Babbitt column | Questioning and thinking about Staking: Why is it not a good model?

I. Introduction

Recently, there have been many articles on Staking on Babbitt. For example, Chen William’s "The more the price is locked, the more the price is rising" is definitely a false proposition , and I am Daewoo's "Opinion: Be especially vigilant." The routine of the currency and the lock-in.

These views are very interesting. They all discuss the problem of Staking in depth. However, the question I want to ask seems to be bigger. What I want to ask is: Is Staking really reasonable? Does it really make sense?

The word Staking economy seems to have suddenly ignited. For a long time, there was no concept of Staking. For a long time, the popular set of Bitcoin in the market was a fixed amount, a fixed amount, and a regular halving. I don't know how, suddenly the wind has changed, and suddenly I became popular with Staking's additional issuance and lockout.

I personally think that the introduction of the "Industrial Structure Adjustment Guidance Catalogue (2019, Draft for Soliciting Opinions)" may be a demarcation point. Although the concept of Staking existed before, but it has not become mainstream. Until the country issued this draft for comments, and officially began to restrict the development of POW and mining industry, the space for adopting POW in new projects was greatly limited, and new projects were promoted. Turned to the POS, DPOS mechanism, so the original not very popular Staking entered the mainstream stage.

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Perhaps it is because this model is too sudden, so the market is less likely to think and question the Staking mode itself, this article is a brick-and-mortar.

Let me first say my conclusion: I don't think Staking is a good model!

Although Staking is a systematic project, the specific method of Staking for different projects is different, but the basic model is the same, that is, the additional issue + lock position, and my main question point is these two points.

Second, additional issuance – from the first day of holding the currency, your currency is depreciating

Staking is generally a POS, POS-like consensus mechanism. The POS mechanism is a bit like the stock in the traditional financial world. Simply speaking, it is to speak with shares. The more shares there are, the more people have the right to speak in the system. high.

However, in the traditional financial world, the total amount of stocks is generally constant. If you want to issue new shares, you need very complicated and rigorous audit procedures. This review procedure may be less difficult than IPO, so you usually get additional opportunities. Not many companies.

Although there are also stock splits, stock repurchases and other means to change the total amount of stocks, but these methods are generally used in real life, so the majority of the company's stocks remain unchanged for a long time.

Under this model, as long as the company's profit, cash flow and other financial data are growing year by year, the value of each share will continue to increase, and the corresponding price per share will gradually increase. This logic is Obvious, and comparable in different periods.

In the current blockchain model, the blockchain is not a stock, it is a Token. The stocks are corresponding to dividends, voting rights, and reclaimed assets. The corresponding rights behind Token are very different. Some correspond to dividends, while others correspond to points and credits. right.

At present, most Staking projects have an additional issuance mechanism. The rate of increase in tokens is generally between 3% and 6%, generally not lower than 3%, and will not exceed 6%. Looking at 3% and 6% alone may not be a lot in a certain year, but if the time scale is lengthened, this issuance is calculated according to compound interest, and the number of additional is actually very scary.

For example, let's take an example. The 100 million Tokens originally issued by a blockchain project are subject to a 6% increase rate. Then, after 30 years, what is the total number of Tokens? It is 570 million pieces, which is nearly six times the number compared to the initial release.

This means that the value of the project itself must be increased by six times in 30 years to offset the inflationary impact of this issuance. If this figure is not outperformed, then the currency is depreciating.

In traditional business, most of the projects last for less than three years. A good project may be 3 to 5 years, and few companies that can last more than 10 years can exist for 30 years. The best. I believe that this big data sample will be placed in the blockchain and will not change.

That is to say, in the mode of no additional issuance, many companies have no way to create value for a long time, and after this time scale is extended, especially under the premise of a large number of additional issuances, it is even more difficult to create incremental value. It is a multiple increase.

What's more, most of the projects' Staking has no agreed end time, not to say that the deadline is 30 years later. Moreover, most of the blockchain public chain projects exist in the form of underlying protocols, and each has a feature: once started, there will be no downtime.

In other words, there are many public chain projects that may last for more than 100 years. If one project can really last for 100 years, do you know how many 100 million has been converted? It has become 34 billion. And the longer the duration, the more obvious the effect of compound interest, the more it will be issued later. Under such a high inflation rate, it is difficult for me to imagine which company, even the best company like Coca-Cola, which can live for 100 years, can hardly create the incremental value of a single currency in the long run.

If even the best company like Coca-Cola can't keep increasing the value of a single coin for a long time, then basically it means that no company can do it.

If a model, for a long time, the value of a single currency is always decreasing, and the longer the time, the more it is reduced, then we need to doubt that this model is not a problem in the initial design?

Third, lock the warehouse – why lock?

Generally speaking, in order to implement Staking, the project side will introduce a lock mechanism. Each company's lock mode is different, but the approximate situation is this: the company provides a lock mechanism, you can lock the lock at any time, you can also unlock at any time. withdraw. The lock is locked immediately, but the withdrawal has to wait 15 days, 20 days or a month; as soon as you start the lock, you will start to calculate the income, but unlock the withdrawal process, say 15 days, 20 days, the process is not Revenue.

