We recently launched Anthem, our staking platform that seeks to improve the experience of participating in decentralized networks.
Anthem is a powerful tool that provides Cosmos ATOM stakers with financially relevant insights and allows them to manage their staking positions. Users can access historical data for any account on the Cosmos Hub, helping them to figure out how much that account earned while staking and how its balance developed over time.
Try it out yourself with any Cosmos account at https://anthem.chorus.one
Aside from providing historical data for individual users, Anthem’s data also allows us to gain insights into how the Cosmos Hub has developed since launch. This post will focus on analysing and visualizing the first year of staking on the Cosmos Hub.
The Cosmos Hub produced its first block more than a year ago, on March 13 2019 at 11pm UTC. Since then, there were three hard fork upgrades that introduced various changes to how the network operates, all coordinated and approved via the on-chain governance process.
Staking rewards on Cosmos are paid in ATOM tokens, which means the circulating token supply is constantly growing, a fact that some popular crypto data sites routinely ignore. In practice, the circulating supply has increased from 236.2m ATOM at launch to 253.5m ATOM at the time of writing (Apr 4, 2020). The following graph illustrates how total and staked token supply developed:
Looking at this graph, we can already tell that the percentage of supply that is at stake has been growing over time.
The Cosmos Hub has one of the most advanced live staking models. One feature is that changes in staking supply dynamically adjust the network’s issuance rate over time. The issuance rate (in Cosmos: inflation) trends downward up to a minimum of 7% when more than ⅔ of the total supply is staked (more details here). Since this threshold was first breached on the first of July 2019 the ratio never fell below the ⅔ threshold again, leading to the inflation parameter reaching the lower bound of 7% on February 25, 2020.
When charting the staking ratio over time, one can clearly pinpoint the moment when the threshold was first breached:
We see that a large amount of ATOM (almost 20m) was delegated around the 1st of July. This is the Tendermint team delegating their ATOM to a variety of validators (check it out yourself on Anthem).
The chart above also plots changes in the inflation rate and the resulting reward rate. The reward rate is the metric most relevant to stakers. It takes into account that staking rewards are only distributed to those staking. The reward rate signifies the annual growth in holdings that someone delegating their ATOM would expect (before accounting for validator commissions and differences in block times). We can see that at launch the reward rate was relatively high since a smaller portion of the supply was staking. Delegators taking on the risk to stake early were rewarded with a larger portion of the rewards. Then, as the amount of delegated ATOM grew, the reward rate quickly adjusted and has been staying between around 9–11% ever since.
Looking at the historical data, we can also see that the dynamic adjustment did not impact issuance much overall — annual inflation started out at 7%, peaked at 7.68% before the staking ratio threshold was breached, and went back down to 7%, where it stayed ever since.
One final interesting dimension to consider is how many accounts have been created on the chain and how many of those have active stake delegations.
Looking at this data, we can see that both overall accounts and those with an active delegation have been growing steadily. We can clearly see a jump and subsequent growth of accounts when ATOM transfers were first enabled with the launch of cosmoshub-2:
At the time of publishing there are around 16,000 staking accounts on the Cosmos Hub, or roughly 40% of the almost 40,000 accounts on the Cosmos Hub.
These are just a few observations from looking at on-chain data in one of the largest live Proof-of-Stake networks. We will follow up with further insights on networks we support in the future and will potentially add features to explore aggregate data within Anthem.
If you are interested in staking and this kind of data, please help us by taking one minute to answer three questions that will help us to improve the product:
Feel free to reach out to me, @FelixLts on Twitter or Telegram, if you’d like to get access to the raw data used in this analysis.
Support for other Proof-of-Stake networks is coming soon to Anthem — stay tuned for announcements by following us on Twitter or by subscribing to the Chorus One newsletter!
Originally published at https://blog.chorus.one on April 7, 2020.
Kava is the 10th project featured on Binance Launchpad. But what is the Kava platform trying to achieve and how does the $KAVA token play a role in it? This post will cover that by giving an overview of Kava’s design.
The Kava blockchain enables users to issue a stablecoin pegged to the USD (USDX) by locking a variety of cryptoassets on the platform using what is called a collateralized debt position (CDP). CDPs are the cornerstone of decentralized finance. One use case is allowing users to get leverage without requiring a centralized counterparty. MakerDAO, the first CDP issuance platform that is live on Ethereum, is leading this space with around $280m (almost 1.5% of the ETH supply) locked in their CDP system.
