Staking: The Foundation of Web 3 - Lorien Gabel (Figment) - TOKEN2049 London

hello thank you good morning um all you intrepid souls who went home early last night so thank you for uh showing up this morning and maybe you'll be able to hear me before the before the crowds arrive so i'm my name is lauren gable i'm a co-founder at figment um i'm going to try something a little bit different today i'm not going to do kind of a vendor pitch i'm not going to talk about my company maybe wax a little philosophical about 10 000 feet where i see we are in the development of blockchains generally and what it means for web3 so when we get figment out of the way we provide staking infrastructure to institutions and individuals billions of assets are are staked on our platform and we also provide tools for developers who are building smart contracts managing their dapps um on these proof of stake protocols which we support okay that's figment awesome um so if you have tokens you want to stake think of us if you're a developer check out our tools awesome okay let's get on that let's move beyond that so um i'm making kind of a pretty bold claim um this staking is the foundation of web 3. uh you'd be like you know is he high in his own supply what's he talking about it's just staking it's not a big deal here's why i think it's important why don't we first define web3 uh web3 is a wonderful term because kind of means nothing and everything to anyone does anyone wanna is anyone bold enough to make a definition of web 3 for me anyone want to try no no one okay see it's difficult right so i'll tell you what web3 means to me i think web 3 is what comes after our current internet tech stack our public private tech stack and um i think we all have in our gut that something's not working quite right whether you're concerned about privacy or data extraction or value extraction um anti-social algorithms why did i look at my phone and get angry that doesn't seem right that seems bad so i think we you know whatever your political persuasion is whatever your background you kind of have a feeling that something's not right and i think web 3 is what's going to be a better internet and i think it's going to be powered by blockchains and i think it's going to be powered by proof of stake blockchains so hear me out so that's so that's web3 what is staking i'm not talking about staking where you um are liquid are yield farming or lending out your tokens or staking to one of the one of the lending platforms i'm talking about where you're staking actually to a protocol so if you have ethereum you're running a node or you're having someone like us run a node for you if you have a so on a token then you're staking it out to a node and essentially what you're doing um unlike if you hold a bitcoin and before people start throwing things at me this is not a negative statement about bitcoin this that ship has sailed we love bitcoin we love proof of work but the difference is as a token holder with bitcoin you don't participate in the protocol itself obviously when you hold a proof of stake token you can do that so you can run a node you can participate in governance which is pretty cool and most importantly you can then share in the benefits of that community so what's that mean if you come from traditional finance now all of a sudden this token looks like maybe not just a speculative asset or a store of value now it looks like something you can apply some traditional valuation frameworks to like this is something that has value over time and so that's pretty cool if you're a developer it means that instead of apple taking 30 of your profits or your revenue for what i don't know for processing transaction you can actually share in the benefits that you bring on your application to that blockchain okay so um that's pretty important i think that's pretty cool um and what does that tie into web3 so we often say you know at figment that we're building a new financial system new economies but we're really building is community like everyone here these are all entirely new communities i don't know i've been i've done the miami new york london circuit and like the enthusiasm uh the diversity of people the engagement it's just like awesome i don't know i mean we kind of watched in a bit of a bear market and it's really fun i think you guys are all seeing it you're all here at 10 in the morning listening to some guy talk about it so it's like i think we all sort of feel it in the air right and so um what you're seeing is really these communities being built and the way the thing about community is like it's not a one-way street to be in a community you have to participate right it doesn't work that way and so when you stake your token stay with me you're participating in this community you're governing you're running a node you're securing the blockchain the value you stay considering the blockchain people will build on it so you are and then you're going to derive the benefits of that community that value over time so um instead of an internet that takes our data extracts value um uses uh takes away our privacy maybe our sanity if you stake tokens and you participate in these new protocols which are building the new internet you can actually be part of a larger community and derive value from it over time so that's why i think staking is the foundation of web3 and so stake your tokens save the world go to better internet that's my pitch for this morning so um yeah i have any questions on that let me get you this gentleman here i i totally agree with the sentiment you're saying but part of staking means that you need some capital and significant capital to invest i know there's pooling and nominated proof of stake and that kind of thing but um surely that excludes a whole bunch of people that can't stake they can't get on well there's a lot so so yes you have to contribute someone has to contribute some value to the network you know the equivalent is i mean if you look how blockchains work at a fundamental level in proof of work you take your cash and you convert it to expensive mining and equipment and electricity right in the case of staking instead of buying electric you know instead of buying asics you're basically buying value in a token and then locking it up so yes at some core level however there's lots of way to earn tokens on a given protocol um there's dows for governance work there's lots of foundation grants as a developer you can you can create a it's a permission you can create an application which then earns those tokens so you're right at some level someone has to contribute that original value but i don't think it's the only way to participate in these in these proof of state blockchains any other questions gentlemen here do you want to comment on social tokens and some of the smaller little communities and how that fits in with this as well so i don't know i so i think they're somewhat controversial you know some people have some some mixed views of them um i think it's still early um but i think they're a form of participate participatory blockchains and