growth and risks of the staking market

Towards the end of 2019, an increasing number of cryptocurrency exchange platforms and applications added support for Proof of Stake (PoS) tokens, as well as for staking services that use PoS encryption on behalf of users. . At the same time, the number and value of the assets involved in the proof of stake has grown.

Growth data

"Given the wide variety of Proof of Stake blockchain projects coming to the market in 2019/2020 and given the growing infrastructure, it is reasonable to expect that the global staking market and related services will grow," explains Stuart Young, researcher on the blockchain for Smith + Crown. "The networks that are part of this trend include both tier 1 networks such as Tezos, Decred, Cosmos and Algorand, as well as applications such as Livepeer."

BitGo's CTO, Ben Chan, is another of the experts who expect staking to grow, as long as two conditions are met. The first is the success of the launch of Ethereum 2.0. The second is the ability of alternative level 1 PoS platforms to achieve adoption and maintain market capitalization.

Stoke and security

This trend will continue to rise in 2020. However, as many commentators suggest, the growth of staking could bring with it considerable risks.

“In 2020 there will be more places to commit your money, than money to be committed – predicts Lawrence Lundy, research manager at Outlier Ventures – The logic of power will bring more and more people to the most profitable networks, generating an overload of PoS token networks ". In addition, there is a possibility that the staking market will assist the financial markets to settle, as they go in the direction in which they are increasingly dominated by a small number of large service providers, such as Binance and Coinbase.

And such consolidation could be risky. But nothing can be taken for granted. "Given the relatively low financial barrier to entry for new investors in staking, a variety of competitors may emerge that differ in terms of costs, operational guarantees and governance functionality. Even historical investors who have already experienced the disadvantages of overly centralized networks may be reluctant to target a large supplier, "explains Stuart Young.

Stake in the future

Assuming that the forecasts are true, the question arises as to how the PoS market could look in the following years.

One thing that will probably happen is that the platforms are starting to offer a growing range of additional services. "To date a key trend in the staking market is large exchanges, such as Coinbase and Binance, which expand into retail staking services that abstract all technical complexity and offer users a more complete set of products," says Stuart Young. "Given the initial success of these programs, in particular the Tezos and Coinbase staking service, these platforms could expand their offerings in order to gain more benefits and revenue from the staking life cycle."