Kava is bringing CDPs to non-Ethereum-based cryptocurrencies (starting with BTC, ATOM, XRP, BNB, and USDT) by leveraging interoperability technologies developed for the Cosmos ecosystem. In addition, Kava is built as a sovereign blockchain uniting security, stability, and governance of the platform in one token: KAVA.
The KAVA token is designed to serve three purposes in the Kava ecosystem:
KAVA holders are rewarded directly for taking on these responsibilities by absorbing KAVA issuance and transaction fees in a variety of tokens (when staking), as well as indirectly through the burning of stability fees paid by CDP users on the blockchain.
KAVA paid as transaction fees from interacting with the blockchain and continuously minted KAVA tokens (block rewards) are distributed to stakers to ensure secure operation of the system. The amount received as staking rewards depends on the staking ratio (percentage of KAVA supply staking), the commission rate charged by validators, and transaction fee volume in the system.
The Kava system is issuing new KAVA tokens starting at a rate of 7% per year. The issuance rate gradually adjusts between a floor of 3% if more than ⅔ of KAVA tokens are at stake and a ceiling of 20% if staked KAVA supply stays below the targeted ⅔ ratio for an extended period of time. In addition, transaction fees paid by users transferring assets onto and on the blockchain, as well as opening and closing CDPs are paid to KAVA stakers.
On the flipside, KAVA stakers run the risk of losing a portion of their tokens (up to 5%) should a validator they are staking with get slashed for misbehaving or for being offline.
The Kava system keeps track of collateral in the system and incentivizes liquidation of CDPs that fall below their specified overcollateralization ratios to keep USDX stable at the price of USD. Should USDX lose its peg anyway, e.g. because the value of collateral fell faster than the liquidation system was able to auction off risky CDPs, KAVA tokens will be minted and used to buy up USDX to return to the peg. In case this rare scenario takes place, KAVA holders will be diluted to ensure the system stays stable.
Every CDP type levies an adjustable stability fee (set to 5% APR at launch) which has to be paid in KAVA when closing the CDP. This fee is burned, which reduces the total KAVA supply and thus indirectly benefits KAVA holders. As an example, an owner of a CDP with a debt of 10,000 USDX that was open for a year would need to pay (and burn) 500 USDX worth of KAVA.
Finally, staking KAVA holders are able to participate in the governance of the system either by delegating to validators or by voting directly. All features and parameters of the system, such as which assets to accept, as well as the specific stability fees and overcollateralization ratios are decided through the on-chain governance system.
We will soon publish more information on Kava staking. For further information please consult the Kava team’s post on token economics and our explainers on Cosmos governance and staking, both of which the Kava design is mostly identical to.
Chorus One is a pioneering operator of blockchain infrastructure and staking services focused on offering non-custodial, secure, and user-friendly ways to participate in Proof-of-Stake networks.
Chorus One will offer staking on the Kava blockchain. You can support our work and earn staking rewards by delegating to our validator node.
Website: https://chorus.one
Twitter: https://twitter.com/chorusone
Telegram: https://t.me/chorusone
Chorus One Podcast Episode with Kava Labs CEO Brian Kerr: https://chorusone.libsyn.com/18-kava-cross-chain-collateralized-debt-positions-with-brian-kerr
Kava is a cross-chain decentralized finance (DeFi) platform on Cosmos, allowing users to access decentralized leverage and hedging for major cryptocurrencies such as Bitcoin (BTC), XRP, Cosmos (ATOM) and BNB.
Website: https://www.kava.io
Twitter: https://twitter.com/kava_labs
Telegram: https://t.me/kavalabs
Originally published at https://blog.chorus.one on October 24, 2019.
Decentralization in Proof-of-Stake is a multifaceted topic. Many theories and designs have been suggested in the wider ecosystem on how a PoS system may decentralize power over multiple entities. The Cosmos Hub is one of few of these experiments that has been live for a couple of months. The following analysis covers stake distribution and diversification on the Cosmos Hub and aims to shine some light on how token holders have actually engaged with this early PoS network.
In a PoS network, the way token holders decide to participate in staking influences power distribution in the network. Do holders stake tokens themselves, do they pick one validator and stick with it, or do they diversify across validators? Diversifying stake should come with benefits: it lowers the impact a slashing would have on the token holder and helps to support different entities, thus strengthening decentralization and the ecosystem in general.