communities in other words that the people um rather than someone else having your profile and then extracting all the value from it you in theory have some control so i think there's like six different models right now being being tested and people are playing with um but i think over time it's probably a better way to do social networks than what we have now which i don't think anyone agrees is a fantastic way to run a social network so anybody else um lauren what about the risk with regards to staking and how should um retail investors look at that space with regards to the yields that are being offered and what advice would you give investors that are looking for higher yields but obviously it doesn't come at a risk-free rate right so what are the risks with staking your tokens um in general you can't lose your principal with some educations which i'll talk about if you are running your own node and staking your own tokens then if that node goes down then you're going to miss some rewards so depending on how technically confident you are if you choose someone like us and we don't do our job then you may miss some rewards so you want to make sure you have an sla and someone who can back it up there are some edge case risks um something called slashing which is double signing which is like forking a network or double spending a token the equivalent of um and in some protocols it's protocol dependent then you can lose some of your capital not like 100 but usually a few basis points so those are the risks to be aware of um if you're doing it yourself then you should know what you're doing and if you're outsourcing to someone like us you should make sure that we know what we're doing so we've never been slashed so okay well that's great to see any other questions gentlemen here let's go to you and i'll come to you next sir um is taking becoming a commodity service like how do you differentiate staking provider from another yeah great great question i appreciate that so we spend you know in our particular case there's a lot more than just running the infrastructure you know like here's what the staking stack looks like from my perspective so you have um we run a lot of bare metal in physical idc's um thought it was an obsolete skill we come out of the data center space but there's actually good reasons for running your own servers and running bare metal um and then you run those in conjunction with the major cloud providers um has decentralization benefits etc and then on top of that there's a data layer and a reporting layer so you would think open ledger easy to track my rewards know what's happening well anyone who's like interacted with a blockchain knows the data structures are a mess and it's difficult to pull that information from so in our case we pride of fairly sophisticated reporting and data infrastructure either by api or in our dashboards and then i think most interesting above that is we have a governance and research group so we have a team of 10 plus people it looks somewhat like a daily proxy service meets sell side research except with a bunch of dgens so who are embedding these communities early we participate in governance um at times we'll actually write proposals if we see there's a technical upgrade and so we really think you know selfishly we might do it anyways we own these tokens we run on these protocols so we think it's important not just to be like running extractive infrastructure and that's it we think it's really important to participate but our customers generally find it useful so you know what does governance look like on blockchains today uh kind of a show i think it's gonna be determinative over the long term but it's like a board reading every day with a thousand people around the world who don't know each other maybe don't like each other um and it's very difficult to do basically you know there's a ton of telegram or discord channels so we have a group of people who all they do that is participate in those communities wrote write back to our or provide information updates make recommendations and sometimes even participate participate um and then above that there's a whole set of like slas and insurance and stuff like that so i think from a commodification sorry to answer your question directly i think if you're just looking at like a raw node server yes probably becomes commodified but if you care about all these other things that i think is important for participating in these networks there's a lot of value added to be to be found there hi hi i was wondering if you could you could comment on the on the tension i perceive between keeping staking rewards high enough that people actually want to do it right that's that's a security budget that you know that's right paid for inflation transaction fees so problem that way and then and then if taking awards get too low five four three two percent then you're probably not left with the people you actually want as you as your stakers and so how to how to land at a good um equilibrium there right so this is how i talk about staking rewards um stake rewards are generally those like at the network launch they're usually the yields are very high because the network the protocol the rules are built so that people lock value up so they're incented to do that so there's a curve going the right way so starting from this way and then going down over time starting from that way going down over time based on sort of the internal economics that have been defined by that protocol and so that's like the internal inflation rate and starts out high generally and then declines over time and there's another line that's coming up from here which is the transaction the value captured on that protocol over time so i think gas fees and ethereum so this number should in theory if people are using the protocol building applications running smart contracts um if there's activity on that protocol that number should go up and then they're going to meet in an equal equilibrium somewhere and so that's going to be the value now um i think that if a network's not being used if no one's doing anything on it then this number's going to decline this number is not going to go up and you're basically going to get a network that's not very secure and people aren't going to build on it so you need to like get that right and it's still pretty early um you're seeing some protocols like terra luna which are all transaction fees right now so all the yield there is from stable coin usage and anchor et cetera and then you have other protocols which you know are very much all essentially inflation and there's no real usage yet so i think you kind of got to watch those two lines and the ones where that one doesn't go up are going to fail so got it any more questions for lorien lauren that was a pretty cool presentation i liked the style thank you and particularly the recommendation of going to bed early and board meetings with a thousand people i can't wait there you go big round of applause i appreciate you this morning thank you very much thank you thank you very very much really appreciate that