Or compare it with the traditional stocks. In the traditional stocks, there is no lock-in position. Although there is also a concept of lock-up period, it is only for the project parties and investment institutions. The stocks held by ordinary people are No ban on sale.

Moreover, even if it is a lock-up period, the CSRC will set rules in advance, such as lifting the ban for half a year and lifting the ban for one year, instead of setting the lock-up time by the project party.

The project party is free to set the lock time, which always makes me doubt whether the project side is suspected of manipulating the market.

For example, many fund disk projects are like this. With the feature of lock bins, they will set a very long period for the lock bins. For example, lock bins must be locked for half a year, and only half a month after unlocking 10%. It takes 10 months for this 10% to arrive.

In addition to the rules of the locks, many project parties can even change the lock rules at will. After you have locked for half a year, he can ask to lock for another year, or set various locks for your unlock. limit.

Perhaps these are not just problems with the lockhouse itself. This is also the problem of lack of supervision and industry standards in the entire blockchain industry. But what value does the lockhouse create for society, and what is the significance of the lockhouse itself? This is a question that we need to think about.

Fourth, Staking – a kind of innovation to be discussed

With the additional issuance and lock-in mode, the Staking mechanism can be officially launched, that is, the total token amount of the project is issued every year according to a certain proportion. The part of the additional issuance is distributed to those who lock the lock according to the number of locks. .

There is a problem here: the issuance of project tokens is for all token holders. As long as the issuance, the token value of all token holders is reduced; but the increase of the token is only distributed to the locker, that is, the locker can maintain the value of his token. The impact, and the value of a single currency of those who do not have a locked position can only be continuously diluted every year, is this really fair?

Why force someone to lock a position? Locked warehouse, the value of a single currency has not increased, but does not lock the warehouse, the value of a single currency is decreasing. Are all token holders not equal? Shouldn’t all token holders’ rights be the same?

If I let me evaluate the issue in one sentence: I think the issue mode will ensure that the project does not have long-term investment value!

If I let me evaluate the lock position in one sentence: I think that the lock mode is to use the loss of most people, in exchange for the income of a small number of people!

After all, whether it is the currency of the locked warehouse or the additional currency, it is ultimately going to market.

The key point is that the innovation direction of both lock-in and post-issuance is not right. The direction of the project needs to be to make the project more solve the market demand and create a greater connection with the market, so that the market demand for tokens will increase. The related incentive problem is solved by the rise of the token price.

The real use of tokens is the key to the increase in demand for tokens. The increase in demand for tokens is the key to the rise in token prices. The rise in token prices is the key to solving incentive problems. Therefore, all the techniques that make tokens really useful are not available. They are all strange and skillful.

Fifth, more thinking

However, I can probably understand the logic behind Staking. There are many blockchain projects that have to use the Staking mode.

Because most blockchain projects are essentially a kind of distributed collaboration, on the basis of distributed collaboration, you need a lot of ecological parties to participate in the construction of your project, such as developers, nodes or other forms. To attract a large number of people to participate, you need to have enough benefits; to attract their long-term participation, they have to provide them with long-term benefits .

So how do you make the benefits long enough and longer? This is an issue that every project urgently needs to solve.

If you want to benefit longer, it is not enough to rely solely on the initial distribution. The initial allocation is one-off, and the subsequent pay is continuous , which does not match, so it will cause some trouble. However, if the additional mode is adopted, this problem can be solved, and at the same time, the lock mode is used to lock the liquidity of the additional issuance.

The idea is perfect, but it solves this problem and brings many other problems.

Using Staking's additional issue + lock mode to solve the incentive problem is a bit like drinking and quenching thirst. It solves the incentive problem by expanding the supply of tokens, and it is expanded in the form of compound interest, with more and more supply of tokens, if If the demand for tokens cannot keep up, then the entire token economy will be destroyed.

If the price of the token continues to decline, and it is even possible to enter the spiral of death, that is, the price of the token will fall, and the interests of the participating ecological personnel will be impaired. The fewer people will participate in the ecology, and the less the ecology, the less the use of tokens will result. The price of the token has further declined, thus creating a negative cycle.

But in fact, to solve the problem of incentives, Staking is not the only way, we can have better choices.

For example, the way Bitcoin takes is worth learning. In the case that the total amount of tokens does not change and does not need to lock the warehouse, it can actually make the whole project grow stronger and stronger, and actually realize the people who know Bitcoin. The more people use Bitcoin, the more and more ecology that supports Bitcoin, the more and more Bitcoin usage scenarios, the more and more bitcoin miners, the more difficult it is to bitcoin mining. The higher it is.

How did it do it? Simply put, it is through the rise in bitcoin prices.

The continuous rise in the price of tokens is fundamental to solving the problem of long-term incentives, rather than relying on additional issuance and lock-in.

The essence of tokens is a right to use. You want the price of tokens to be higher and higher. If the supply is constant, then the higher the demand for society, the better. In other words, you need to expand the application and ecology of the project, let the project cover more social needs, create more social value, and let more people in the society have demand for this token, then the price of the token will rise. The rise in the price of the token will solve a series of problems in the entire token economy cycle.

The lock and the issuance itself obviously do not make the token useful to the society .

Conclusion

At present, my personal opinion is: POS makes sense, Staking is debatable.

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