To find out how Atom token holders are participating in staking, I took a snapshot of data from the 5th September using the Stargazer API (thanks to Certus One for providing this API). The data takes into account all active delegations, as well as their size and the corresponding delegator and validator addresses. It should be noted that addresses don’t equal entities, there could be holders that hold their funds in different addresses, or holders that share addresses (exchanges/custodians), which will not be reflected in the following analysis.
Let’s start with a summary of the snapshot data. In total, at the time of the snapshot, 177,771,881 Atoms were being staked. The snapshot contains 11,387 active delegations from 6,459 addresses on the Cosmos Hub, which means the average address has 1.76 active delegations. From that we can already see that a large number of holders don’t seem to diversify.
Before we go more in-depth regarding stake diversification, let’s first consider the stake distribution. The following graph shows Atoms at stake with validators ordered by stake and colored according to the commission rate bracket that the validator belongs to (5% or lower, between 5–10%, and greater than 10%).
Looking at this we can see that the largest validators either charge a low commission rate below 5%, while others charge above 10%. These often signify funds that validate their own stake, or providers that focus on larger holders. Looking at the validator set ranked by stake visualizing the amount of addresses that delegate stake to them, we can see that low fee validators are popular especially among smaller holders. The top 3 validators by number of delegations charge no or a low fee:
This graph also contains some interesting outliers: e.g. Huobi Wallet on rank 43 has delegation from 636 addresses. Similarly, Coinone Node on rank 15 has 745 delegators. Both of these are exchange run validators. Another interesting mention is Cosmostation at rank 7, who managed to attract 678 delegators to their validator with a 12% fee, potentially a result of their successful wallet.
Now that we got an overview of stake distribution among validators, let’s take a closer look at delegations and the addresses they are coming from:
This data contains some interesting insights. For one, only about a quarter of addresses actually diversify their stake, but together these addresses account for about 64% of the total stake. What this means is that addresses that diversify on average hold about 5 times as many Atoms as those that don’t, providing us with insights that diversification is more popular with larger holders.
Taking a closer and counting the number of addresses given how many active delegations they have (n), we see a swiftly declining curve. While there are still 786 addresses with 2 delegations and 347 with 3; addresses with more than 5 delegations become very rare. There are a few interesting outliers that were cut off this graph. Specifically, an address maintained by B-Harvest sports 119 delegations with low Atom amounts that were carried for tracking purposes. 6 other addresses with seemingly similar patterns (<500 Atoms across 67 to 83 validators) exist.
Finally, if we visualize the Atom amount staked by addresses sorted by the number of validators they diversify amongst, we are presented with some more data points that stand out:
The peak of holdings with 36 delegations is from the Tendermint team address, which stakes ~21 million Atoms. Another peak with 46 delegations and ~7 million Atoms at stake is due to the ICF address. The most diversified address with significant holdings delegates to 51 validators. The two peaks with 16 and 18 delegations also signify well-diversified large holders.
In conclusion the data presented clearly indicates that Atom holders largely don’t diversify across multiple validators. In addition, we also saw a preference for low fees among smaller holders.
Our team at Chorus One believes that stake diversification is important to create a thriving validator set that engages with the network and contributes to ecosystem growth. It might be that currently token holders don’t care about diversification, are unaware of benefits, or that it is simply too hard, or not worth the effort to diversify (low slashing risks, diversifying requires increased research on validators, bad UX of having to carry out multiple transactions to delegate and to withdraw rewards,…).
We are researching ways to make participating in staking and diversifying easier. Join our Telegram to discuss and let me (@FelixLts) know what else you’d be interested in for future analysis. Interesting extensions could be to expand on differences between whales and small holders or to take a look at other Proof-of-Stake networks (e.g. Tezos). If you have a dataset for other PoS networks or want to help obtaining the relevant data please reach out.
Originally published at https://blog.chorus.one on September 10, 2019.
This article is an overview of staking on the Terra network. It covers risks to consider and rewards to expect, as well as how to participate.
