Hi Steemians, this is my assignment post for Professor @imagen.
It has been a while however, thank God we are back.
Research and choose 2 platforms where you can do Staking, explain them, compare them and indicate which one is more profitable according to your opinion. (Binace is not allowed)
For the purpose of this assignment, I chose Coinbase and Kucoin.
Is one of the largest digital asset platforms where users or traders can utilize it's exchange and wallet platforms to transect with cryptocurrencies like BTC, ETH etc.
It also offers varieties that includes Staking Service.
This platform was founded in 2012.
Coinbase fee structure consist of 0.5% premium over the market price, plus a transaction fee relative to the amount transacted.
Overall, Coinbase offers competitive fee structure when compared to similar alternatives. However, users don't have direct access to the funds stored at Coinbase and they also have poor customer support service.
This is the very pioneer of Exchange Staking.
It enables users to stake different cryptocurrency assets without locking them. This is made possible through the use of Soft Staking mechanism.
One may ask: what is Soft Staking?
It is a process where users are allowed to earn staking rewards without locking their cryptocurrency assets.
This idea of Soft Staking was first introduced by KuCoin in 2019.
This very method of staking rewards users daily. Thus, allows for flexibility and efficiency in compounding and portfolio management.
How Staking Work.
This is about users, investors or staking pool (group of stakers) locking their cryptocurrencies in a wallet to earn a reward.
The locked funds is a kind of collateral or guarantee that they will be honest as they (stakers) discharge their duties in validation of transactions. So if they default, there is something to hold on as punishment.
Comparison Between Coinbase and KuCoin.
|Platforms||Stakable Assets||Staking Fee|
|Coinbase||Ethereum (ETH), Cosmos (ATOM) and Tezos (XTZ)||20% – 25%|
|KuCoin||Algorand (ALGO), Cosmos (ATOM), EOS (EOS), Aion (AION), Tron (TRX), Internet of Services (IOST), Neblio (NEBL), DeepOnion (ONION), Energi (NRG), NULS (NULS), (TOMO), Loom Network (LOOM), Loki (LOKI), V Systems (VSYS), TomoChain, WAN (Wanchain), Tezos (XTZ) and PIVX (PIVX)||5% – 10%|
KuCoin to me is more profitable because of the following reasons.
By offering more stackable assets, It gives me the flexibility to explore other assets.
Lowest staking fee: this means I will be able to save more funds and as well be able to take more risk.
I also have the advantage to earn stake rewards daily and also able to use my deposited funds easily. Thanks to Soft Staking.
What is Impermanent Loss?
This is one of the major risks in decentralized finance (DeFi)
It is a temporary loss of funds that happens when liquidity is provided.
It usually occur in the standard liquidity pool where the liquidity provider has to provide both assets in the correct ratio (50/50), where one of the asset is volatile in relation to the other.
In essence, the more the volatility, the greater the impermanent loss.
What is Delegated Proof of Stake (DPoS)?
It is a consensus mechanism used in the blockchain based network to determine who the validator of each block will be, and reach on a consensus on what data should be added to the chain.
It was invented in 2013 by Dan Larima, who was attempting to solve the issues that plagued Bitcoin's Proof of Work system.
DPoS can be likened as a technological democracy that is a digital version of an organizational hierarchy.
DPoS has a certain number of delegates that secure the network by validating transactions and blocks, and these delegates are voted into position by the token holders.
How DPoS Work.
Delegate's responsibilities include ensuring their nodes is always running, collecting transactions and building them into blocks to validate the transactions, and resolving consensus issues that may arise in the network.
In most DPoS chains, voting for delegates is accessible to all token holders in the network, and voting power is directly proportional to the number of tokens held by a certain account. Users can also delegate their voting power to another user who will vote on their behalf.
The threat of loss of income and reputation provides a kind of understanding for delegates to act honestly and keep the network secure.
Votes are dynamic and can be changed, which means delegates can be voted in or out at any time.
Delegate are responsible for distributing the block rewards they receive to their voter in a proportional manner based on voting power.
Unlike traditional proof of stake, delegates are not required to have a large stake on the network, but they must compete for votes from token holders.
DPoS systems sacrifice some decentralization by limiting who is allowed to validate blocks of transactions, but in turn gain efficiency as less work is required to reach consensus on the network.
Staking: it is needful in order to encourage and support the security and operations in the blockchain network through the act of staking of funds, and in return earn rewards.
Since it is a normal occurrence in DeFi. Hence, it's wise to avoid volatile coins and provide liquidity only on Stablecoins pair.
DPoS: this is a unique algorithm meant to achieve consensus in a decentralized ecosystem, which is very vital for decentralized cryptocurrency network.