Zilliqa, Solana to benefit from further inquiries. IMO.
Some of the biggest US banks have taken notice and dipped their toes into crypto. It will be no time till ALL banks enter in one way or another.
One interesting approach was taken recently by JPMorgan, perhaps one of, if not, THE best investment bank in the US. It came up unscathed from the 2008 financial crisis and had the option of buying over other banks because of its sound investment approach and its shunning of the CDOs (collateralised debt obligations) that other banks swallowed. Naturally, the poison pill killed some and caused a gaping hole in many others which required the Federal Reserve to step and prevent a collapse.
Instead of purely buying Bitcoin like another company, Microstrategy, JP Morgan is looking very seriously at staking. For those of us who already know what staking is, this is a no-brainer. In fact, this was what JP Morgan said about cryptocurrency staking, that it makes the
“Crypto ecosystem more attractive as an asset class.” source: Decrypt.co
(https://decrypt.co/75108/ethereum-staking-crypto-jp-morgan)
This was part of the statements released in its report to clients:
“We estimate that staking is currently a $9 billion business for the crypto economy, will grow to $20 billion following the Ethereum merge, and could get to $40 billion by 2025 should proof of stake grow to the dominant protocol” - JPMorgan report
(https://decrypt.co/75108/ethereum-staking-crypto-jp-morgan)
What is staking? And how can you and I benefit from it?
Staking allows you to actively participate in transaction validation, since validation needs to happen all the time across the blockchain to ensure that transactions are complete and verified. On the blockchain itself, if you hold some cryptocurrency and that blockchain allows you to stake, you can take part in earning rewards that come in the form of that crypto by putting your crypto in as part of the validation equation.
This is the powerful ecosystem set up with the Proof of Stake (PoS) approach.
Would this cause inflation to balloon to crazy levels?
It depends. The rules governing that particular ecosystem need to be robust to prevent such a problem from happening. Let’s not forget that Ethereum does NOT have a maximum cap on the number of Ethereum that can be mined. But because of its utility and usage, the system keeps itself in check and is very unlikely to balloon.
Here is how it works. The algorithm rule for Ethereum has it that it will have a “fixed issuance schedule”. Ethereum will only issue 2 new coins into circulation for “every block produced on the network”. This is regardless of the number of active users, price of Ethereum. This supply increase is programmatic in nature. As long as the demand for Ethereum outstrips the programmed increased in supply, its “inflation” so to speak, will not cause value to deflate.
So long as demand for ether outpaces its steady supply growth, it will not be an inflationary currency whose value depreciates over time. There will also be changes to the mechanism from time to time. E-1559 which will be released, is touted to “burn” coins out of the system. This will also help to ease the inflation metrics.
Just how high are the rewards for staking Ethereum?
At the moment, it is 4 to 5% per annum.
Minimum requirements to play the staking game
It seems like a good thing – just buying an investment and then staking it.
YES. Invest to invest.
This allows those who have something to grow it further. In short, the rich get richer syndrome.
But what is the minimum amount to play this? Well, 32 Ethereum. That is a whopping nearly USD70k upfront investment. To some, it is not a big sum but to others who may be dipping toes in for the first time, it can be a barrier to entry.
Fear not however, there are other options available!
OTHER STAKING OPTIONS
First, you can use an exchange that gives you an opportunity to stake along with others. So you don’t need all 32 Ethereum. The exchange gives you the opportunity to enter with a small stake and it pools together that stake and makes the staking happen.
Second, you can consider other forms of cryptocurrency that may be giving a better yield! Here are some excellent alt-coins that have excellent utility and a great future ahead
- Zilliqa – staking rewards at 14%. Zilliqa has a cap of 21 billion coins to protect it from inflation. It has other robust measures to also prevent it inflationary dynamics. From now till about October 2021, there will be an additional gZil issued per 1000 Zilliqa rewarded for staking. gZil which is a governance token allowing you to vote on issues. Very powerful tool. Worth about USD80 per token in the market.
- Algorand – staking rewards at 6%
- Solana – staking rewards at 8%.
There will be others, but because you must have a stake to participate, and crypto prices are constantly fluctuating, what you will want to do is to find out what projects are already on that ecosystem and if so, how are they doing? If many projects are thriving, doing well, the ecosystem will thrive. If not, it will eventually fade away and die off. And along with it, the altcoin.
Is staking safe?
Yes. You will not lose your altcoins staking. What you are likely to gain or lose is in the ability to buy and sell your altcoins and capitalise on price fluctuations in a liquid market.
If you would like a video presentation of what we just shared, here is something done up by @99Bitcoins on YouTube. Enjoy!
Yours,
Chief Editor
BBA Market Perspectives