First, let’s start with a basic description of what the Terra network is. Terra centers around an economy of price-stable cryptocurrencies that are integrated into various applications and processed on the network, e.g. via their mobile payment application CHAI. The network’s token Luna ($LUNA) mainly fulfills three purposes:
Luna is used…
The Terra protocol includes an automated market maker, a mechanism designed to algorithmically guarantee that Terra stablecoins stay at their desired peg. This is achieved as follows: the protocol enables arbitrageurs to exchange stablecoins and Luna at a fixed peg rate, which allows them to profit from deviations in the market. The protocol automatically mints or burns Luna tokens (expanding or contracting the supply) depending on how external parties interact with the protocol. Terra relies on arbitrageurs exchanging tokens with the automated market maker and trading on the open market to dynamically return Terra stablecoins to their peg. There are multiple resources that cover this mechanism in-depth, e.g. our whitepaper walkthrough or the official documentation. A key insight is that Luna is used as the lender of last resort should a stablecoin lose its peg downward. Luna holders are diluted to absorb this type of volatility.
The Terra design counters this in multiple ways. For one, rewards earned from transactions processed in the network are distributed to those staking Luna tokens. A larger portion of Luna tokens staked results in a larger share of the tx fees received. Transactions on the network charge a 0.1–1% fee per tx (capped at 1 TerraSDR). The percentage dynamically adjusts based on the demand for transactions on the network to smoothen economic cycles. Rewards are largely received in stablecoins, as most transactions on the network happen denominated in stablecoins.
Additionally, the protocol charges a small spread for atomic swaps between Terra stablecoins. These fees are distributed to validators that correctly vote on Terra price oracles (more below). Atomic swaps are capped to limit the volatility in Luna supply. Currently, the spread taken increases linearly from 2% up to 10% when the daily cap is reached.
Furthermore, the protocol also burns a portion of Luna (currently 5%) sent to the protocol when issuing Terra stablecoins. Burned Luna indirectly rewards Luna holders by contracting the overall supply. The official Terra documentation expands on these topics.
Finally, a recent change introduced an equivalent of block rewards to support the staking ecosystem while the network is in its growth phase. A community initiative that pays out a part of the Luna treasury to those staking was implemented. In the first year 21.7mn Luna have been committed to this effort. This corresponds to a ~10% staking yield at the current staking ratio (at the time of writing there are ~225mn Luna at stake, see e.g. here). In total 100mn Luna have been committed to keep staking yields competitive in the short to medium term. You can learn more about Project Santa here.
The Terra protocol includes a sophisticated oracle design to maintain the exchange rate between stablecoins and Luna. This design is still in flux. Core to it is that validators cast votes on price feeds and receive rewards from swap fees based on the correctness of their votes (measured by considering deviations from the median of all votes).
Finally, Terra uses the remaining seigniorage (Luna sent to the protocol for minting stablecoins) to stimulate growth of the Terra economy. This is out of scope for this article (more on this can be found here or in the whitepaper).
The following will focus on summarizing the factors that have an influence on the staking lifecycle, as well as provide details on the currently implemented values that need to be considered.
As Terra is using a design similar to that of the Cosmos Hub, refer to our more comprehensive Cosmos Staking Primer in case you are new to staking or unclear about what is meant with some of the following terms.
Automatic Unbonding. There are scenarios in which delegators unbond from their validators and stop earning rewards from staking as a result. In all of these cases, delegators need to manually stake their tokens again. Scenarios are:
To stake Luna, you need to first obtain $LUNA tokens. CoinGecko e.g. lists available exchanges. The easiest tool to stake your Luna currently is through the official Terra Station wallet. The Terra team released this guide that walks you through the wallet. Terra Station will soon also have Ledger support, meaning you can store and stake your Terra tokens on a Ledger.
Chorus One is operating a highly available and secure validator on the Terra network. Stake today to start earning while supporting our work. Visit our website to learn more about our Terra validator!
To re-iterate, returns from staking Luna depend on a variety of factors. Some of which are dependant on the performance of the validator you choose to delegate to, others depend on network activity and various parameters in the protocol. Do due diligence on the project and validator(s) you aim to delegate to. Take into consideration the various implications described in this article before obtaining and staking Luna.
Many of the variables described in this post are subject to change and will be governed by Luna holders to optimize for the success of the Terra economy. At Chorus One, we are excited to contribute to the success and health of the Terra network. By staking with our validator, you are supporting our contributions and the effort we put into helping Terra succeed. Follow us on Twitter or join our Telegram to stay informed and in case you have questions!
Terra Website
Official Terra Documentation (best to understand the actual protocol)
Terra Agora Forum
Chorus One Terra Whitepaper Walkthrough
Chorus One Interview with Terra Co-Founder Do Kwon
Originally published at https://blog.chorus.one on August 28, 2019.
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