January 3, 2024
Infrastructure
Instruction
iVerse Vision Explains: What is Staking?
The concept behind staking is simple: security through decentralization.
Proof-of-stake blockchains rely on a network of community validators to process transactions. Each validator operates one or more nodes, which are essentially different computers located around the world that all work together in unison.
To help secure the network, validators provide some ‘skin in the game’ in the form of locked tokens. Web3 users can become delegators by safeguarding some of their tokens with a trusted validator. Validators are also known as staking providers, since they provide staking services to the community.
For every round of transactions, the blockchain rewards a node for processing it. These rewards go to the validator who operates the selected node. On a regular basis such as every 24 hours, validators receive their rewards and automatically share them with their delegators.
The more you stake, the more rewards you get!
For some blockchains like Bitcoin, the amount of skin in the game doesn’t matter.
Instead of using the proof of stake model that we just explained, Bitcoin uses a different mechanism known as proof of work to validate transactions.
Instead of requiring that nodes have locked tokens, proof-of-work blockchains require nodes to solve mathematical equations. Proof-of-work nodes compete against each other to complete these equations first in a process known as mining.
Because proof of work rewards nodes based on the power of their computers, it requires more advanced equipment than staking and is significantly more energy intensive. For these reasons, Ethereum switched from proof-of-work to proof-of-stake in 2023 to improve their network’s efficiency, scalability, and sustainability.
Other blockchains have been built with staking in mind from day one. One example is MultiversX, where iVerse Vision has been a leading validator for EGLD since the blockchain first launched as the Elrond Network in 2019.
In contrast to blockchains that rely on mining, MultiversX is carbon negative and does not require expensive hardware or high energy costs in order to run nodes.
You might be asking yourself, what is the advantage for a blockchain to run on hundreds or even thousands of nodes? Why is this necessary?
Imagine you want to store a very important business document. Instead of just keeping it in one place, you would probably consider backing it up elsewhere. Although even centralized tech companies like Google or Meta host different servers across the globe, Web3 technology takes this dynamic even further for enhanced protection against hacking and censorship.
By leveraging a network of decentralized nodes, blockchains can make it nearly impossible to corrupt or falsify transactions. The result is greater security and democratization compared to technology from big tech companies.
In terms of democratization, staking doesn’t just give everyday users the chance to support network security. It also plays a key role in governance, where users can vote on the future of a Web3 ecosystem. Governance empowers community members to decide on upcoming priorities, areas of expansion, token economics, and more. Instead of forcing updates on users, this process invites their participation and feedback.
Governance often requires staked tokens to participate, so that long-term participants are rewarded with more decision-making power.
Staking can also help tokens perform better across different market conditions because staked tokens are typically locked for several days or weeks.
When 75% of the circulating tokens are staked, this means there are 3/4 fewer tokens available to potentially trade on the open market. While users can start to remove their staked tokens at any time, the locking mechanism provides protection against sudden drops in price.
At the same time, staking can also amplify gains when the market is trending upwards.
If there are many potential buyers interested in a token, staking can contribute to a supply shock where the reduced availability leads to a greater price increase than if there were more tokens on the market.
Here at iVerse Vision, we believe in the power of decentralized finance (DeFi).
That’s why we support projects like Hatom as a validator for their liquid staking protocol. It is called ‘liquid’ staking since users can earn staking rewards while also maintaining control of their liquidity.
This process still helps secure the network, while also empowering users to earn more rewards by using their liquidity in other applications. It also supports greater freedom for delegators, such as by allowing them to pay a small fee to immediately sell their liquid staked tokens instead of waiting for the unlock period to end like with normal staking.
Liquid staking recently became the #1 source of total value locked (TVL) out of all types of DeFi protocols. This means it currently represents more value for the ecosystem than any other type of DeFi platform available on the market.
As staking technology continues evolving, we will make sure to stay on top of all new trends so that we can keep delivering the maximum amount of value and security for our community.
Beyond adapting to new innovations, iVerse Vision may also expand our staking network in 2024 to take a multichain approach.
It has become more common in the Web3 world to see projects that serve as validators for multiple blockchains at once. While each chain has slightly different technical requirements, experienced staking providers can transfer much of their expertise from one blockchain to another.
While we cannot confirm any details yet about which new networks iVerse Vision might support moving forward, we can already say for certain that we will bring our same level of expertise and reliability with us wherever we go in the Web3 space.
No matter where we expand, MultiversX will remain a home base for us in many ways because we believe strongly in the transformational potential of this blockchain.
At the same time, it is also in the best interest of the MultiversX ecosystem to invite new validators to take on additional responsibilities moving forward. A more decentralized network helps all stakeholders through enhanced security and inclusivity, and iVerse Vision is ready to adapt with the times as EGLD Staking Phase 4 begins this year.
Wherever the future of staking takes us, we hope you will join us for the ride!
To stake EGLD, we recommend downloading the xPortal app for iPhone or Android.
If you don’t already have xPortal, check out this video tutorial to get started:
Once you are set up with the app, it’s easy to start staking.
Congratulations, you are now helping secure the MultiversX Network while earning passive income every day!
To claim or re-invest your rewards, click the ‘Earn’ icon again in xPortal and then click ‘Claim’ or ‘Stake’ next to your staking provider. If you ever want to unstake your EGLD, click ‘Earn’ and then ‘Unstake’. Please note, you must wait 10 days to finalize the unstaking process and remove your funds.
What risks are involved in staking?
Is staking the same on different blockchains?
How do I choose a validator?
Do I have control over my staked tokens?
Can I lose money by staking?
If you have any other questions about staking, feel free to contact us on Telegram. And for more information about iVerse Vision staking and our other services, you can check out our official website.
As the world of staking and Web3 continues to evolve, make sure to follow us on Twitter for all the latest insights and opportunities!
Founded in 2019, iVerse Vision is a full-service Web3 solutions provider based in Zug, Switzerland. The company’s team has extensive experience maintaining high-performance infrastructure, developing cutting-edge products and educational content, and incubating blockchain startups across a wide range of industries such as DeFi, GameFi, and Metaverse.
