a lot of blockchains are totally overpaying um there there will probably be like Arbitrage opportunities for um insiders if they know like what's the actual and the perceived risk because because right now like I guess the perceived risk of like uh running a validator uh is still way way higher than the actual risk of slashing um so right now it's kind of an an Arbitrage trade um but yeah in in the end uh this will become way way more efficient um same with like muv I think uh muv is just like uh it's it's very value extracting from the users um I think that like protocols must find ways uh to eliminate me from uh obviously it's always like a a and mouse thing um but in the end uh I think all the protocols will find ways to eliminate me um with like private man pools and so on uh it's just like it doesn't make sense to expose your users like it just creates a bad uix um and protocols obviously don't want that um right now it's a big opportunity but I I think the opportunity will will die out as these systems become more efficient um I think yeah uh everyone like all all the blockchain space need to find more ways of like really creating uh incentives for decentralization currently we we don't see like if you run a home Staker you own the the same rewards like running a professional ster um I don't think it should be that way we must find ways to create like and I don't think that this should be done with with slashing uh like the stick approach I think it should be done with the uh rewarding approach with the carrots um really finding ways how can like uh someone that's running valid dator from home and really contributing to the resilience of the network how can they earn more um so I think think there should be way way more research going into that direction um obviously like when we talk about like um the the the space being being more streamlined uh there's a lot of m&a happening already in staking it all started like uh a few years back already when when coinbase acquired bison trails and uh we saw a lot of Acquisitions also in the last year bitwise acquiring a tant the staking provider um nansen acquired stake with us iy acquired labs and so on and I I think this trend is going to uh continue a lot I think in the end all the banks all the uh custodians will want to have their own Stak in service so they're either going to like acquire someone or they're going to like build it themselves um and probably like there there will just be like one big staking provider um like Pro country um yeah so definitely there there's going to be a lot of m&a happening uh maybe even across chains obviously like a lot of chains are also like there have already been mergers across chains in in the AI space um and maybe this could also happen in like the the generalized L1 space um I think ZK will have to Streamlight uh proof of stake even more um there's like already experiments where you can like with a ZK proof move from one L L2 to another L2 without even settling on the L1 which eliminates the the purpose of having an L1 in the first place uh so I think also like yeah the the the settlement uh will become uh yeah way more uh yeah not that important actually if we have ZK so it will continue to streamline the P um also like I I think a lot of proof of stake systems they're just going to default to like becoming more and more proof of authority uh we see this is a very uh it's a big Trend already that like the biggest providers are always the one with with the best brand the best reputation and so on so it's not about like that they have the the most resilient valid data or something it's about they having the best brand um and this is Trend I think that will continue and probably also um the the capital um that that makes the capital even cheaper right because the authority and like the reputation is um yeah contributing a lot on on that side um much much more than actually the the capital at stake um it's more the reputation at stake um another Point talking about um yeah efficiency I think Bitcoin staking uh has the potential um to really uh yeah also streamline the whole industry I don't think this is right now um but uh like over the over the next few years I think Bitcoin will play a much much bigger role in terms of like um yeah providing economic security for the for the crypto uh for the crypto space it's just the Bigg big biggest asset if we compare the different collaterals uh BDC eth and usdc um I think networks and services everything will always default to the most convenient asset with the highest market value um currently um this is actually eth because it's it's it's way more convenient all the networks and services are built on ethereum so like native BTC is not really accessible um to like these networks there's no trustless Bridge from Bitcoin to ethereum um but I think as the things continue to be developed on uh Bitcoin uh Bitcoin will become a a much much more important role on that um yeah so yeah if we look at it uh BTC is like the mo the biggest asset right now but it's not very convenient to use um and then ethereum is like uh is is bigger um and is obviously also way more convenient but I think as as BDC becomes more convenient to use for any decentralized service um this is really going to uh increase over the next few years um the last Point um the last biggest challenge that I see is like unlocking growth via obstruction um I think the whole Space staking is going to move way more into like um Structured Products um and yeah if we uh um how how will it staking products look like either it's like everyone is staking pure staking or like it's staking is entirely absorbed in like other Financial products um currently we are probably here maybe a little bit more on the right um there have been previous attempts from like um kaken for example to um to offer staking but um this has been shut down uh now they're revisiting it obviously um with like yeah kind of um a different stance on crypto right now in the US um so I think it's going way more on that direction um I think um my prediction is going to be like very very close to being entirely absorbed from Financial products um we see that already I mean most users they interact with staking from like um just uh exchanges and so on they have earned programs and like the largest custodians like bito they they're just going to offer like yield products um and the users they actually don't care if it's stake if it lent or whatever they they just have a certain risk profile and they want to earn a certain Target yield um so in the end like staking is U yeah not not be very uh user facing I think um yeah um we also at St Wars going in that direction abstracting the the staking uh we we have a product looped hype uh which is basically an an automated looping trade uh which also abstruct away the staking um and I think this trend is just going to uh continue uh over the next two years um yeah let's unlock the full potential of staking together I think it's a very exciting there there's still um a lot happening um there will be a lot to come um and yeah very excited for it thank you very much